Does North Korea Have a Central Bank?

North Korea maintains a central banking institution, officially known as the Central Bank of the Democratic People’s Republic of Korea. This institution serves a foundational role in the nation’s financial system by managing the national currency and overseeing monetary affairs. Its primary purpose is to manage the monetary system of the country, which includes the issuance of currency and the regulation of financial flows within the economy.

The Central Bank’s Establishment and Structure

The Central Bank of the Democratic People’s Republic of Korea was formally established on December 6, 1947. Its origins trace back to a central bank created in January 1946, which initially operated under Soviet control. In 1959, the Farmers’ Bank was merged into the Central Bank, consolidating the country’s banking system.

Administratively, the Central Bank is subordinated to the Cabinet of North Korea. The Workers’ Party of Korea exerts significant political control over the bank, reflecting the party’s overarching authority. This hierarchical structure ensures the bank’s operations align with broader state and party directives. The institution maintains an extensive network of over 220 branches. Since 2023, the president of the bank has been Paek Min Gwang, who is accountable to the Cabinet.

Primary Responsibilities of the Central Bank

The Central Bank of the Democratic People’s Republic of Korea holds the exclusive authority to issue the North Korean won. This responsibility includes managing currency circulation and controlling the money supply within the economy. The bank is also tasked with managing state finances, acting as the government’s banker by receiving all national revenues and precious metals. It provides working capital to government agencies and manages the national treasury.

The bank oversees other state-owned financial institutions, supervising their operations and ensuring adherence to national financial policies. It has the power to provide loans to banking institutions. Furthermore, the Central Bank organizes payment systems and determines standard exchange rates and interest rates. The Central Bank also directly engages in commercial banking activities, including retail finance, corporate finance, and even insurance services.

Operational Context within North Korea’s Economy

The Central Bank operates within North Korea’s distinctive command economy, where the state maintains comprehensive control over the means of production and economic planning. In this centrally planned system, monetary policy is not determined by market mechanisms but rather by direct state directives aimed at supporting national financial planning. This approach means the bank’s role involves allocating credit and resources in line with government-set priorities, rather than influencing economic activity through interest rates or open market operations typical of market economies.

International sanctions have profoundly impacted the bank’s operations and the broader North Korean financial system. These sanctions target trade, financial assets, and banking transactions. The country’s disconnection from global financial messaging platforms like SWIFT has further isolated its banking system. This isolation has compelled the bank and the government to navigate challenges such as reduced trade and difficulties in securing essential imports.

The challenging economic environment has led to the widespread use of foreign currencies, which circulate alongside the North Korean won. This “dollarization” phenomenon presents a complex challenge for the Central Bank’s ability to control the money supply and maintain the won’s value. North Koreans increasingly rely on commodity exchanges and foreign currency for daily transactions, and the government frequently attempts to regulate or suppress this parallel economy.