North Korea finds itself in the grip of a severe economic crisis marked by a dramatic currency devaluation and soaring prices, with foreign exchange rates and domestic prices more than doubling compared to the previous year. The government’s response has centered on intensifying state control, particularly through measures like state-run grain shops and integrated management facilities to centralize control over food distribution.
However, this push for greater state intervention – including stricter market regulations, legal penalties for unauthorized grain sales, and detailed distribution rules – appears to be exacerbating rather than solving the crisis. While authorities claim these measures will stabilize food security and prices, there is a concern that such heavy-handed market controls are actually deepening economic distortions.
The Current State of North Korean Markets
According to Daily NK’s sources, intensifying market control by North Korean authorities is the primary reason for the worsening economic crisis. For instance, the South Pyongan Province People’s Committee suddenly implemented control measures late last year, claiming that “capitalist elements are spreading through the markets.”
While authorities cited illegal capitalist transactions occurring in both large wholesale markets, including the Pyongsong Market, and smaller markets, this appears to be merely a pretext. Sources told Daily NK that foreign currency and medicine have long been traded in North Korean markets, which raises questions of why enforcement is suddenly being intensified.
Indeed, North Korean authorities have consistently enforced market controls under various pretexts. During the COVID-19 pandemic, they would suddenly suspend market operations citing spikes in fever cases or create an atmosphere of fear by threatening “closure” until key suspects were caught for allegedly circulating South Korean media content.
As a result of all this, markets have become increasingly constrained, and the atmosphere of free trade has diminished. With market vendors unable to conduct business freely, their financial situation has deteriorated, leading to reduced consumption among the general population who supplied goods. The government’s increased controls have effectively led to an overall decline in people’s purchasing power.
State Response to the Price Crisis
Amid tightening market restrictions and declining purchasing power, the government has unveiled an ambitious strategy to tackle the deepening economic crisis. Rather than liberalize markets to boost activity, authorities have intensified their centralized control through a sweeping initiative to regulate prices across the economy.
The centerpiece of this approach is the “price improvement project,” announced at last year’s plenary meeting to address North Korea’s soaring food prices and currency instability. The program reflects how price and exchange rate controls have become paramount for the authorities, who view price stabilization as crucial for easing economic hardship and maintaining social order.
The government’s plan rests on three main elements: tighter state control over the grain system, reformed food distribution networks, and stricter foreign currency controls. These measures aim to curtail private food sales while reinforcing state distribution channels – steps the authorities see as essential to preserve faith in their faltering socialist food system.
Cabinet reports from regional financial offices indicate that rising food prices and exchange rates have not only threatened economic stability but also sparked public discontent. In response, authorities have taken the striking step of treating price instability as a security threat rather than just an economic challenge. While the government claims it is “overcoming the economic crisis” through “price stability,” there are concerns that these tighter controls are only deepening economic distortions and pushing real solutions further away.
North Korea’s Grain Management Ambitions
This pattern of tightening market controls has culminated in an ambitious government intervention – a comprehensive plan to regulate the grain trade. While previous market restrictions were often justified by temporary crises or security concerns, the regime’s new approach to grain management represents a systematic attempt to permanently restructure North Korea’s food distribution system.
At the center of this effort is an expanding network of state-run grain shops, operating nationwide since 2021 – a clear move to bring previously independent grain sales and distribution under direct state oversight.
Building on the foundation of these grain shops, the government announced plans for an “integrated grain management facility” during last year’s plenary meeting. This ambitious expansion aims to centralize every aspect of grain handling – from production to distribution and allocation – under a single management system. The shift from local to centralized control reflects the government’s view of food distribution as a powerful tool for maintaining social control.
The implementation of this system is already underway, with new grain management facilities being constructed across the country, particularly in key agricultural regions and distribution hubs. A major storage facility was completed in Pyongsong last January, and an August directive laid out plans to further centralize grain distribution from rural areas to population centers where it’s most needed.
North Korea Threatens Punishment for Secret Sales
To enforce this new centralized distribution system, the regime has moved beyond physical infrastructure to establish a comprehensive legal framework. While the construction of facilities demonstrates the practical implementation of the policy, newly enacted regulations reveal how authorities intend to maintain strict control over every aspect of grain distribution – backed by the threat of severe penalties.
Specifically, the government has introduced significant new regulations through Articles 43-44 of the revised grain law of 2022. Article 43 establishes a rigid framework for food distribution, mandating that supplies be allocated based on labor difficulty, position, and target, with strict prohibitions against deviating from or duplicating these set quantities and types. Article 44 further requires that sales portion food must be processed and sold to consumers according to specific periodic and monthly schedules.
The 2022 law marks a dramatic expansion of state control over North Korea’s food supply. While the 2021 version only monitored supply targets, the new law creates a comprehensive system governing every aspect of food distribution, from supply chains to sales schedules. Through Article 45, which requires grain outlets to “conduct surplus grain purchase and sales business as prescribed,” the government appears to grant these outlets some autonomy while maintaining tight control over surplus management.
The government’s struggles to achieve its economic goals have cast uncertainty over its latest policy direction. At last year’s plenary meeting, the brief mention of “economic management policy” raised red flags for experts like Choi Ji-young from the Korea Institute for National Unification. Despite implementing specific penalties – including fines, confiscation, and business suspensions – the government seems to be falling short of its goals for centralized control over North Korea’s grain supply. Adding to these challenges, leadership changes have introduced new questions about the path forward.
Unclear Future
In particular, questions are emerging about whether the new premier can effectively address North Korea’s complex economic challenges. Some officials have expressed doubts about Pak Thae Song’s economic credentials, noting his career has been primarily in party bureaucracy. His previous roles – chief secretary of the South Pyongan Provincial Party Committee, chairman of the Supreme People’s Assembly, director of Party Propaganda and Agitation, and Party Secretary for Science and Education while serving as chairman of the National Space Science and Technology Committee – suggest limited hands-on economic experience.
According to Daily NK reports, North Korean citizens have a straightforward request: They want the government to loosen its grip on markets. Many believe the economy would naturally improve if they could simply conduct business with fewer restrictions, longer market hours, and less frequent crackdowns. Their modest demands point to a telling conclusion: over-regulation, not insufficient state control, lies at the heart of their economic struggles. As the new premier takes office, he might consider that what people want most are economic policies that allow greater flexibility to help ease their daily hardships.
