What Is the North Korean Won (KPW)?
The North Korean won (KPW), previously known as the Korean peoples' won, is the official currency of North Korea. The KPW, can be subdivided into 100 chon.
The KPW is not convertible into foreign currencies, and as a blocked currency it is difficult to exchange it and is unavailable for trade on forex markets.. The North Korean government, which keeps into under strict control, uses a special convertible won for use by foreign visitors when in country.
As of September 2020, U.S. $1 is worth roughly 900 KPW.
- The North Korean won (KPW) is the official currency of the Democratic Peoples' Republic of Korea (DPRK).
- Due to its isolationist policies, communist government, and command economy, the state of economy of the country is shrouded in opacity, but is widely believed to be struggling.
- As a result, economic and political sanctions have made the currency inconvertible and blocked on forex markets as well as in international trade.
Understanding the North Korean Won
The North Korean won is the currency of record within North Korea's centralized economy, meaning that it is controlled by the communist 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 underwent a controversial, and quite 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 at 1 percent of its existing value. The result was that any and all savings individual citizens had accumulated were essentially wiped out by 99%.
The North Korean Economy
Korea was historically an independent kingdom. However, following the Russo-Japanese War, the Korean peninsula was formally annexed by the Japanese. Korea remained a Japanese colony from 1910 to 1945. After World War II, the Japanese forces in the northern region of Korea surrendered to the Soviet Union. As Japanese forces withdrew (and the Japanese occupation effectively ended), Soviet troops took control of the northern region of the country. At the same time, American troops took charge of the southern region. The North and South remained in conflict with one another, culminating in the U.S.-involved Korean war from 1950-1953, after which time the North locked down and isolated itself.
The country of North Korea, officially known as the Democratic People’s Republic of Korea (DPRK), has an isolated and tightly controlled command economy. A command economy is a standard component of any communist country. In a command economy, the economy is centrally planned and coordinated by the government. The North Korean State and the communist party determine what goods should be produced and by whom, how much should be produced, and the price at which the goods are offered for sale.
Poverty and civil strife has increased exponentially over the past decades 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.
North Korea's gross national income per capita stood at 1.408 million won (U.S. $1,185) in 2019, just 3.8% of that of South Korea's.