DPRK Briefing Book: Tables of Modern Monetary Systems: Asia
Kurt Schuler, preliminary version, February 29, 2004, at www.dollarization.org. Copyright 2004 by Kurt Schuler; reproduced by permission.
Also known as the Democratic People’s Republic of Korea. Independent in a split of Korea on 9 September 1948.
Before 1945, see Korea, South and pre-1945 united. At the end of the Second World War, Japan surrendered Korea, which had been a Japanese colony. The Union of Soviet Socialist Republics (USSR), which had entered the war against Japan on 8 August 1945, only a week before the war ended, was given the administration of the country north of the 45 th Parallel; the United States was given the administration of the southern part of the country. The United States did not want a unified communist Korea and the USSR did not want a united capitalist Korea. On 9 September 1948, soon after the Republic of Korea had been established in the south, the northern zone became the communist Democratic People’s Republic of Korea under the dictatorship of Kim Il Sung. North Korean troops invaded South Korea on 25 June 1950, beginning the Korean War. United Nations troops, consisting chiefly of U.S. soldiers, came to the aid of South Korea. Chinese soldiers reinforced the North Korean army, which was also supplied with equipment by the USSR. After bloody fighting that claimed more than 2.5 million lives and left the division of the country approximately as it had been before the war, an armistice was signed on 27 July 1953. Kim Il Sung remained in power until his death on 8 July 1994; his son, Kim Jong Il, succeeded him. Kim Il Sung transformed Korea into one of the most militarized and repressive countries in the world, centered on a cult of his personality. North Korea’s autarkic, centrally planned economy has been unable to provide even subsistence for all its people: as many as 2 million North Koreans have died in famines since 1994. The government has used famine as a political weapon to kill whole regions of people whose loyalty to the regime is suspected to be weak. North Korea has chosen to devote considerable resources to developing nuclear weapons, and as of 2004 claimed it had such weapons.
Wars since 1500
For united Korea, see Korea, South and pre-1945 united. Independent North Korea’s only war has been the Korean War, 1950-1953 (North Korea and China, supported by Union of Soviet Socialist Republics, against South Korea, United States, and allies).
North Korea’s currency has always had strict exchange controls; as of 2004 they may be the strictest in the world.
Defaults on or restructurings of debt to the foreign private sector: 1980.
Banking crises: None, although by the late 1990s the economy was in deep trouble. Information is quite scarce.
Frankel and Rose (1996) list of currency crashes: None.
Primary sources: See the publications of the monetary authorities, and the laws listed in the “Legal basis” column.
Main secondary sources: Bank of Korea (1994, 2000), K. S. Kim (1995), P. Y. Kim (1995).
Monetary authorities: Korea, North Dates Type Name Legal basis Remarks 15 August 1945
-5 December 1947 central bank (with commercial banking functions) (as part of currency union) Han’guk Chosun (Bank of Chosun, or Chosen, or Korea) (headquarters Seoul, Korea) Japan, Bank of Chosun [or Chosen] Act, 1 August 1911 Before this period, North and South Korea were united; see the table for South Korea for details. During the period, the Bank of Chosun continued to operate after Japan’s surrender and withdrawal from Korea following the Second World War. North Korea issued its first coins in 1959. 6 December 1947
-present monobank Chung-ang Un-haeng Cho-sun Min-ju-ju-i In-min Kong-hwa-guk (Central Bank of the People’s Democratic Republic of Korea) (headquarters Pyongyang, North Korea) North Korea established a central bank and national currency separate from those of South Korea. It had nationalized banks in August 1946. North Korea is the largest country in existence today that has never belonged to the IMF.
Exchange rate arrangements: Korea, North Dates Arrangement Legal basis Remarks 15 August 1945
-5 December 1947 fixed; used Korean won (as part of currency union) Before this period, North and South Korea were united; see the table for South Korea for details. After the Second World War ended, they continued to have a unified currency until their ideological differences became acutely apparent. The Korean won was a decimal currency whose first modern decimal coins had been issued in 1882. 6 December 1947
-1958 North Korean won, managed float, multiple rates A currency exchange and confiscation from 6-12 December 1947 exchanged old Japanese-era currency for North Korean won at rates varying from 1-to-1 to 10-to-1. The Korean word “won” is based on the same Chinese character as the word for the (Japanese) yen, meaning “circle.” 1958
-16 February 1959 hard peg, multiple rates; 1 North Korean won = 1 Soviet ruble (controlled) Officially became attached to the Soviet currency bloc. 17 February 1959
-31 December 1960 hard peg, multiple rates; 0.30 new North Korean won = 1 Soviet ruble (controlled) Introduced a new currency from 13-17 February 1959 at 1 new North Korean won = 100 old North Korean won. No currency confiscation occurred. 1 January 1961
-October 1974 hard peg, multiple rates; 1.33 North Korean won = 1 new Soviet ruble (controlled) no action by North Korea The Union of Soviet Socialist Republics redenominated its currency at 10 old Soviet rubles = 1 new Soviet ruble and devalued the ruble, for purposes of foreign trade only, from 10 old Soviet rubles = US$2.50 to 1 new Soviet ruble = US$1.10. The nominal cross rate against the US dollar remained 1.20 North Korean won = US$1. There was also a noncommercial rate of 1.44 North Korean won = 1 Soviet ruble for the ruble area and another noncommercial rate of 2.57 North Korean won = US$1 for transactions with capitalist countries. October 1974
-1990 managed float, multiple rates (controlled) Apparently the former rate of 1.33 North Korean won = 1 Soviet ruble continued to apply, but did not have the same significance for North Korea’s foreign trade. Old currency was exchanged for new, redesigned currency without limit at 1-to-1 from 7-12 April 1979. 1990
-present hard peg, multiple rates (controlled); official rate 0.97 North Koran won = US$1 A currency confiscation occurred on 15 July 1992, as old currency was again exchanged for new currency at 1-to-1 from 15-20 July 1992. Up to 399 North Korean won could be exchanged in cash. Amounts of 400-30,000 North Korean won could be deposited into bank accounts not immediately available for withdrawal, while amounts over 30,000 North Korean won were not accepted. A trade rate of 2.15 North Korean won = US$1 began in 1988. There have been de facto devaluations from that rate to 150 North Korean won = US$1 on 1 August 2002 and to 900 North Korean won = US$1 in August? 2003.