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North Korea currency reform sparks chaos
North Korea has revalued its currency for the first time in a half century, reportedly triggering chaos in the impoverished nation by moving to assert state control over a growing market economy.
The development came at the end of a year of turmoil as leader Kim Jong Il apparently recovered from a stroke. The communist country also stoked tensions by launching a long-range rocket and conducting its second nuclear test, drawing U.N. condemnation and beefed-up sanctions.
North Korea revalued its currency — known as the won — at an exchange rate between old and new notes of 100 to 1, China's Xinhua news agency said in a dispatch from Pyongyang. It cited a verbal notice Tuesday from North Korea's Foreign Ministry to embassies in the capital.
The surprise move reportedly sent shockwaves through North Korea, with reports of shops being closed and citizens angry and panicked.
The exchange of old notes started Monday and will continue until Sunday, Xinhua reported. It said no reason was provided for the sudden change.
State-run shops in Pyongyang were closed Tuesday morning, with one unidentified saleswoman saying they would reopen a week later after the government sets new prices, Xinhua said.
Pyongyang residents rushed to black markets to convert stashed-away money into dollars and Chinese yuan, South Korea's Yonhap News Agency reported, citing unidentified North Korean traders operating in China.
"Pyongyang residents were taken aback and thrown into a big confusion due to the currency reform," they were quoted as saying.
The North Korean won was officially traded at 145 to the dollar, according to Dong Yong-sueng, a senior fellow at Samsung Economic Research Institute in Seoul. But more than 3,000 won were needed to buy $1 on the black market, he added.
Yonhap quoted Good Friends, a South Korean humanitarian organization, as saying that besides shops, public bathhouses and restaurants in the North were also mostly closed.
"I worked like a dog for two months for the winter, but the money became useless paper overnight," the group quoted a North Korean as saying, according to Yonhap.
The revaluation had South Korean media and North Korea watchers guessing as to the motive for the change. Some said the government was trying to impose limits on private commerce.
"This is a way to strike a blow against people who are engaged in market economic activities that are beyond state control," said Marcus Noland, deputy director of the Peterson Institute for International Economics in Washington and an expert on North Korea's economy. "They are fundamentally uncomfortable with the development of an entrepreneurial class."
The regime introduced economic reforms in 2002, including street and farmers' markets. But the government backtracked in 2006 after the changes failed to revive the economy and resulted in an influx of foreign goods.
North Korea shut down its biggest wholesale market on the outskirts of Pyongyang in mid-June because of apparent concern that big markets spread capitalist influence, a private South Korean monitoring group said in September.
The country's economy has been in various degrees of turmoil since the collapse of the Soviet Union cut off a steady source of aid and trade in the early 1990s.
The situation worsened severely in the mid-1990s when the economy collapsed due to natural disasters and mismanagement that resulted in a deadly famine. North Korea has relied on international food handouts ever since.
South Korea's mass-circulation Chosun Ilbo newspaper said the currency change was to start from Tuesday, and speculated it was part of leader Kim Jong Il's way of tightening control over the nation's 24 million people as he prepares to hand over power to one of his three known sons. The paper cited unidentified sources in North Korea.
Officials at the National Intelligence Service and the Unification Ministry in Seoul said they couldn't immediately confirm the report.
It would be the impoverished communist country's first currency reform since 1992, when it issued new notes with the exchange rate set at 1:1.
The change appeared to be the country's first currency revaluation since 1959, according to a chronology of currency reforms the country has carried out and carried by Yonhap. The news agency cited South Korea's Unification Ministry, which deals with the North.
Other analysts called the change a significant move for a nation with a stagnating economy and millions going hungry.
"The aim is to flush out money being traded on the black market and to reinvest it in the public sector," said Dong of the Samsung Economic Research Institute.
The Peterson Institute's Noland said the reports of chaos inside North Korea indicate that there is a chance the revaluation could spark some limited political turmoil in the tightly run country.
"This is the kind of pocketbook issue that could set off protests," he said, though added that given the absence of a civil society in the country any unrest would ultimately pose no danger to the regime.
Despite the reports of panic inside North Korea, some who trade with the country from outside took the currency reform in stride.
"There won't be any impact on our trade," said Piao Chunhao, a salesman with Haoyu International Trading Co. in Huichun city in China's Jilin province, which borders North Korea. "We just need to do the math. We gain the same profits."
Associated Press
North Korea currency reform sparks chaos
North Korea has revalued its currency for the first time in a half century, reportedly triggering chaos in the impoverished nation by moving to assert state control over a growing market economy.
The development came at the end of a year of turmoil as leader Kim Jong Il apparently recovered from a stroke. The communist country also stoked tensions by launching a long-range rocket and conducting its second nuclear test, drawing U.N. condemnation and beefed-up sanctions.
North Korea revalued its currency — known as the won — at an exchange rate between old and new notes of 100 to 1, China's Xinhua news agency said in a dispatch from Pyongyang. It cited a verbal notice Tuesday from North Korea's Foreign Ministry to embassies in the capital.
The surprise move reportedly sent shockwaves through North Korea, with reports of shops being closed and citizens angry and panicked.
The exchange of old notes started Monday and will continue until Sunday, Xinhua reported. It said no reason was provided for the sudden change.
State-run shops in Pyongyang were closed Tuesday morning, with one unidentified saleswoman saying they would reopen a week later after the government sets new prices, Xinhua said.
Pyongyang residents rushed to black markets to convert stashed-away money into dollars and Chinese yuan, South Korea's Yonhap News Agency reported, citing unidentified North Korean traders operating in China.
"Pyongyang residents were taken aback and thrown into a big confusion due to the currency reform," they were quoted as saying.
The North Korean won was officially traded at 145 to the dollar, according to Dong Yong-sueng, a senior fellow at Samsung Economic Research Institute in Seoul. But more than 3,000 won were needed to buy $1 on the black market, he added.
Yonhap quoted Good Friends, a South Korean humanitarian organization, as saying that besides shops, public bathhouses and restaurants in the North were also mostly closed.
"I worked like a dog for two months for the winter, but the money became useless paper overnight," the group quoted a North Korean as saying, according to Yonhap.
The revaluation had South Korean media and North Korea watchers guessing as to the motive for the change. Some said the government was trying to impose limits on private commerce.
"This is a way to strike a blow against people who are engaged in market economic activities that are beyond state control," said Marcus Noland, deputy director of the Peterson Institute for International Economics in Washington and an expert on North Korea's economy. "They are fundamentally uncomfortable with the development of an entrepreneurial class."
The regime introduced economic reforms in 2002, including street and farmers' markets. But the government backtracked in 2006 after the changes failed to revive the economy and resulted in an influx of foreign goods.
North Korea shut down its biggest wholesale market on the outskirts of Pyongyang in mid-June because of apparent concern that big markets spread capitalist influence, a private South Korean monitoring group said in September.
The country's economy has been in various degrees of turmoil since the collapse of the Soviet Union cut off a steady source of aid and trade in the early 1990s.
The situation worsened severely in the mid-1990s when the economy collapsed due to natural disasters and mismanagement that resulted in a deadly famine. North Korea has relied on international food handouts ever since.
South Korea's mass-circulation Chosun Ilbo newspaper said the currency change was to start from Tuesday, and speculated it was part of leader Kim Jong Il's way of tightening control over the nation's 24 million people as he prepares to hand over power to one of his three known sons. The paper cited unidentified sources in North Korea.
Officials at the National Intelligence Service and the Unification Ministry in Seoul said they couldn't immediately confirm the report.
It would be the impoverished communist country's first currency reform since 1992, when it issued new notes with the exchange rate set at 1:1.
The change appeared to be the country's first currency revaluation since 1959, according to a chronology of currency reforms the country has carried out and carried by Yonhap. The news agency cited South Korea's Unification Ministry, which deals with the North.
Other analysts called the change a significant move for a nation with a stagnating economy and millions going hungry.
"The aim is to flush out money being traded on the black market and to reinvest it in the public sector," said Dong of the Samsung Economic Research Institute.
The Peterson Institute's Noland said the reports of chaos inside North Korea indicate that there is a chance the revaluation could spark some limited political turmoil in the tightly run country.
"This is the kind of pocketbook issue that could set off protests," he said, though added that given the absence of a civil society in the country any unrest would ultimately pose no danger to the regime.
Despite the reports of panic inside North Korea, some who trade with the country from outside took the currency reform in stride.
"There won't be any impact on our trade," said Piao Chunhao, a salesman with Haoyu International Trading Co. in Huichun city in China's Jilin province, which borders North Korea. "We just need to do the math. We gain the same profits."
Associated Press
