Empty bowls and rising rates: North Korea's currency chaos returns

Dec. 4 (UPI) -- In the shadowed alleys of Pyongyang, the market stalls buzz with a quiet desperation. Rice, corn, and other staples -- already scarce -- are slipping out of reach for most North Koreans. The relentless rise in the exchange rates of foreign currencies, coupled with surging food prices, paints a bleak picture of an economy on the brink of collapse. Having experienced North Korea's economic landscape firsthand, I find these symptoms disturbingly familiar, echoing past crises fueled by mismanagement and systemic flaws.

In just half a year, the value of the North Korean won has plummeted against foreign currencies. The U.S. dollar now commands over 18,000 won, more than double its rate of six months ago, while the Chinese yuan has similarly surged from 1,200 to 2,400 won. These sharp increases are not merely numerical shifts -- they are harbingers of a deeper economic malaise. Behind the numbers lie stories of hoarding, speculation, and a government desperately clinging to an eroding system of control.

The anatomy of crisis

The partial reopening of the border with China, North Korea's economic lifeline, initially brought a wave of optimism. But the surge in imports also ignited demand for foreign currencies, as domestic products failed to meet the needs or expectations of the population. This reliance on imported goods, from rice to electronics, exposed the structural weaknesses of North Korea's economy.

Compounding this issue is waning trust in the North Korean won. Haunted by memories of the 2009 currency reform -- a catastrophic event that wiped out life savings overnight -- North Koreans have little faith in their national currency. Many rush to exchange their won for U.S. dollars or Chinese yuan, viewing these currencies as safe havens in a turbulent sea. This flight to stability fuels speculation, where opportunists hoard foreign currency and essential goods, driving up prices and deepening the population's misery.

At its core, this crisis shows the regime's failure to stabilize the economy or provide basic necessities. With food shortages worsening, those fortunate enough to possess food stockpiles or foreign currency hold immense power, exploiting the desperation of others. The price of rice, once 5,000 won per kilogram, now surpasses 8,000 won in some regions -- a stark reminder of how economic collapse manifests in the lives of ordinary citizens.

Currency reform and the shadows of 2009

The rumors of another currency reform, as reported by Japan's Asia Press, have further destabilized the fragile economic environment. North Korea's issuance of temporary notes and increased restrictions on foreign currency transactions have stoked fears that the regime might again resort to confiscating wealth under the guise of reform.

The 2009 currency reform is a painful memory etched into the collective psyche of North Koreans. Announced without warning, it limited currency conversions to 100,000 won, rendering most people's savings worthless overnight. Families who had painstakingly accumulated wealth saw it evaporate in an instant. In the streets of Pyongyang, shredded banknotes floated in the rivers, a silent protest against the regime's betrayal.

The aftermath was devastating. Prices skyrocketed as the new currency lost its value within weeks, plunging the population into deeper poverty. The scars of that event remain visible today in the widespread preference for foreign currencies and the black-market economy that thrives despite government crackdowns.

The real cost of control

The government's push for cashless transactions, ostensibly a step toward modernization, is yet another attempt to tighten its grip on economic activity. By promoting card usage, the regime aims to monitor and control financial flows. However, this policy is undermined by North Korea's unreliable electricity, lack of internet infrastructure, and limited public understanding of digital finance. Rather than fostering modernization, it highlights the regime's inability to address the root causes of economic instability.

Kim Jong Un's economic policies, driven by an outdated centrally planned model, exacerbate the crisis. His rejection of market mechanisms and insistence on state control have led to inefficiency, waste, and widespread poverty. While markets emerged as survival tools during the famine of the 1990s, Kim's regime has sought to suppress them, fearing their potential to undermine his authority. This approach, however, only deepens the population's reliance on informal networks and erodes trust in the regime.

A desperate nation

North Korea's economy is a reflection of its governance: opaque, repressive, and disconnected from the realities of its people. The current crisis in exchange rates and food prices is not just an economic problem; it is a human tragedy, marked by empty rice bowls and children going hungry. The people of North Korea are resilient, but their resilience is tested daily by a system that prioritizes control over welfare.

The path forward requires more than short-term fixes. It demands a fundamental shift in the regime's priorities, from preserving power to empowering its people. Economic liberalization, the establishment of stable financial institutions, and engagement with the global community are essential steps. Yet, these solutions remain unattainable under the current leadership, which views reform as a threat to its survival.

As I reflect on North Korea's economic turmoil, I am reminded of the strength and resourcefulness of its people. They endure despite the odds, finding ways to survive in a system that often works against them. Their perseverance deserves recognition, and their plight calls for action -- from within the regime and the international community alike.

The numbers -- 18,000 won per dollar, 10,000 won per kilogram of rice -- are not just statistics. They are the cries of a nation in distress, yearning for change. It is time for the world to listen.

Ri Jong-ho is a former senior North Korean economic official who served under all three leaders of the Kim family regime. His most recent role was in Dalian, China, where he headed the Korea Daehung Trading Corporation, overseen by the clandestine Office 39 under the direct control of the ruling Kim family. Before his assignment in Dalian, Ri held pivotal positions, including Executive Director of the Daehung General Bureau of the North Korean Workers' Party, a role equivalent to Vice-Minister rank in the North Korean party-state. Subsequently, he was appointed Chairman of the Korea Kumgang Economic Development Group (KKG) under the North Korean Defense Committee by Kim Jong Il. Ri is a recipient of the Hero of Labor Award, the highest civilian honor in North Korea.

Lee Hyun-seung is a North Korean escapee and human rights advocate. With an extensive background in international business and military affairs in North Korea, he has contributed to the U.S. government and policy community as a consultant. Lee has held numerous positions, including a Lead Strategist at the Global Peace Foundation and an advisory role at the Committee for Human Rights in North Korea (HRNK). Lee is a frequent contributor to media platforms like Voice of America, Radio Free Asia, and UPI. He holds a Bachelor's degree in International Trade and Economics from Dongbei University in China and a Master's degree in Public Administration from Columbia University.