[Evaluation of North Korea's 5-Year Economic Development Plan] Part 1: Crisis and Response in the North Korean Economy, 2021-2025

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

1. Introduction

At the 8th Party Congress in 2021, North Korea faced severe economic difficulties. In 2020, North Korea's economic growth rate was -4.5%, the lowest since the economic crisis of the 1990s, and negative growth continued until 2022. Of course, North Korea is a low-income country with a per capita income of around $1,000, and the structural cause of economic crisis, namely excessive defense spending hindering economic development, did not suddenly emerge in 2021-2025. The deepening economic difficulties at the time of the 8th Party Congress were due to new shocks being added to the existing structural crisis: namely, the trade shock resulting from intensified UN Security Council sanctions and COVID-19 border closures.

The economic crisis of the past five years in North Korea, stemming from trade shocks, shares significant similarities with the crisis of the 1990s. The intensification of UN Security Council sanctions caused export shocks, while COVID-19 border closures led to import shocks. The overall trade volume of North Korea in 2020-2021 contracted more than in the early 1990s, immediately after the collapse of the socialist bloc. It was, in effect, a closed economy. After admitting the failure of the 3rd Seven-Year Plan (1987-1993), North Korea acknowledged for the first time that the goals of the 2016-2020 National Economic Development Five-Year Strategy were "vastly unmet in almost all sectors."[2]The North Korean economic crisis at the time of the 8th Party Congress, in that trade shocks led to the failure of economic plans, also bears significant resemblance to the crisis of the 1990s.

The economic crisis triggered by trade shocks exacerbated the shortage of two crucial resources for operating the North Korean economy: food and finance, thus showing a high degree of similarity with the 1990s. Import shocks not only reduce grain imports but also negatively impact domestic grain production by decreasing the supply of agricultural raw materials like fertilizer. Export shocks signify a reduction in North Korea's foreign exchange earnings, which leads to a deterioration of fiscal conditions, as a significant portion of exports is linked to enterprises under the Party and the military. We can observe the deepening food and fiscal crises over the past five years through various indicators, but what is noteworthy is North Korea's response to these crises. Over the past five years, the North Korean regime has responded relatively swiftly and actively to the economic crisis through various policies, which differs from the lukewarm policy responses of the 1990s. After admitting the failure of the 3rd Seven-Year Plan in 1993, North Korea designated 1994-1996 as a buffer period but did not establish specific economic development plans. In contrast, the National Economic Development Plan (2021-2025) was established immediately after the failure of the previous five-year plan (2016-2020), emphasizing the achievement of targets for key products such as the '12 Major Goals.' Policy responses to the food and fiscal crises were also filled with quite specific measures. This article examines the progression of North Korea's food and fiscal crises over the past five years, along with the achievements and limitations of the policy responses.

2. Development and Response to the Food Crisis

1) Process of Food Crisis Development

Immediately after the outbreak of the COVID-19 pandemic in 2020, North Korea sealed its borders and implemented stringent epidemic prevention policies. Given North Korea's fragile health and medical infrastructure, an epidemic crisis posed a significant risk of population loss. The North Korean regime appears to have judged the health crisis to be more severe than the economic crisis. The sudden border closures and movement restrictions particularly exacerbated food shortages. Border closures reduced food availability through decreased imports, while restrictions on movement led to decreased food accessibility due to reduced economic activity and purchasing power.

Food security is generally assessed in terms of availability, accessibility, utilization, and stability. Availability, which can be understood as the total amount of food accessible to people, is the starting point for food security. North Korea is chronically food-deficient, with supply consistently falling short of demand, making it highly vulnerable to even temporary decreases in supply. North Korea's food security significantly worsened in 2021, the year of the 8th Party Congress, due to reduced domestic production and external imports, leading to decreased food availability. Under Kim Jong-un's leadership, grain production has typically ranged between 4.5 and 4.8 million tons, but it hit a low of 4.4 million tons in 2020, and external imports were also at their lowest in 2021. Thus, overall food availability in North Korea appears to have deteriorated most significantly in 2021, as it was the year when grain produced in 2020 was distributed, and external imports were at their lowest.[3]2) Process of Food Crisis Development

<Figure 1> North Korea's Food Supply (Domestic Production and External Imports)

Note: 1) The left figure shows estimated grain production in North Korea by the Rural Development Administration of South Korea.

2) External imports are based on UN Comtrade data of exports to North Korea from various countries (HS 1003, 1005, 1006, 1008, 1101, 1108) for 2012-2023 (Accessed May 12, 2025).

Source: National Statistics Office North Korea Statistics Portal (Searched November 4, 2025); UN Comtrade (Searched November 4, 2025).

The deterioration of food accessibility is attributed to the North Korean authorities' control policies aimed at curbing the spread of COVID-19. The North Korean authorities declared a state of emergency epidemic prevention system (January 24, 2020) immediately after the outbreak of COVID-19, adopted the "Emergency Epidemic Prevention Law" (August 22, 2020), and in the latter half of 2021, transitioned to a state of preparedness for the "long-term" nature of emergency prevention. While many countries began to ease travel restrictions with the start of vaccinations in the latter half of 2021, North Korea refused vaccine support from COVAX at the time and maintained strict epidemic prevention policies until the Omicron variant spread and subsided in the first half of 2022. During the COVID-19 pandemic, measures were taken to increase the spacing between market stalls,[4] and during the actual Omicron outbreak, markets were sometimes closed or their operating hours reduced.[5] These strengthened epidemic prevention policies acted as a factor making it difficult to obtain food by hindering participation in economic activities and thus blocking income-generating opportunities.[6][7] Furthermore, intensified controls on market transactions and inter-regional movement also weakened food stability by increasing price volatility. In 2021, major grain prices in North Korean markets rose sharply, and price disparities between regions widened. Food utilization also generally declined. Border closures not only reduced grain imports but also decreased the supply of processed foods such as cooking oil, sugar, and flour, which are highly dependent on imports. According to surveys by the World Food Programme (WFP), dietary diversity in surveyed households in 2021 worsened compared to 2019.[8]

Thus, North Korea's food security significantly regressed during the COVID-19 pandemic. At the time, many countries had to make policy choices between responding to the health crisis and pursuing economic interests. The fragile health and medical infrastructure and the difficulty in acquiring COVID-19 vaccines likely led North Korea to choose an excessively harsh response. The policy response to the health crisis was bound to have significant side effects in terms of the food crisis, but what is noteworthy is the North Korean regime's response to this. Immediately after the food shortage intensified in 2021, the North Korean regime acknowledged the crisis and responded immediately by issuing a "special order",[9] and at the year-end plenary meeting, presented focused policies on agriculture and rural areas to resolve the food problem. While the food crisis during the COVID-19 pandemic did not become as severe as in the 1990s partly due to the temporary nature of the health crisis and the existence of markets as a new distribution channel, it can also be seen as a result of immediate and focused policy responses.

2) Policy Response to the Food Crisis

North Korea's response to the food crisis in 2021-2025 was immediate and focused, contrasting with the lukewarm policy responses 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 food security's 'availability' and 'accessibility,' respectively.

a. Food Production Policy: 'The Program for Socialist Rural Revolution in the New Era'

First, let's examine the policy response aimed at expanding 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 described as a 'focused policy on agriculture and rural areas' as it involves increased investment of labor and capital in the agricultural sector, along with various incentive policies for farmers, such as the construction of rural housing. Let's first look at the increased capital investment. In 2022, while the overall budget size remained almost unchanged at around 1%, North Korea separately allocated budget items for the agricultural and rural sectors and significantly increased expenditures compared to the previous year.[10] The increase in budget expenditure for the agricultural and rural sectors continued in 2023 at 14.7%, significantly exceeding the overall planned increase of 1.7%. The structure of North Korea's budget expenditure in 2022-2023 directly reflects the policy focus on resolving the food problem. Along with increased fiscal expenditure for agriculture and rural areas, financial measures such as the write-off of 'unrepaid loans' for farms were also implemented. At the 4th Plenary Meeting of the 8th Central Committee, where the 'Program for Socialist Rural Revolution in the New Era' was presented, it was announced as "an important measure to reinforce the economic foundation of the farms" to "thoroughly analyze the overall financial situation of cooperative farms" and to "exempt" the funds that cooperative farms had borrowed from the state and not repaid.[11] This measure serves to improve the financial conditions of agricultural production units while also enhancing incentives for agricultural workers.[12] While policy on increased labor input is not confirmed through official documents, testimonies from North Korean defectors confirm intensive mobilization of labor for farms between 2021 and 2023. Starting around 2020-2021, when the COVID-19 pandemic began, efforts were made to control workers residing in farm villages and separate them from farm workers, with directives stating, "Even workers living in farm villages must go to work on the farms." Furthermore, inspections and crackdowns on farm workers who had moved to cities began, and a large-scale return of farm workers was confirmed in August 2023.[13]

While increased labor and capital in the agricultural sector are essential for boosting food production, the North Korean authorities may have faced significant constraints in their policy responses. This is because expanding budget expenditures for agriculture and rural areas amid a deepening fiscal crisis requires sacrifices from other sectors. Nevertheless, the immediate and focused policy response yielded positive effects in terms of alleviating the food crisis. As a result of increased labor and capital investment between 2021 and 2023, domestic grain production in North Korea began to rebound significantly (+6.9%) in 2023.[14]

b. Food Distribution Policy: Strengthening the State Grain Distribution System

While the 'Program for Socialist Rural Revolution in the New Era' addresses food production, the policy of strengthening the state grain distribution system through amendments to the Grain Management Law and the expansion/establishment of grain sales outlets addresses food distribution. North Korea's food distribution channels have been largely bifurcated since the crisis of the 1990s into state supply (rationing) and market sales. While the state grain distribution system originally included only state supply (rationing), the amendment of the Grain Management Law added the state sales channel for grain. To strengthen official grain distribution channels, North Korea revised the Farm Law and the Grain Management Law, and adopted the Grain Management Act, thereby overhauling the entire legal framework related to grain procurement, distribution, supply, sales, and consumption. Through the revision of the Farm Law, the priority of fulfilling the 'state's mandatory grain procurement plan' was further emphasized, and the scope of grain that cooperative farms could independently dispose of was significantly reduced.[15]

Through the amendment of the Grain Management Law, 'state sales' of grain were newly introduced, and the establishment of 'grain sales outlets' was mandated as a distribution channel for its implementation. Consequently, approximately 220 grain sales outlets appear to have been expanded and established nationwide at the city, county, and district levels. According to North Korean defectors, although there are regional and temporal variations, grain sales outlets were partially operational even before 2020. Thus, the policy to restore official grain distribution channels is not a new attempt. However, the recent strengthening of the state grain distribution system is somewhat unusual in that it failed to formalize state sales of grain or establish a nationwide system. Most notably, the operation of grain sales outlets has continued for over three years, and last year, 'grain management facilities' were included as one of the '3 Major Essential Construction Projects' in the 'Local Development 20x10 Policy.' Policy interest in strengthening the state grain distribution system continues this year as well. In February, the Ministry of Grain Management was newly established, and at the 13th session of the 14th Supreme People's Assembly in September, the Grain Management Law was adopted, continuing efforts to regulate "all matters related to the storage, processing, supply, and sale, and consumption of grain."

What, then, is the intention behind the policy to strengthen the state grain distribution system? Considering that this policy was implemented concurrently with market control policies for COVID-19 prevention, the 'state sales' of grain appear to be aimed at replacing 'market sales.' As is well known, the food rationing system, as a public distribution system, has operated differentially only for key officials of the Party, military, and cabinet, and for some enterprises since the food crisis of the 1990s, with the majority of ordinary residents excluded from this system purchasing grain in the market. The operation of grain sales outlets has the effect of incorporating ordinary residents, who were excluded from the differential food supply system, into the state grain distribution system. The state selling essential foodstuffs for survival can lead to an expansion of political influence over ordinary residents. Meanwhile, investigations into the operational status of grain sales outlets reveal that, although there are regional and temporal variations, the selling prices are significantly higher than state-set prices but lower than market prices, and there are limits on the maximum sales volume per household and individual, as well as benefits for preferential households. In other words, it can be seen as having some effect in alleviating food access for low-income and vulnerable groups. [16] While preferential household benefits include some for vulnerable groups such as families with many children and disaster victims, they also include benefits for groups politically favored by the North Korean regime, such as war veterans and teachers, making it difficult to consider 'vulnerable group' protection as the primary objective. Finally, state sales of grain also contribute to expanding fiscal resources by absorbing the profits from grain transactions previously obtained by market sellers. In early 2024, North Korea took measures to increase the price of food supply (rationing). The supply price of food in North Korea had remained at approximately 48 North Korean won per kilogram for a long time, despite currency reforms at the end of 2009 and subsequent market price increases, but it was raised to 2,000 North Korean won per kilogram in early 2024. What is the reason for this policy shift, including the increase in the near-free food supply price and the introduction of state sales by modifying the grain distribution system? The background to this policy transition appears to be the fiscal crisis resulting from the prolonged sanctions against North Korea.

3. Development and Response to the Fiscal Crisis

1) Process of Fiscal Crisis Development

Deterioration of state finances is a typical phenomenon for sanctioned countries. Economic sanctions are generally divided into trade sanctions and financial sanctions. Various trade sanctions isolate the sanctioned country from the global supply chain, widening its trade deficit, while financial sanctions make access to international financial markets difficult. Reduced production leads to decreased fiscal revenue, but worsening living conditions increase demand for fiscal expenditure, inevitably leading to an expansion of the fiscal deficit. North Korea's fiscal crisis is also an inevitable consequence of the intensified UN Security Council sanctions in 2016-2017. The signals of North Korea's fiscal crisis that we can identify are as follows: First, a decrease in North Korea's export value. Exports 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, which had already plummeted due to sanctions; export value in 2020-2021 was only $80-90 million. Since North Korea's major exports before the intensification 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. Furthermore, as exports are directly linked to foreign exchange earnings, it is highly probable that the foreign exchange reserves of the official sector have drastically declined.

Second, changes in the scale of official taxation. Although North Korea does not disclose the scale of its finances, it announces the planned growth rates for revenue and expenditure annually through the Supreme People's Assembly. Of course, since the planned growth rate of budget revenue and expenditure has shown a trend of increasing, albeit slightly, every year since Kim Jong-un came to power, there is no basis to assume that the overall scale of finances has absolutely decreased. However, the planned growth rate for budget revenue and expenditure, which was around 4-6% from 2013 to 2020, significantly slowed down to around 1% from 2021 to 2023.

<Figure 2> Planned Growth Rate of North Korea's Budget Revenue and Expenditure

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

Third, there is mention of financial problems revealed through North Korean media. Recognition of the financial crisis at the regime level is observed in major events of the Party and the Cabinet where key economic policies are decided. The 8th Party Congress in 2021 included mentions of utilizing economic spaces such as 'finance, banking, and prices,' and the 7th Plenary Meeting of the 8th Central Committee of the Party, held in February 2023, placed 'improvement of national finance and banking operations' on its agenda. The budget report of the Supreme People's Assembly also partially indicates signs of deteriorating financial conditions. From 2021 to 2024, it was mentioned that some units failed to meet their budget revenue plans and 'national tax payment plans' consecutively, with the proportion of content pointing out 'defects' in national budget execution being most prominent in 2021. Notably, in the 2025 budget report, while defects in national budget execution and criticisms of economic guidance bodies and officials were mentioned, similar to 2021-2024, there was no mention of failure to meet national tax payment plans. North Korea's overall budget revenue and expenditure growth rate plan declined to around 1% from 2021 to 2023, and began to rise to 2-3% from 2024. Based on this, it can be inferred that the financial crisis, like the food crisis, was most severe from 2021 to 2023.

The fundamental cause of the deteriorating financial conditions from 2021 to 2023 was the severance of external demand due to intensified sanctions against North Korea. However, domestic demand also began to shrink as domestic production conditions worsened due to COVID-19 border closures from 2020 to 2022. Prior to 2020, despite a decrease in capital goods imports, raw material imports were maintained, making it difficult to consider industrial production, excluding mining and heavy industry, as significantly contracted. However, with the suspension of raw material imports due to border closures in 2020, the decline in manufacturing significantly spread to light industry, and economic activity contracted due to strengthened epidemic prevention measures, resulting in North Korea's economic growth rate reaching its lowest point since the mid-to-late 1990s. The contraction of domestic production led to a reduction in the scale of two major sources of fiscal revenue: transaction revenues generated from the circulation of goods and state enterprise profits (income) taxes, which are levied on the profits of production units. Even with the expansion of the market economy, it is estimated that the planned economy's involvement in industries other than agriculture, light industry, and services remains substantial, suggesting that the overall stagnation of industrial production rapidly worsened the fiscal conditions of state institutions.

Conversely, the increase in imports since the latter half of 2022 and the transition to COVID-19 endemicity are presumed to have acted as factors mitigating the financial crisis in terms of revitalizing domestic production. North Korea's economic growth rates were recorded at 3.1% and 3.7% in 2023 and 2024, respectively. At the Party Plenary Meeting at the end of 2023, North Korea boasted that production results across the people's economy, including 12 important goals, had significantly recovered compared to 2020. The absence of mention of failure to meet national tax payment plans for the first time since 2021 in the budget report in early 2025 signifies that the net income of institutions and enterprises was sufficient to meet national tax payment plans, indicating that North Korea has escaped its worst financial crisis. Furthermore, the expansion of North Korea-Russia cooperation since September 2023 has also created an opportunity for North Korea to partially overcome its financial crisis. Exports of military supplies to Russia partially offset the decline in exports due to intensified sanctions, and North Korea's sanctions evasion and violations may have become easier. Nevertheless, the financial crisis began earlier than the food crisis and is a more difficult shock to overcome. Unlike grains supplied annually at harvest time, it is not easy to discover new sources of foreign exchange income, and despite strengthened North Korea-Russia cooperation, exports of goods other than military supplies have not shown significant increases, leading to a cumulative trade deficit.

2) Policy Responses to the Financial Crisis

While policy responses to the food crisis were immediate and concentrated, responses to the financial crisis have been gradual and multifaceted. Considering the immense side effects of the radical currency reform in 2009, the utilization of various policy tools and a gradual approach can be seen as a positive change; however, the response to the financial crisis cannot be considered effective compared to the response to the food crisis. The following examines North Korea's response to the financial crisis in light of the 8th Party Congress policy direction of utilizing economic spaces such as 'finance, banking, and prices.'

a. Policy Responses in the Fiscal Aspect

Policy interventions to expand state finance were intensively observed in 2021-2022, generally focusing on increasing fiscal revenue through minor amendments to existing laws. First, in 2021, North Korea amended its Public Finance Law. Titles such as self-retained funds, incentive funds, and bonus funds, which production units could reserve for their own management activities after paying their national share, were deleted. The phrase 'self-funded funds not fully utilized within the plan period, such as self-science and technology development funds and bonus funds, will not be mobilized into the state budget' was also deleted. Additionally, the 'sectoral budget system' was implemented, requiring the balancing of revenues and expenditures for each sector within the central budget, and penalties for violating the Public Finance Law were strengthened. The amendment to the Public Finance Law can be seen as aimed at reducing the retained profits of production units, increasing state fiscal revenue, and thereby minimizing the fiscal deficit. Second, in the 2022 budget report of the Supreme People's Assembly, changes in the names of taxes levied on production units and an increase in 'collection income' (a 6.8-fold increase compared to the previous year), which is a tax on income from market economic activities, were observed. The name of the profit deduction for production units changed from the existing state enterprise profit (cooperative organization profit) to state enterprise income (cooperative organization income). Based on past precedents, this appears to be an attempt to expand the centralized mobilization of fiscal revenue by changing the collection method or adjusting the 대상 of payment. Similarly, the increase in 'collection income' can be seen as an intention to expand taxation on market economic activities to bolster fiscal conditions.[17]

It is noteworthy that despite the policy to expand state fiscal revenue, the Socialist Enterprise Responsibility Management System, introduced in the early years of Kim Jong Un's rule, has been maintained. The core of the Socialist Enterprise Responsibility Management System is the 'financial management right,' which grants enterprises the authority to raise and manage their own funds. With the 2021 amendment, the financial management right, previously included only in the Law on Enterprises, was also reflected in the Public Finance Law. This signifies that North Korea's economic management methods, while maintaining their broad framework, are undergoing micro-adjustments as needed, with the direction being to reduce retained profits of enterprises and increase state fiscal revenue.

b. Policy Responses in the Financial Aspect

Various policy interventions, not observed in the past, are also evident in the financial sector. This is likely due to the urgent need for fund procurement through financial institutions amidst the deterioration of state finances caused by prolonged sanctions and border closures. Officially confirmed policy interventions include the 'declaration of preferential measures to exempt unredeemed loans of cooperative farms' at the 4th Plenary Meeting of the 8th Party Central Committee in late 2021, the enactment of the Law on Loans and the Law on Financial Supervision in 2023, and amendments to the Law on the Central Bank in 2022-2023. In addition to these, although official confirmation as regulations is difficult, attention should also be paid to fund procurement through the issuance of temporary currency called 'Central Bank Notes.'

As mentioned above, the measure to write off unredeemed loans of cooperative farms was carried out as an extension of the response to the food crisis. It can also be interpreted as the North Korean authorities pursuing both fiscal policy of expanding budget expenditures and financial policy of writing off unredeemed loans amidst a severe food shortage. In a socialist economic system, finance is typically subordinate to fiscal policy, and when fiscal resources are insufficient, policies are implemented to supplement them through loans. By proposing the 'Program for Socialist Rural Revolution in the New Era,' the North Korean authorities appear to have mobilized all available means within the scope of official finance and banking.

The enactment of the Law on Loans and the Law on Financial Supervision in 2023 demonstrates that North Korea's response to the financial crisis is progressing in a multifaceted manner. Provisions concerning commercial banking functions such as lending and the financial supervision of the central bank were previously included only in the Law on Commercial Banks and the Law on the Central Bank. With the enactment of the Law on Loans and the Law on Financial Supervision, the obligations and powers of financial institutions have become more concrete. What is the background for the enactment of these laws? Since Kim Jong Un took power, North Korea has institutionalized the system of allowing enterprises to raise their own funds by granting them financial management rights. Furthermore, a system has been established to absorb private funds through the intermediary function of commercial banks and lend them for the operation of production units. The deterioration of state fiscal conditions due to prolonged sanctions may have increased the dependence of enterprises on bank loans, and the need to assign responsibility for their management and supervision likely led to the enactment of the Law on Loans and the Law on Financial Supervision.

Another noteworthy aspect of policy responses in the financial sector is the intervention through the Central Bank, which can be divided into amendments to the Law on the Central Bank and the issuance of 'Central Bank Notes.' Amendments to the Law on the Central Bank highlight the establishment of an electronic payment system and the creation of foreign exchange reserves. While requiring the Central Bank to standardize the electronic payment system and establish a 'unified electronic payment center' nationwide, it also stipulates the creation and management of foreign exchange reserves necessary for monetary stabilization. If the Law on Financial Supervision regulates information control over financial transactions, the Law on the Central Bank requires the digitalization of payment information accompanying commodity transactions. Informatization is one of the most prominent policies in North Korea's response to the financial crisis from 2021 to 2025, and it appears to be utilized as a measure to prevent fiscal leakage and absorb funds held by the private sector. Similarly, foreign exchange reserves, added as an independent article, are defined as 'gold and convertible foreign currencies held by the government or central bank for payments to other countries.'[18]In North Korean literature, this is also referred to as 'foreign exchange reserves,' a concept close to our foreign exchange reserves.[19]Although the creation and management of foreign exchange reserves are basic tasks of the Central Bank, they were not included in previous laws and were added in the 2022-2023 amendments. With the significant widening of the trade deficit following intensified sanctions, North Korea's foreign exchange holdings are presumed to be shrinking, and the need for the Central Bank to create foreign exchange reserves has likely increased.

Next, let's examine the issuance of 'Central Bank Notes.' 'Central Bank Notes are temporary currency with the same status as cash, guaranteed and issued by the state.'[20]In 2021, North Korea issued Central Bank Notes with a face value of 5,000 won, and in 2022, it was confirmed that 50,000 won notes were issued. Immediately after the issuance of Central Bank Notes was confirmed, various interpretations of their nature were attempted, but the prevailing assessment was that circulation was not active due to households and enterprises avoiding their use.[21]

However, according to testimonies collected from North Korean defectors who arrived in 2023-2024, Central Bank Notes were relatively actively used in daily transactions or paid as wages, and North Koreans even preferred the high-denomination 50,000 won notes.[22]Of course, it is difficult to grasp the policy intentions of North Korea solely based on the testimonies of the narrators, but the accounts that 'Central Bank Notes' were transacted in daily life without distinction from existing cash or that high-denomination notes were preferred suggest that these measures may have largely served as a channel for currency expansion. In particular, if Central Bank Notes were paid as wages to workers to a significant extent, the increase in state wages in the latter half of 2023 to early 2024 could have acted as a catalyst for a substantial increase in the money supply. As is well known, North Korea's market exchange rate has been on a sharp upward trend since the latter half of 2023. If the money supply increased due to the issuance of Central Bank Notes, it could be a cause for the sharp rise in the market exchange rate.

<Table 1> Policy Changes in the 'Finance, Banking, and Prices' Sectors, 2021-2025

Source: National Intelligence Service (2024), 『Collection of North Korean Laws』, Rodong Sinmun, NK Economy, RFA, Asia Press

c. Policy Responses in the Price Aspect

Policy responses in the price aspect are also related to expanding fiscal revenue in the following aspects. First, attempts are being made to build platforms for collecting information related to prices. The enactment of the Law on Receipts and the Law on Electronic Payments in 2021, and the amendment of the Law on Prices in 2023, can be seen as attempts by the state to grasp information on prices, sales, and profits by modernizing the payment infrastructure related to daily transactions. The Law on Prices mandates producers to register the prices of goods, and the Law on Electronic Payments stipulates the collection of electronic payment information for goods through the 'bank electronic payment system.' Through these channels, electronic payment information for commodity transactions is collected by the 'unified electronic payment center' reflected in the amendment to the Law on the Central Bank. Price information serves as basic data for securing the basis of fiscal revenue by identifying the sales and profits of sellers, thus reflecting the intention of the fiscal authorities to minimize fiscal leakage.[23]Second, price management aimed at strengthening state distribution is observed. In the latter half of 2023 to early 2024, North Korea increased state-set prices and distributed a 'Unified State Price List.' The increase in state-set prices signifies an increase in the price of grain supply (rationing), which appears to be a measure to reduce the gap with the prices at grain sales outlets. The Unified State Price List can be seen as setting 'fixed prices' for each type, specification, and brand of commodity. Considering that it was newly established as a state sales channel for consumer goods through the amendment of the 'Socialist Commercial Law,' similar to the 'Grain Management Law,' it can be viewed as specifying the price limits within the state-run commercial network.

4. Conclusion

This article examined the North Korean economic crisis over the past five years in terms of food and finance. The underdevelopment of the North Korean economy lies in its hostile security policy and the resulting economic isolation, but intensified sanctions against North Korea and the COVID-19 pandemic have acted as factors exacerbating this situation. The crisis in the North Korean economy from 2020 to 2022 shares significant similarities with the crisis in the mid-to-late 1990s in that it originated from trade shocks. However, there are also differences in the policy responses to overcome the crisis. The response to the food crisis was immediate and comprehensive, while the response to the financial crisis was gradual and multifaceted. Compared to the mid-to-late 1990s, North Korea is clearly utilizing a wider range of policy tools and actively intervening in economic problems.

Of course, these policy interventions by the North Korean regime have not yielded only positive effects. While positive effects are observed in terms of mitigating the food crisis, they appear insufficient to resolve the financial crisis. In terms of the food crisis, policy interventions concentrating labor and capital on agricultural and rural development have shown partial results, such as an increase in domestic grain production in 2023-2024. As the 'availability' of food is the first step in food security, the results of the policy to concentrate on agriculture and rural areas can be evaluated positively. However, the results of the policy to strengthen state distribution of grains in terms of food 'accessibility' are somewhat uncertain. State sales of grain expand access to low-priced grains such as corn and provide partial protection for vulnerable groups, but as grains are concentrated in the official sector, market grain prices remain unstable. In terms of the financial crisis, the negative impact of sanctions is a more difficult problem to overcome. While the use of various policies such as gradual legislative amendments, issuance of temporary currency, and informatization, instead of extreme policies like currency reform, is commendable, these policies alone are insufficient to offset the trade and fiscal deficits. Therefore, the overall economic performance, despite various positive and negative ripple effects from the North Korean regime's economic crisis response over the past five years, has shown a gradual recovery, with growth rates exceeding 3% annually since 2023.

The fact that North Korea has somewhat overcome its worst economic conditions is also attributable to policy responses and strengthened cooperation with Russia. North Korea's heavy industry grew by 8.1% and 10.7% in 2023 and 2024, respectively. Even considering the base effect from the pandemic period, the increased operating rate of the defense industry appears to have contributed to the partial recovery of manufacturing. Furthermore, increased supply of grains and refined oil likely helped alleviate food shortages and promote economic activities such as transportation. In other words, the factors that enabled North Korea to overcome the crisis amidst severe economic isolation over the past five years include various policy responses and improved external relations.

The 9th Party Congress will be a crucial turning point determining whether the North Korean economy can sustain its recent recovery. Domestically, the stabilization of policies attempted over the past five years is key, and externally, economic cooperation with China and Russia is crucial. While the success of policies to strengthen state control over grain and currency circulation is important, from North Korea's perspective, creating avenues for foreign exchange earnings to overcome the financial crisis is the most urgent issue. Therefore, the 9th Party Congress is likely to present various external economic initiatives, such as revitalizing the tourism industry and fostering export industries. The problem is that various variables are emerging in cooperation with China and Russia. If the Russia-Ukraine war ends, the economic benefits from North Korea-Russia cooperation may differ in content and scale, and changes in China's attitude towards sanctions against North Korea are also uncertain. Currently, after the end of the Russia-Ukraine war, North Korea-Russia cooperation is expected to shift towards the dispatch of North Korean overseas workers, and North Korea-China cooperation is likely to develop 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 compared to the pre-pandemic period, achieving economic growth of around 1-2%. This means that while North Korea is unlikely to face an economic crisis, it will also not have the opportunity for growth that would lift it out of its low-income status. Although it has pledged to realize a socialist power by 2035, building a strong economy seems difficult solely through 'self-reliance under sanctions.' ■

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

[3]Availability refers to the supply side of food, including production, inventory, and imports. Access refers to factors affecting household-level food security, such as income, expenditure, markets, and prices. Stability refers to weather, price, and political/economic factors affecting stable food access, and utilization refers to factors affecting adequate energy and nutrient intake.

[4]'North Korean residents protest measure of rationing market stalls,' 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]At that time, many mines and enterprises in North Korea ceased operations, cutting off income sources. Interview with North Korean defector J. Choi Ji-soon et al. (2024), 『Study on the State of Food Security in North Korea: Focusing on Comparison with the 1990s』, Ministry of Unification Policy Research Service Report, Korea Institute for National Unification, p. 180.

[7]According to interviews with North Korean defectors, at that time, the North Korean authorities strictly controlled access to mountains and seas, causing significant damage to workers who relied on fishing and forestry, excluding agriculture, for their livelihoods. Interview with North Korean defector 9 (July 2, 2025, Korea Institute for National Unification).

[8] WFP (2021a) Household food security in the DPRK, cited in: Lee Ji-soon et al. (2024) 『Changes in North Korea's Food System and Korea's Food Exchange Program』, Economic and Humanitarian Social Research Council Cooperative Research Series.

[9]Through the Third Plenum of the 8th Central Committee of the Workers' Party of Korea, North Korea unusually acknowledged that the people's 'food situation had become tense' due to the failure to meet the national grain procurement plan last year, and Chairman Kim Jong Un personally issued a 'special order' to stabilize people's livelihoods. “Convening of the Third Plenum of the 8th Central Committee of the Workers' Party of Korea,” *Rodong Sinmun*, June 16, 2021.; “Holding of the Third Plenum of the 8th Central Committee of the Workers' Party of Korea, Third Session,” *Rodong Sinmun*, June 18, 2021.

[10] The figures presented in the budget report of the Supreme People's Assembly are 'plans' for the growth rate of the current year.

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

[12] At that time, the measure to exempt unredeemed loans of cooperative farms may have received a positive response from North Korean residents. According to interviews with North Korean defectors, loans from cooperative farms are provided for the purchase of agricultural raw materials, and after repaying the loans after harvest, the distribution share for farm members inevitably decreases. Therefore, the measure by the state to forgive unredeemed loans is likely to have contributed to the improvement of agricultural workers' productivity in that it provided benefits such as 'a little more distribution for farm members in the fall.' Interview with North Korean Defector Case 9 (July 2, 2025, Korea Institute for National Unification).

[13] Interview with North Korean Defector Case 1 (April 11, 2025, Korea Institute for National Unification).

[14] As confirmed in <Figure III-2>, North Korea's domestic food crop production recorded its lowest level since Kim Jong Un took power in 2020 at 4.4 million tons, 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, Choi Eun-ju (2023), *North Korea's Consumer Goods Production and Distribution Since Kim Jong Un Took Power*, Korea Institute for National Unification, pp. 120-130.

[16] In the case of preferential household benefits, while there are some benefits for vulnerable groups such as multi-child households and disaster victim households, it is difficult to consider the protection of 'vulnerable groups' as the main 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-soo, Lee Hye-jin (2022), *Changes in North Korea's Fiscal and Financial Systems Since Kim Jong Un Took Power*, Korea Institute for National Unification, pp. 155-187.

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

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

[20] “North Korea <Top Secret> Document Obtained...Acknowledges Suspension of Banknote Issuance Due to Financial Deterioration, Chaos Caused by Temporary Currency 'Money Vouchers' Also Vividly Described,” *Asia Press*, November 13, 2021, cited in: Choi Ji-young, Yang Moon-soo, 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-soo, Lee Hye-jin, *Changes in North Korea's Fiscal and Financial Systems Since Kim Jong Un Took Power*, pp. 193-198.

[22] Through interviews with North Korean defectors, the experience of using 'Central Bank Money Vouchers' was confirmed as follows. Case 1 received wages mixed in foreign currency, domestic currency, and Central Bank Money Vouchers, and did not particularly avoid using money vouchers in market transactions. Case 7 perceived the 50,000 won Central Bank Money Voucher as a new issuance of high-denomination domestic currency, not distinguishing between Central Bank Money Vouchers and cash. Cases 8 and 9 also stated that Central Bank Money Vouchers were actively used in daily transactions. Interview with North Korean Defector (Case 1, March 25, 2025; Case 7, June 24, 2025; Case 8, June 27, 2025; Case 9, July 2, 2025, Korea Institute for National Unification).

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

■ Choi Ji-young_Senior Researcher, Korea Institute for National Unification.

■ Lee Sang-jun_EAI Research Fellow

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