What Is North Korea’s Currency and How Is It Used?
Learn about North Korea's complex currency, its official value, and its real-world function amidst foreign money.
North Korea’s currency system is profoundly shaped by the nation’s isolated economic policies and strict governmental control. Understanding its financial landscape requires examining its official currency, how its value is managed, and its practical application. This system operates distinctly from typical market-driven economies, reflecting a centralized approach to monetary management.
The North Korean Won
The official currency of North Korea is the Korean People’s Won (KPW), symbol ₩. It is subdivided into 100 chon. The Central Bank of the Democratic People’s Republic of Korea issues and manages the currency.
Banknotes range from 5 to 5,000 won. Coins are rarely used due to their low value.
The won has undergone several significant revaluations, with notable reforms in 1959 and 2009. The 2009 revaluation, the third incarnation of the won, was particularly impactful, exchanging old notes for new ones at a rate of 100 to 1. This measure, intended to curb inflation and control private market activities, effectively wiped out a substantial portion of citizens’ savings, leading to widespread economic hardship.
Official Exchange Rates and Unofficial Markets
The North Korean government establishes an official exchange rate for the won, which significantly overvalues the currency compared to international standards. This rate does not reflect the currency’s true market value. Historically, the won was symbolically pegged to the US dollar at 2.16 won, a rate chosen based on Kim Jong Il’s birthday, though this peg was abandoned in 2001.
A substantial disparity exists between this official rate and rates found in unofficial, or black, markets, where foreign currencies are traded. In these unofficial settings, the North Korean won trades at a much weaker rate against major foreign currencies like the US dollar, Chinese Yuan, and Euro. For example, reports indicate black market rates around ₩4,000 per US dollar in 2009, with more recent estimates closer to ₩9,000 per US dollar.
This significant gap is a consequence of the country’s highly centralized, state-controlled economy, severe economic isolation due to international sanctions, and a persistent demand for foreign goods and capital. The dual-rate system has practical implications for residents and the broader economy. It creates an environment where access to foreign currency becomes a necessity for many transactions, especially for higher-value goods or services not readily available through official channels. This unofficial economy often undermines state control and contributes to economic instability for citizens.
Usage Within North Korea
Within North Korea, the won is used for daily transactions, such as purchasing goods in state-run stores or paying for public services. However, its utility is limited by the availability of goods and the currency’s purchasing power in the official economy. This creates a reliance on other means for acquiring various necessities.
There is a parallel use of foreign currencies, primarily the Chinese Yuan and US Dollars. These foreign currencies are widely accepted for higher-value transactions and for acquiring goods that are either scarce or expensive in the official economy. The prevalence of foreign currency use varies across different social strata and regions within the country.
While the North Korean won is the official medium of exchange, it cannot be freely traded on international foreign exchange markets. The government historically maintained different currency systems for its citizens and foreign visitors, including special foreign exchange certificates for external use. This system has evolved, and foreigners are now expected to use hard currency directly for transactions within the country.
The possession and use of foreign currency by North Korean citizens face restrictions and regulations, reflecting the government’s efforts to maintain control over the economy and limit the influence of external markets. Despite these controls, the practical necessity and demand for foreign currency have led to its widespread, albeit unofficial, circulation, shaping daily economic life for many North Koreans.