 The late North Korean leader Kim Jong-il looks at canned food in Kwangbok Area Supermarket in Pyongyang in this photo taken on Dec. 15 last year. / Korea Times |
North Korea is apparently allowing foreign currency to be exchanged at unofficial, black market rates at a newly-renovated department store in Pyongyang, according to a diplomatic source who recently visited the country, Tuesday.
The source said people could exchange euros, dollars and yuan at kiosks at Kwangbok Area Supermarket, which recently opened after refurbishment and is said to resemble department stores in the South. The North has long kept the value of its local currency artificially high.
Euros were being exchanged at the rate of one euro for 4,420 North Korean won, while the official rate is around 130 won per euro, the source said.
“They are exchanging hard currency at a rate that seems to be an unofficial rate,” the source told The Korea Times. “People can also shop at the department store using foreign currency by taking their receipts to the booths.”
An official of the Ministry of Unification could not confirm the development. Another recent visitor to the North had heard of the kiosks from sources there but did not visit the department store directly.
Given the high visibility of the store ㅡ late North Korean leader Kim Jong-il made his last on-site inspection there before his death in December ㅡ observers said any currency exchanges there were in all likelihood known of by authorities.
The source added that the exchange rates were written on a board inside the kiosks.
Products at the store were priced in won. Prices, when calculated in terms of the black market exchange rate, were reasonable, the source said, adding that bread and fruit appeared to be selling particularly well.
Word of the booths comes amid speculation over the growing role of foreign currency in the North Korean economy, where the value of the won has eroded in the wake of a disastrous currency revaluation in 2009.
The revaluation, experts say, was carried out to control a bourgeoning market system. But after the measure sent inflation soaring, Pyongyang turned a blind eye to the activities. As the won has eroded, the importance of foreign currency has grown.
Foreign currency is said to enter the North mostly though cross-border trade with China and remittances from abroad.
Some analysts say Pyongyang is making an all-out effort to gather hard currency and re-circulate won to strengthen state control over the economy, which in recent years has become increasingly reliant on private business activity and foreign currency-based commerce.
“My interpretation is that the regime is doing this to control the inflow of hard currency and absorb it by allowing people to buy goods at an acceptable exchange rate,” the source said of the activity at the store. “The effect for the people is that it increases their buying power.”
The Washington Post said last week that aid groups visiting the North had reported the recent opening of official kiosks for people to convert Chinese and U.S. currency at the black market rate.
The death of Kim Jong-il and the rise of his youngest son, Kim Jong-un as the new leader has raised cautious hope over possible economic reforms in the communist state. But the North, which this year has promised to emerge as a prosperous state, has given little real indication of its future policy.
Among those urging economic reform is China, the North Korea’s biggest ally. The redevelopment of the Kwangbok supermarket was reportedly ordered after the late Kim’s travels to his giant neighbor in his final years. The reconstruction was reportedly financed with Chinese capital.
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