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(This article is a revised version based on the contents of Chapter 3 of the following research report in which the author participated: Choi Ji-young et al. (2025), Crisis and Response of North Korea as a Social System: 2021–2025, Korea Institute for National Unification (KINU).)

Introduction

At the time of the 8th Party Congress in 2021, North Korea faced severe economic difficulties. In 2020, North Korea’s economic growth rate was -4.5%, recording the lowest figure since the economic crisis of the 1990s, and negative growth continued until 2022. Of course, given that North Korea is a low-income country with a per capita income of around $1,000 and that the cause impeding economic development lies in excessive defense spending, the structural causes of the economic crisis did not suddenly emerge in 2021–2025. The deepening of North Korea’s economic difficulties at the time of the 8th Party Congress was due to new shocks added to existing structural crises: specifically, the strengthening of UN Security Council sanctions against North Korea and the trade shock resulting from the COVID-19 border blockade.

The economic crisis of the past five years resembles the crisis of the 1990s in that it originated from a trade shock. The strengthening of UN Security Council sanctions brought about an export shock, while the COVID-19 border blockade caused an import shock; consequently, the scale of North Korea’s trade in 2020–2021 shrank to levels smaller than in the early 1990s, immediately following the collapse of the socialist bloc. It was no exaggeration to call it a virtually closed economy. After acknowledging the failure of the 3rd Seven-Year Plan in 1987–1993, North Korea admitted[2] for the first time that the goals of the 5-Year Strategy for National Economic Development (2016–2020) fell "tremendously short in almost all sectors." The economic crisis at the time of the 8th Party Congress also bears significant resemblance to the crisis of the 1990s in that the trade shock led to the failure of economic planning.

The similarity to the 1990s is also high in that the economic crisis triggered by the trade shock deepened shortages in two critical resources for operating the North Korean economy: food and finance. The import shock not only reduced grain imports but also negatively affected domestic grain production through a decrease in the supply of agricultural raw materials such as fertilizer. The export shock signified a decrease in North Korea’s foreign currency earnings, which led to a deterioration of fiscal conditions given that a significant portion of exports is linked to enterprises under the Party and the military.

We can observe the deepening of the food and fiscal crises over the past five years through various indicators; what is notable is North Korea’s method of responding to the crisis. Over the past five years, the North Korean regime has responded relatively quickly and actively to the economic crisis through various policies, which differs from the tepid policy response of the 1990s. After acknowledging the failure of the 3rd Seven-Year Plan in 1993, North Korea merely set 1994–1996 as a buffer period and did not establish a concrete economic development plan. Conversely, the National Economic Development Plan (2021–2025) was established immediately after the failure of the existing 5-Year Plan (2016–2020), and the achievement of goals for key products, such as the "12 Major Goals," was emphasized. Policy responses to the food and fiscal crises were also filled with quite concrete measures. This paper examines the unfolding process of North Korea's food and fiscal crises over the past five years and the achievements and limitations of the policy responses thereto.

1. The Unfolding of the Food Crisis and Response

1) The Process of the Food Crisis Unfolding

Immediately after the outbreak of the COVID-19 pandemic in 2020, North Korea sealed its borders and implemented strong quarantine policies. Considering North Korea’s fragile health and medical infrastructure, there were concerns that the epidemic crisis could trigger significant population loss. It appears the North Korean regime judged the health crisis to be more serious than the economic crisis. The sudden border blockade and movement controls particularly deepened food shortages; the border blockade reduced food availability through decreased imports, while the decline in economic participation due to movement controls led to reduced purchasing power, thereby lowering food accessibility.

Generally, food security can be evaluated[3] in terms of availability, access, utilization, and stability; availability, which can be referred to as the total amount of food disposable to people, becomes the starting point of food security. Because North Korea is a country with chronic food shortages where supply is always insufficient relative to demand in terms of availability, it is very vulnerable even to temporary decreases in supply volume. In 2021, when the 8th Party Congress was held, North Korea’s food security deteriorated significantly because food availability decreased due to reductions in both domestic production and external imports.

Since Kim Jong Un came to power, food crop production had typically been between 4.5 and 4.8 million tons, but in 2020 it recorded a low of 4.4 million tons, and external imports were also at their lowest in 2021. In other words, the total food availability in North Korea appears to have been at its worst in 2021. This is because it was the year when grains produced in 2020 were distributed, while external imports were at their lowest.

[Figure 1] North Korea’s Food Supply (Domestic Production and External Imports)

Note: 1) The figure on the left is the Rural Development Administration (South Korea) estimate of North Korea’s food crop production.

        2) External imports are based on UN Comtrade statistics for exports to North Korea by country for 2012–2023 (HS 1003, 1005, 1006, 1008, 1101, 1108) (Accessed 2025.5.12.)

Source: Ministry of Unification North Korea Statistics Portal (Accessed: 2025.11.4.); UN Comtrade (Accessed: 2025.11.4.).

The deterioration in food accessibility was attributed to the control policies of the North Korean authorities to suppress the spread of COVID-19. The North Korean authorities declared a National Emergency anti-Epidemic System immediately after the occurrence of COVID-19 (Jan. 24, 2020), adopted the "Emergency Anti-Epidemic Law" (Aug. 22, 2020), and shifted to a posture preparing for a "prolonged" emergency anti-epidemic situation in the second half of 2021. While many countries began to relax movement controls as they started vaccinations from the second half of 2021, North Korea rejected vaccine support offered by COVAX at the time and maintained strict quarantine policies until the period when the Omicron variant spread and subsided in the first half of 2022. During the pandemic period, measures were taken to expand the spacing between stalls in markets,[4] and during the actual spread of Omicron, markets were closed or operating hours were reduced.[5] These strengthened quarantine policies acted as a factor making food acquisition difficult by blocking income-generating opportunities through hindering participation in economic activities.[6][7] Furthermore, strengthened controls on market transactions and inter-regional movement weakened food stability by expanding the volatility of food prices. In 2021, the prices of major grains in North Korean markets rose relatively sharply, and a phenomenon of widening price deviations between regions was also observed. Food utilization also generally declined. The border blockade reduced the supply not only of grain imports but also of processed food products with high import dependence, such as cooking oil, sugar, and wheat flour. According to a survey by the World Food Programme (WFP), the dietary diversity of surveyed households in 2021 had deteriorated compared to 2019.[8]

As such, North Korea’s food security regressed significantly during the COVID-19 pandemic. At the time, while many countries had to make policy choices between the two values of responding to the health crisis and economic interests, the fragile health infrastructure and the difficulty in acquiring COVID vaccines seem to have compelled North Korea to choose an excessively harsh response. The policy response to the health crisis inevitably brought about significant side effects in terms of the food crisis; what is notable is the North Korean regime's response to this. Immediately after food shortages deepened in 2021, the North Korean regime acknowledged the crisis, responded immediately through the issuance of a "Special Order,"[9] and presented policies focused on agriculture and rural areas to resolve the food problem through the year-end Plenary Meeting. The fact that North Korea’s food crisis during the COVID pandemic did not deepen as much as in the 1990s is partly due to the temporary nature of the health crisis and the existence of new distribution channels called markets, but it can also be seen as the result of immediate and concentrated policy responses.

2) Policy Response to the Food Crisis

North Korea’s response to the food crisis in 2021–2025 was immediate and concentrated, contrasting with the tepid policy response of the 1990s. The policy response can be broadly divided into aspects of food production and distribution, which can be seen as strategies to enhance the "availability" and "accessibility" of food security, respectively.

A. Food Production Policy: ‘Program for Socialist Rural Revolution in the New Era’

First, let us examine the policy response to expand food production. At the Party Plenary Meeting at the end of 2021, North Korea adopted a 10-year long-term plan called the "Program for Socialist Rural Revolution in the New Era"; this can be termed a "concentrated policy on agriculture and rural areas" in that labor and capital inputs into the agricultural sector were expanded, while various incentive-granting policies for farmers, such as the construction of rural housing, were prepared. First, let us look at the expansion of capital input. In 2022, while the overall budget scale remained almost unchanged at around 1%, North Korea separately organized budget items for the agriculture and rural sectors and significantly expanded expenditures compared to the previous year.[10] The expansion of budget expenditures for the agriculture and rural sectors was maintained at 14.7% in 2023, largely exceeding the planned total increase rate of 1.7%. The structure of North Korea’s budget expenditures in 2022–2023 directly reflects the policy interest in resolving the food problem. Along with the expansion of fiscal spending on the agriculture and rural sectors, a financial measure to write off "unpaid loans" of farms was also executed. At the 4th Plenary Meeting of the 8th Central Committee where the "Program for Socialist Rural Revolution in the New Era" was presented, a "special measure to exempt" funds that cooperative farms had borrowed from the state but could not repay was declared[11] as part of "analyzing the overall financial status of cooperative farms in detail" and as an "important measure to reinforce the economic foundations" of the farms. This measure has the significance of improving the financial conditions of agricultural production units while simultaneously enhancing incentives for agricultural workers.[12] Regarding policies on the expansion of labor input, while not confirmed in official documents, testimonies from North Korean defectors confirm that labor mobilization for farms was intensively carried out in 2021–2023. From around 2020–2021 when the COVID pandemic began, separation of farm members and workers began through crackdowns on workers residing in farm member villages in rural areas, and there were instructions that "even the working class living in farm villages must go out to the farms and work." Additionally, inspections and crackdowns on former farm members who had migrated to cities began, and it is confirmed that massive measures for the return of farm members were carried out in August 2023.[13]

While the expansion of labor and capital in the agricultural sector is essentially required to increase food production, there is a possibility that the constraints on the North Korean authorities’ policy response were significant. This is because expanding budget expenditures in the agriculture and rural sectors amidst a deepening fiscal crisis requires sacrifices in other sectors. Nevertheless, the immediate and concentrated policy response showed positive effects in terms of alleviating the food crisis. As a result of expanding labor and capital inputs in 2021–2023, North Korea’s domestic grain production began to rebound by a relatively large margin (+6.9%) in 2023.[14]

B. Food Distribution Policy: Strengthening the State Food Administration System

If the "Program for Socialist Rural Revolution in the New Era" is a policy response on the side of food production, the policy of strengthening the state food administration system through the revision of the Food Administration Law and the expansion and installation of Grain Sales Stations is a response on the side of food distribution. Since the crisis of the 1990s, North Korea’s food distribution channels have been largely bifurcated into state rationing and market sales. The state food administration system meant state rationing, but with the revision of the Food Administration Law adding state sales channels for grain, the state food administration system has expanded to encompass both state supply and state sales.

To strengthen the official sector's grain distribution channels, North Korea revised the Farm Law and the Food Administration Law, and adopted the Grain Management Law, thereby reorganizing overall laws related to the procurement, distribution, supply, sales, and consumption of grain. Through the revision of the Farm Law, the priority of achieving the "State Mandatory Grain Procurement Plan" was further emphasized, and the scope of grain that cooperative farms could dispose of independently was significantly reduced.[15] Through the revision of the Food Administration Law, "state sales" of grain were newly established, and the "installation of Grain Sales Stations" was mandated as a distribution channel to implement this. Accordingly, it appears that about 220 Grain Sales Stations have been expanded and installed nationwide in every city, county, and district unit.

According to North Korean defectors, although there are differences by region and period, it is confirmed that Grain Sales Stations were partially operational even before 2020. In other words, the policy to restore the grain distribution channels of the official sector is not a first-time attempt. However, the recent measures to strengthen the state food administration system are somewhat unusual in that previous attempts failed to codify state sales of grain or establish a nationwide system. Above all, the operation of Grain Sales Stations has continued for over three years, and in last year’s "Regional Development 20×10 Policy," "grain management facilities" were included as one of the "three essential constructions." Policy interest in strengthening the state food administration system continues this year as well. The Ministry of Grain Management was newly established in February, and the Grain Management Law was adopted at the 13th Session of the 14th Supreme People's Assembly in September, continuing attempts to regulate "various issues related to the storage, processing, supply, sales, and consumption of grain."

Then, what is the intention of the policy to strengthen the state food administration system? Considering that this policy was paralleled with market control policies for COVID-19 quarantine, the "state sales" of grain seem to have the purpose of replacing "market sales." As is well known, the food rationing system as a public distribution system has operated only discriminatorily for major cadres of the Party, military, and Cabinet or select enterprises since the food crisis of the 1990s, and the majority of general residents excluded from this have purchased grain in markets. The operation of Grain Sales Stations has the effect of incorporating general residents excluded from the discriminatory food supply system into the state food administration system. The state selling food, which is indispensable for survival, can lead to the expansion of political influence over general residents. Meanwhile, investigating the operational status of Grain Sales Stations reveals that, although there are regional and temporal deviations, the sales price is much higher than the state-set rationing price but lower than the market price; maximum sales quantities per household and individual are set; and benefits for preferential households are included. That is, it can be seen as having some effect in relatively alleviating food accessibility for low-income and vulnerable classes.[16] Finally, the state sales of grain contribute to expanding fiscal conditions by having the official sector absorb the grain transaction profits previously gained by market sellers. In early 2024, North Korea took measures to raise the rationing price of food. Although North Korea’s food supply price had maintained a level of 48 KPW/kg for a long time despite the currency reform at the end of 2009 and subsequent market price increases, it was raised to 2,000 KPW/kg in early 2024. Why were such reasons as raising the price of food supply, which was close to free, and introducing state sales by modifying the grain distribution system adopted? The background of this policy shift seems to be the fiscal crisis resulting from prolonged sanctions against North Korea.

2. The Unfolding of the Fiscal Crisis and Response

1) The Process of the Fiscal Crisis Unfolding

The deterioration of national finances in a sanctioned country is a typical phenomenon. Economic sanctions are generally divided into trade sanctions and financial sanctions. Various trade sanctions separate the sanctioned country from the international supply chain, expanding the trade deficit, while financial sanctions make access to international financial markets difficult. Fiscal revenue shrinks due to the decline in production performance, but fiscal expenditure demand increases as people's livelihoods worsen, inevitably expanding the fiscal deficit.

North Korea’s fiscal crisis is also an inevitable result of the UN Security Council sanctions strengthened in 2016–2017. The signals of North Korea’s fiscal crisis that we can identify are as follows:

First is the decrease in North Korea’s export value. The export value decreased from $2.82 billion in 2016 to $1.77 billion in 2017, and to $240 million in 2018. The COVID-19 pandemic further reduced exports that had already plummeted due to sanctions; exports in 2020–2021 amounted to merely $80–90 million. Since North Korea’s major exports before the strengthening of sanctions were led by state institutions such as the Party and the military, the decrease in exports likely led to a fiscal crisis through reduced income for these institutions. Also, given that exports are directly linked to foreign currency income, it is highly likely that the foreign currency holdings of the official sector plummeted.

Second is the change in the scale of official taxes. Although North Korea does not reveal the scale of its finances itself, it announces the planned rates of increase for budget revenue and expenditure through the Supreme People's Assembly every year. Of course, since the planned rates of increase for budget revenue and expenditure have been increasing, albeit slightly, every year since Kim Jong Un took power, there is no basis to view the fiscal scale as having absolutely shrunk. However, it is confirmed that the planned rates of increase for budget revenue and expenditure, which were at the 4–6% level in 2013–2020, slowed significantly to around 1% in 2021–2023.

[Figure 2] North Korea’s Plan for Budget Revenue and Expenditure Increase Rates

Source: Rodong Sinmun (Created by the author based on the Supreme People's Assembly budget report)

Third is the mention of fiscal problems revealed through North Korean media. At major events of the Party and the Cabinet where key economic policies are decided, the regime’s perception of the fiscal crisis is observed. At the 8th Party Congress in 2021, mentions such as the utilization of economic leverages including financial, monetary and price administration appeared, and at the 7th Plenary Meeting of the 8th Central Committee of the Party held in February 2023, "improving the state financial work" was tabled as an agenda item. Signs of deteriorating fiscal conditions can also be partially read in the Supreme People's Assembly budget reports. From 2021 to 2024, it was continuously mentioned that some units fell short of the budget revenue plan and the "state payment plan," and the proportion of content pointing out "defects" in state budget execution was most prominent in 2021. What is notable is that in the 2025 budget report, while there were points made regarding defects in the state budget execution process and regarding economic guidance institutions and officials as in 2021–2024, no mention was observed regarding falling short of the state payment plan.

North Korea’s planned total budget revenue and expenditure increase rates dropped to around 1% in 2021–2023 and then began to rise to the 2–3% range from 2024. Based on this, it can be estimated that the fiscal crisis, like the food crisis, was most severe in 2021–2023. While the fundamental cause of the deterioration in fiscal conditions in 2021–2023 was the severance of overseas demand due to strengthened sanctions, domestic demand also began to contract as domestic production conditions worsened due to the COVID border blockade in 2020–2022. Before 2020, despite the decrease in capital goods imports, imports of raw materials were maintained, so it was difficult to say that industrial production, excluding mining and heavy industry, had significantly contracted. However, as imports of raw materials stopped due to the border blockade in 2020, the regression in manufacturing spread significantly even to light industry, and as economic activities shrank due to strengthened quarantine, North Korea’s economic growth rate recorded the lowest level since the mid-to-late 1990s.

The contraction of domestic production leads to a reduction in the scale of two major fiscal revenues: transaction revenue generated in the process of commodity distribution and state enterprise earnings, which are taxes on the profits of production units. Even if the market economy has spread, it is estimated that the planned economy's involvement is substantial in industries other than agriculture, light industry, and services; thus, the overall stagnation of industrial production likely deteriorated the fiscal conditions of state institutions rapidly.

On the other hand, the expansion of imports and the transition to COVID endemicity after the second half of 2022 are estimated to have acted as factors alleviating the fiscal crisis in terms of revitalizing domestic production. North Korea’s economic growth rate recorded 3.1% and 3.7% in 2023 and 2024, respectively. At the Party Plenary Meeting at the end of 2023, North Korea propagandized that production performance across the people's economy, including the 12 Major Goals, had recovered significantly compared to 2020. In the budget report at the beginning of 2025, the fact that the shortfall in the state payment plan was not mentioned for the first time since 2021 implies that the net income of institutions and enterprises was good enough to meet the state payment plan, meaning North Korea has escaped from the worst fiscal crisis situation.

Also, the expansion of North Korea-Russia cooperation since September 2023 can be seen as having created an opportunity for North Korea to partially overcome the fiscal crisis. This is because the export of military supplies to Russia partially offset the decrease in exports due to strengthened sanctions, and North Korea’s sanctions evasion and violations could become easier. Nevertheless, the fiscal crisis started earlier than the food crisis and is a shock that is more difficult to overcome. Unlike grain which is supplied every harvest season, discovering new sources of foreign currency income is not easy, and despite the strengthening of North Korea-Russia cooperation, exports of goods other than military supplies are not showing a meaningful increase, leading to an accumulating trade deficit.

2) Policy Response to the Fiscal Crisis

If the policy response to the food crisis was immediate and concentrated, the policy response to the fiscal crisis takes on a gradual and multifaceted aspect. Considering the tremendous side effects of the radical currency reform in 2009, the utilization of various policy means and a gradual approach may be positive changes, but the response to the fiscal crisis is difficult to view as effective compared to the response to the food crisis. Below, North Korea’s response to the fiscal crisis is examined in light of the policy direction of the 8th Party Congress regarding the utilization of economic leverages of "financial, monetary, and pricing."

A. Policy Response in the Fiscal Aspect

Policy interventions to expand national finances were observed intensively in 2021–2022, focusing largely on revising existing laws slightly to expand fiscal revenue. First, in 2021, North Korea revised the Finance Law. Items such as self-reserve funds, incentive funds, and prize funds, which production units could retain for their own management activities after paying the state share, were deleted, and the phrase "funds such as self-science and technology development funds and prize funds that were not fully used during the planning period and were to be used by themselves shall not be mobilized into the state budget" was also deleted. Additionally, the "sectoral budget system" was implemented, adding that sectoral revenues and expenditures of the central budget should be "matched independently," and penalties for violations of the Finance Law were also strengthened. The revision of the Finance Law can be seen as having been carried out in a direction to minimize the fiscal deficit by reducing the retained profits of production units and expanding the state’s fiscal revenue. Second, in the 2022 Supreme People's Assembly budget report, a change in the name of taxation on production units and an expansion of "collection income" (a 6.8-fold increase over the previous year), which is taxation on market economic activities, are observed. The name of the profit deduction from production units was changed from the existing State Enterprise Profit (Cooperative Organization Profit) to State Enterprise Earning (Cooperative Organization Earning); based on past precedents, this appears to be intended to expand the centralized mobilization of fiscal revenue by changing the collection method or adjusting the payment targets. Similarly, the increase in "collection income" can also be seen as an intention to expand taxation on market economic activities to expand fiscal conditions.[17]

What should be noted is that despite the policy to expand state fiscal revenue, the Socialist Corporate Responsible Management System introduced in the early days of Kim Jong Un’s rule is being maintained. The core of the Socialist Corporate Responsible Management System can be said to be the "financial management right," which is the enterprise's authority to raise and operate funds independently. With the revision in 2021, the financial management right, which was included only in the existing Enterprise Law, was also reflected in the Finance Law. This means that while North Korea’s economic management methods since Kim Jong Un took power maintain continuity in the big picture, fine-tuning is being attempted according to necessity, the direction of which lies in reducing the retained profits of enterprises and expanding state fiscal revenue.

B. Policy Response in the Financial Aspect

In the financial aspect as well, various policy interventions not observed previously are noticeable. This appears to be because fundraising through financial institutions was desperate in a situation where national finances deteriorated due to prolonged sanctions and the economic downturn caused by the border blockade. Officially confirmed policy interventions include the "declaration of special measures to exempt" unpaid loans of cooperative farms at the 4th Plenary Meeting of the 8th Central Committee at the end of 2021, the enactment of the Loan Law and the Financial Supervision Law in 2023, and measures to revise the Central Bank Law in 2022–2023.

As mentioned above, the measure to write off unpaid loans of cooperative farms was carried out as an extension of the response to the food crisis. It is interpreted that the North Korean authorities paralleled the fiscal policy of expanding budget expenditures and the financial policy of writing off unpaid loans in a situation where food shortages deepened. Originally, in a socialist economic system, banking sector has a strong character of being subordinate to public finance, and when public finance is insufficient, policies are implemented to supplement it with loans. By proposing the "Program for Socialist Rural Revolution in the New Era," the North Korean authorities seem to have mobilized all possible means at the official fiscal and financial level.

The enactment of the Loan Law and the Financial Supervision Law in 2023 shows that North Korea’s response to the fiscal crisis is progressing in a multifaceted way. Provisions regarding commercial banking functions such as loans and financial supervision by the central bank were included only in the existing Commercial Bank Law and Central Bank Law, but with the enactment of the Loan Law and the Financial Supervision Law, the duties and authorities of financial institutions have been further concretized. What is the background for the enactment of these laws? Since Kim Jong Un took power, North Korea has institutionally allowed enterprises to raise funds independently by granting them financial management rights. Also, a system was established to absorb private funds by utilizing the fund intermediation function of commercial banks and to loan this as operating funds for production units. The deterioration of national fiscal conditions due to prolonged sanctions likely expanded the reliance of enterprises on bank loans, and the need to assign responsibility for management and supervision thereof was likely requested; in this regard, the background of the enactment of the Loan Law and the Financial Supervision Law can be understood.

Another thing worth noting in policy interventions in the financial sector is intervention through the central bank, which can be divided into the revision of the Central Bank Law and the issuance of "Central Bank Money Coupon (Donpyo)." In the revision of the Central Bank Law, it is necessary to pay attention to the establishment of an electronic payment system and the creation of foreign currency reserves. While requiring the central bank to standardize the electronic payment system and build a nationwide "unified electronic payment center," it codifies the creation and management of foreign currency reserves necessary for currency stability. If the Financial Supervision Law stipulates the grasp of information on financial transactions, the Central Bank Law can be seen as requiring the digitization of settlement information accompanying commodity transactions. Informatization is one of the most notable policies in North Korea’s response to the fiscal crisis in 2021–2025, and it appears to be used as a measure to prevent fiscal leakage and absorb funds held by the private sector. Also, the foreign currency reserve, added as an independent clause, is defined as "gold and convertible foreign currency held by the government or the central bank for payments to other countries."[18] In North Korean literature, this is also expressed as "foreign currency reserve," which can be said to be a concept close to our foreign exchange reserves.[19] Although the creation and operation of foreign exchange reserves are basic duties of a central bank, they were not included in existing laws but were added in the 2022–2023 revisions. As the trade deficit expanded significantly after the strengthening of sanctions, it is estimated that North Korea’s foreign currency holdings are shrinking, and the need for the central bank to create foreign currency reserves likely expanded.

Next, let us examine the issuance of "Central Bank Money Tokens." "Central Bank Money Tokens are temporary currency with the same status as cash guaranteed and issued by the state"[20]; North Korea issued Central Bank Money Tokens with a face value of 5,000 won in 2021, followed by the issuance of 50,000 won notes in 2022. Immediately after the issuance of Central Bank Money Tokens, various interpretations were attempted regarding their nature, but the dominant assessment was that circulation was not active because households and enterprises avoided using them.[21] However, according to testimonies collected from North Korean defectors who defected recently in 2023–2024, Central Bank Money Tokens were paid in the name of wages or used relatively actively in daily transactions, and North Korean residents even preferred the issuance of the high-denomination 50,000 won notes.[22] Of course, it is difficult to grasp North Korea’s policy intentions solely through the testimonies of defectors, but the statements that "Central Bank Money Tokens" were traded in daily life without distinction from existing cash or that there was a preference for the issuance of high-denomination notes suggest the possibility that this measure acted as a path for currency expansion to a significant extent. In particular, if the proportion of "Central Bank Money Tokens" paid as workers' wages was high, the increase in state-set wages in the second half of 2023 to early 2024 may have acted as an opportunity to significantly increase the money supply. As is well known, North Korea’s market exchange rate has continued a sharp upward trend since the second half of 2023, and if the money supply increased due to the issuance of Central Bank Money Tokens, it could be a cause of the sharp rise in the market exchange rate.

[Table 1] Policy Changes in the ‘Financial, Monetary and Price’ Sectors (2021–2025)

Source: National Intelligence Service, 『Compendium of North Korean Laws』 (Seoul: National Intelligence Service, 2004), Rodong Sinmun, NK Economy, RFA, Asia Press

C. Policy Response in the Price Aspect

Policy responses in the price aspect are also related to the expansion of fiscal revenue in the following aspects. First, attempts are being made to build platforms for collecting information related to prices. The enactment of the Receipt Law and the Electronic Payment Law in 2021, and the revision of the Price Law in 2023 can be seen as attempts by the state to grasp information such as prices, sales, and profits by modernizing payment infrastructure related to daily transactions. The Price Law forces producers to register the prices of goods, and the Electronic Payment Law stipulates that electronic payment information for goods be collected into the "bank electronic payment system." Through this path, electronic payment information on commodity transactions is collected into the "unified electronic payment center" reflected in the revision of the Central Bank Law. Since price information is basic data for securing the basis for fiscal revenue by grasping the sales and profits of sellers, it reflects the intention of the fiscal authorities to minimize fiscal leakage.[23] Second, price management for strengthening state distribution is observed. From the second half of 2023 to early 2024, North Korea raised state-set prices and distributed the "State Unified Price List." The increase in state-set prices means an increase in food supply rationing prices, which appears to be a measure to narrow the gap with prices at Grain Sales Stations. The State Unified Price List can be seen as setting "fixed prices" by type, standard, and brand of goods. Considering that consumer goods state sales channels were newly established through the revision of the "Socialist Commerce Law" as well as the "Food Administration Law," it can be seen as specifically stipulating price limits within the state commercial network.

Conclusion

This paper examined the crisis of the North Korean economy over the past five years in terms of food and finance. While the underdevelopment of the North Korean economy lies in hostile security policies and consequent economic isolation, the strengthening of sanctions against North Korea and the COVID pandemic acted as factors aggravating this further. The crisis of the North Korean economy in 2020–2022 bears significant similarity to the crisis of the mid-to-late 1990s in that it originated from a trade shock. However, differences are also observed in terms of policy responses to break through the crisis. The response to the food crisis was immediate and comprehensive, while the response to the fiscal crisis was gradual and multifaceted. Compared to the mid-to-late 1990s, North Korea is certainly utilizing various policy means to actively intervene in economic problems.

Of course, these policy interventions by the North Korean regime have not achieved only positive effects. While positive effects are observed in terms of alleviating the food crisis, they appear insufficient to resolve the fiscal crisis. In terms of the food crisis, partial achievements such as an increase in domestic grain production in 2023–2024 appear due to policy interventions concentrating labor and capital on agricultural and rural development. Given that "availability" of food is the first starting point of food security, the achievements of the concentrated policy on agriculture and rural areas can be evaluated positively. However, in terms of "accessibility" of food, the results of the policy to strengthen state distribution of grain are somewhat uncertain. This is because, while state sales of grain expand accessibility to low-priced grains such as corn and have partial effects of protecting vulnerable classes, grain prices in the market remain unstable as grain is concentrated in the official sector.

In terms of the fiscal crisis, the negative impact of sanctions is a more difficult problem to overcome. While the utilization of various policies such as gradual enactment and revision of laws, issuance of temporary currency, and information technology means instead of extreme policies like currency reform is worth evaluating positively in itself, it is because offsetting the trade deficit and fiscal deficit with these policies alone is not easy. As such, while the North Korean regime’s response to the economic crisis over the past five years has produced various positive and negative ripple effects, overall economic performance has shown a gradual recovery trend, recording a growth rate exceeding 3% annually since 2023.

The fact that North Korea has overcome the worst economic conditions to some extent is attributed to the strengthening of cooperation with Russia along with policy responses. North Korea’s heavy and chemical industry appeared to grow by 8.1% and 10.7% in 2023 and 2024, respectively; even considering the base effect of the pandemic period, the increased operation rate of the munitions industry seems to have contributed to the partial recovery of manufacturing. Also, the increase in the supply of grain and refined oil likely contributed to alleviating food shortages and promoting economic activities such as transportation. In other words, the factors that allowed North Korea to break through the crisis amidst severe economic isolation over the past five years included various policy responses and the improvement of foreign relations.

The 9th Party Congress will be an important inflection point determining whether the North Korean economy continues its recent recovery trend. Internally, the stabilization of policies attempted over the past five years is key, and externally, economic cooperation with China and Russia is key. While whether the state’s control reinforcement policies on grain and currency circulation will achieve a soft landing is important, since the creation of foreign currency acquisition channels to break through the fiscal crisis is the most urgent problem for North Korea, it is highly likely that various foreign economic projects such as the revitalization of the tourism industry and the fostering of export industries will be presented at the 9th Party Congress.

The problem is that various variables are also emerging in cooperation with China and Russia. If the Russia-Ukraine war ends, the content and scale of economic benefits from North Korea-Russia cooperation could change, and China's attitude toward sanctions on North Korea remains uncertain. For now, it seems highly likely that after the end of the Russia-Ukraine war, North Korea-Russia cooperation will shift to center on the dispatch of North Korean overseas workers, and North Korea-China cooperation will also unfold in forms possible under sanctions, such as the tourism industry. If the dispatch of overseas workers expands and the attraction of foreign tourists increases, North Korea’s external economic relations are expected to be similar to or slightly improved from before the COVID pandemic, and economic growth at the level of 1–2% could be achieved. This means that while the possibility of North Korea facing an economic crisis is low, it also fails to prepare opportunities for growth to escape the low-income level. Although it professes the realization of a socialist powerhouse by 2035, the construction of an economic powerhouse does not seem easy with only "self-reliance under sanctions." 

[2] “Opening Address at the 8th Congress of the Workers' Party of Korea,” Rodong Sinmun, January 6, 2021.

[3] Availability refers to the supply side of food, such as production, stock, and imports. Access refers to factors affecting food security at the household level, such as income, expenditure, markets, and prices. Stability refers to weather, price, and political/economic factors affecting stable access to food, while utilization refers to factors affecting the intake of sufficient energy and nutrients.

[4] “North Korean Residents Protest Measure to Use Market Stalls on Alternate Days,” RFA, April 27, 2021.

[5] “North Korea Expands Market Operating Hours After Declaring End of COVID-19... Managing Public Sentiment?” Daily NK, August 19, 2022.

[6] It is reported that income generation channels were blocked as a significant number of North Korean mines and enterprises suspended operations at the time. Interview with North Korean defector Case J. Choi Ji-young et al., “Study on the State of North Korean Food Security: Focusing on a Comparison with the 1990s,” p. 180.

[7] According to interviews with North Korean defectors, the North Korean authorities strictly controlled access to mountains and seas at the time, causing significant damage to workers earning a living through economic activities related to fishing and forestry, excluding agriculture. Interview with North Korean defector Case 9 (July 2, 2025, KINU).

[8] WFP (2021a), Household food security in the DPRK, re-cited in: Lee Ji-soon et al. (2024), Changes in the North Korean Food System and the Inter-Korean Food Exchange Program, NRC Cooperative Research Series.

[9] Through the 3rd Plenary Meeting of the 8th Central Committee, North Korea exceptionally mentioned that the people's “food situation has grown tense” due to the failure of the national grain procurement plan the previous year, and Chairman Kim Jong-un directly issued a “Special Order” to stabilize people's livelihoods. “Convening of the 3rd Plenary Meeting of the 8th Central Committee of the Workers' Party of Korea,” Rodong Sinmun, June 16, 2021; “3rd Day Session of the 3rd Plenary Meeting of the 8th Central Committee of the Workers' Party of Korea Held,” Rodong Sinmun, June 18, 2021.

[10] The figures presented in the Supreme People’s Assembly budget report represent planned growth rates for the current year.

[11] “Report on the 4th Plenary Meeting of the 8th Central Committee of the Workers' Party of Korea,” Rodong Sinmun, January 1, 2022.

[12] At the time, the measure to exempt cooperative farms from unpaid loans likely received a positive response from North Korean residents. According to interviews with North Korean defectors, loans to cooperative farms are made for the purpose of purchasing agricultural raw materials; once the loans are repaid after harvest, the distribution share for farmers inevitably decreases. Therefore, the state's measure to write off unpaid loans appears to have contributed to increasing the productivity of agricultural workers in that it was a benefit ensuring “a little more distribution goes to the farmers when autumn comes.” Interview with North Korean defector Case 9 (July 2, 2025, KINU).

[13] Interview with North Korean defector Case 1 (April 11, 2025, KINU).

[14] As confirmed in [Figure 2], North Korea's domestic food crop production recorded its lowest level since Kim Jong-un took power at 4.4 million tons in 2020, and was only 4.5 million tons in 2022, but recovered to 4.82 million tons in 2023 and maintained a level of 4.78 million tons in 2024.

[15] Choi Ji-young, Kim Su-jeong, and Choi Eun-ju, The Reality of Consumer Goods Production and Distribution in North Korea Since Kim Jong-un Took Power (Seoul: KINU, 2023), pp. 120–130.

[16] In the case of benefits for preferential households, while there are some benefits for vulnerable groups such as multi-child households and flood victims, it is difficult to view the protection of “vulnerable groups” as the primary objective, given that benefits for groups politically favored by the North Korean regime, such as war veterans and teachers, are included.

[17] Choi Ji-young, Yang Moon-su, and Lee Hye-jin, Changes in North Korea’s Fiscal and Financial Systems Since Kim Jong-un Took Power (Seoul: KINU, 2022), pp. 155–187.

[18] Shin Seong-ju, Modern Dictionary of Finance and Banking (Pyongyang: Social Sciences Publishing House, 2015), p. 1382.

[19] Generally, foreign exchange reserves refer to external payment reserve assets that the central bank or government can use at any time to compensate for balance of payments imbalances or to stabilize the foreign exchange market. In the case of South Korea, foreign exchange reserves consist of gold, Special Drawing Rights (SDRs), IMF reserve positions, and foreign exchange. Bank of Korea, Korea’s Foreign Exchange Market and Foreign Exchange System (Seoul: Bank of Korea, 2023), p. 157.

[20] “Acquisition of North Korean Document... Admission of Suspension of Banknote Issuance Due to Fiscal Deterioration, Chaos Caused by Temporary Note ‘Donpyo’ Also Laid Bare,” Asia Press, November 13, 2021, re-cited in: Choi Ji-young, Yang Moon-su, and Lee Hye-jin, Changes in North Korea’s Fiscal and Financial Systems Since Kim Jong-un Took Power, p. 195.

[21] Choi Ji-young, Yang Moon-su, and Lee Hye-jin, Changes in North Korea’s Fiscal and Financial Systems Since Kim Jong-un Took Power, pp. 193–198.

[22] Confirmation of experiences using “Central Bank Donpyo” (money coupons) through interviews with North Korean defectors is as follows. Case 1 received wages mixed in foreign currency, domestic currency, and Central Bank Donpyo, and stated that Donpyo were not particularly avoided in market transactions. Case 7 perceived the Central Bank Donpyo with a face value of 5,000 won as a new issuance of high-denomination domestic currency, failing to distinguish between the Donpyo and cash, while Cases 8 and 9 also stated that Central Bank Donpyo were actively used in daily transactions. Interviews with North Korean defectors (Case 1, March 25, 2025; Case 7, June 24, 2025; Case 8, June 27, 2025; Case 9, July 2, 2025, KINU).

[23] Choi Ji-young (2025), “North Korea’s Active Economic Management Policy Based on Informatization: Current Status and Implications,” KINU Online Series 25-24, Korea Institute for National Unification.

■ Ji-young CHOI is a Research Fellow at the Korea Institute for National Unification (KINU).

■ Translated and edited by Inhwan OH, EAI Senior Research Fellow; Sangjun LEE, EAI Research Associate
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