North and South Korea Should Use Single Currency

South and North Korea should use a single currency to form an economic union in the mid to long term, the Korea Institute of Finance noted in a report Sunday.

“When investment increases in North Korea along with inter-Korean trade of goods and services, the flow of capital will naturally follow. It will lead to problems such as settlements and which currencies should be used,” said Lee Yoon-sok, a senior research fellow at the KIF, Yonhap reported.

To deal with such problems, the two governments may allow residents to exchange their money with other currency when traveling North or South.

They may also allow the currencies of the two countries to be freely used in both countries. The researcher added that some North Koreans are known to be holding South Korean currency, expecting economic integration.

In the long run, however, the two countries should consider unifying the two currencies. “Just as the European Union introduced the euro in its final stages while heading toward economic union, North and South Korea will be able to complete their economic community by introducing a unified currency,” he said.

Currencies of both the South and North are called “won” but they are totally different from each other. He expects a financial infrastructure will be set up in North Korea.

“South Korea has experience in setting up a financial infrastructure in developing countries, and North Korea is also seeing expanding financial transactions, including mobile payments. It won’t be difficult to set up a financial infrastructure in North Korea.”

He expected sanctions on North Korea to be eased gradually while economic cooperation between South and North will soon gain momentum.

“US President Donald Trump needs an important external accomplishment ahead of the interim elections in the US, while the North Korean leader Kim Jong-un needs sanctions eased for economic development.”

Lee said that economic reconstruction of North Korea as well as development projects that will lead to economic growth in Northeast Asia will become a new growth momentum for the South Korean economy which has entered a phase of slow growth.

“It is time to see the fruit of inter-Korean economic cooperation, the ultimate goal of which will be setting up an economic union,” he said.