North Korea’s Kim Jong Un is trying to roll back the use of the US dollar and China’s yuan as a way to solidify his power, the Associated Press reported.
For more than a decade, North Korea permitted the use of more stable currencies like the yuan and the dollar, particularly after the revaluation of the North Korean won triggered massive inflation in 2009.
This “dollarization” eased North Korea’s inflation and stabilize exchange rates, which allowed Kim to establish his hold on power when he became North Korea’s leader in late 2011.
But the “dollarization” trend now poses a threat to Kim’s power by undermining his government’s control of monetary policies and the money supply.
Lim Eul-chul, a professor from Seoul’s Kyungnam University, told the Associated Press that with Kim “locked in confrontations” with the United States, he has no choice but to strengthen his hold over North Korea’s economy. As such, North Korea’s economy is currently focused on controlling the markets to limit the demand for US dollars, Lim said.
However, the confusion and anger over banning the use of the dollar and yuan would likely backfire on North Korea, according to experts.
An analyst at South Korea’s Korea Institute for National Unification told the Associated Press that the North Korean people would likely resist any attempt by Pyongyang to confiscate foreign currency, especially in light of the lack of public trust in the North’s economic policies.
There are two exchange rates for the North Korean won, one is set artificially high by the government while the other is set by the market.
Since 2012, the won stabilized at about 8,000 per US dollar. But in 2020, the won strengthened after North Korea sealed its borders during the pandemic. By late 2020, the won was trading at about 6,700-7,000 per US dollar. In the first half of 2022, it traded at 5,200-7,500 per US dollar only to drop back to around 8,000 per US dollar at the end of 2022.