What is the North Korean Won (KPW)
The North Korean won (KPW), previously known as the Korean people’s won, is the official currency of North Korea. The KPW, which is subdivided into 100 chon, or monetary subunits, is not convertible to foreign currencies. The North Korean government, which keeps into under strict control, uses a special convertible won for use by foreign visitors when in country.
BREAKING DOWN North Korean Won (KPW)
The North Korean won is the currency of record within North Korea's centralized economy, meaning that it is controlled by the state. As a result of that state control, getting accurate information about the North Korean economy can be difficult. State control can also lead to some unique monetary policy decisions. For example, in 2001 the government removed the rate of 2.16 won to one dollar, allegedly a symbolic because rumors were that it was based on former Supreme Leader Kim Jong-il’s February 16 birthday. State banks now issue banknotes at rates closer to the black market rate.
The Central Bank of the Democratic People’s Republic of Korea has complete authority over the KPW, being responsible for its regulation and issuance. It processes all national revenues and precious metals and funds all government agencies throughout the country. The central bank also has oversight of several state banks, including the Foreign Trade Bank, which is responsible for processing foreign transactions and foreign currencies.
The North Korean Won and 2009 Revaluation
The North Korean won underwent a controversial, and costly, revaluation in November 2009. The government wanted to tighten control over the country’s markets, and the won proved to be its method of choice. The goal of the currency overhaul was to tamp down inflation and take back the nation’s economy from merchants on the black market. The revaluation was to 1 percent of its existing value. The result was that any and all savings individual citizens had accumulated were essentially wiped out.
Civil unrest increased exponentially as the private sector originally gained steam because the state was unable to provide the populace with sufficient food. Facing a food crisis, the government allowed select wholesale market activity, including farmer’s markets, starting in 2002. But as those markets developed and threatened Kim Jong-il’s totalitarian rule, and that of his successors, he stepped in with the revaluation. The move effectively shut down private markets and threw the country and its citizens into a deep economic crisis.