A looming food crisis? or an end to Inflation? A roundup

As North Korea celebrates the birthday of Kim Il-sung and prepares for the Military Foundation Day, big things are transpiring in the country’s foreign affairs and economy that may have lasting impact on the country’s food security.

According to the official website of the Mongolian president

Today, the Ambassador Extraordinary and Plenipotentiary from the Democratic People’s Republic of Korea to Mongolia Hong Gyu presented a letter of Credence to the President of Mongolia Ts.Elbegdorj… Mr. Hong Gyu said “North Korea may face severe food shortage. Therefore, we ask Mongolia to learn possibilities of delivering food aid to North Korea”.

As a Wall Street Journal article from April 22, 2013 points out, the period between April and September, or time between harvests in North Korea, has always been the most tenuous months in terms of food security. According to Dr. Kwon Tae-jin, this year’s yield was “moderate, but not sufficient to tide the country over.”

These troubles come as no surprise to longtime observers of the food situation in North Korea. However, recently, there have been a number of articles highlighting a possible fissure between Pyongyang and Beijing. It seems the nuclear test may have pushed the Chinese a bit too far and anecdotal evidence suggests that North Korea’s largest aid provider is attempting to economically discipline bad behavior.  

Could North Korea’s call to Mongolia be related to an unanticipated loss of subsidies from China? One cannot be sure, but the fact that this call for help has been so public does raise an eyebrow.  

Meanwhile, the North Korean state has been able to slightly curb inflation in the food market by reinstituting state distribution. According to the DailyNK, the state has been attempting to normalize its obligations to the people and the consistent disbursement of rations in March and April has significantly affected food prices.

Last food price update notes that market price for rice in Pyongyang was KPW 6950, but the most recent information from North Korea suggests that prices have stabilized around KPW 5000, prices unseen since July 2012. DailyNK has also checked in other major cities and based on similar declines in food prices in Hyesan, Hoiryeong, and Chongjin, it might be safe to say that the policy is being implemented nationwide.

If continued rationing allows food prices to remain stable, two medium-term effects should occur. First, by being able to anticipate food prices, North Koreans will be able to invest their income more effectively, thereby boosting the nascent jangmadang and other entreprenuerial activities. Second, it will slow the trend of “yuanization” as North Koreans would not feel as desperate to hedge their income in a more stable currency.

Given North Korea’s call for assistance from Mongolia, one has to also ask how long the North Korean state can maintain this policy. The same DailyNK article that reported the decline in prices also noted that

in Hyesan prices fell, but when the authorities then stopped importing rice from China, they rose again, reaching 6400 won.

So the success of the policy is also largely dependent on how the DPRK-China relations develop in the next few months.

But for now, one is inclined to surmise that the North Korean state at least recognizes inflation as a key issue to tackle and that the best way to tackle it is to ensure greater food security for its people. It is as positive of a news as you are going get from North Korea.  


About Yong Kwon

I develop trade advocacy strategies for a DC-based consulting firm. Studied economic history at the London School of Economics, and can be found on twitter at @ykwon88
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2 Responses to A looming food crisis? or an end to Inflation? A roundup

  1. Pingback: Yuanization, Lessons from Argentina, and Dreams of Self Sufficiency | DPRK Food Policy Blog

  2. Pingback: Assessing the risk of another food crisis, 1954 and 2014 | DPRK Food Policy Blog

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