N. Korea revalues currency for first time in 17 yrs: sources

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SHENYANG, China, Dec. 1 (Yonhap) -- North Korea has sharply raised the value of
its currency, its first such move in 17 years, in an apparent bid to tackle
inflation and clamp down on black market trading, sources here said Tuesday.
North Korean sources who engage in trade in this eastern Chinese city told Yonhap
News Agency that the North Korean government implemented the currency reform as
of 11 a.m. Monday and the exchange for the new currency began at 2 p.m.
The exchange rate for new currency is 100 to 1, in which the old denomination of
1,000 won is replaced by the new 10 won, the sources said, speaking on strict
condition of anonymity. The drastic revaluation disturbed the local market, they
said.
"Many citizens in Pyongyang were taken aback and in confusion. Those who were
worried about their hidden assets rushed to the black market to exchange them
with yuan or U.S. dollars. The yuan and the dollar jumped," one of the sources
said.
The revaluation was the first for North Korea since 1992. Since its government
was founded in 1947, North Korea has also undertaken 1 to 1 currency exchanges
four times.
The latest move appeared to be mostly aimed at tackling inflation as the local
currency value has nosedived since the country took economic reforms in 2002 to
make payments and prices more realistic and introduce market freedom. North Korea
also may have sought to draw out money hidden in the underground economy, some
stashed by citizens working abroad.
North Korea is also in a nationwide campaign to rebuild its economy by 2012, the
birth centennial of its founder, Kim Il-sung.
South Korean officials were cautious about the report, as North Korea has yet to
make an official announcement as it did in 1992.
"We cannot confirm the report," an official at the Unification Ministry said.
Yang Moon-soo, an economy specialist at the University of North Korean Studies in
Seoul, said he believes the currency reform has both economic and political aims.
North Korea wanted to shed heavy inflation pressure, and in the process of
exchanging the denominations, the government would be able to discover and
question those who have amassed wealth, he said.
"In the economic aspect, the government will be able to retrieve banknotes that
people have amassed in their own coffers," Yang said. "In that process, those who
have legally or illegally stashed a large amount of money will be exposed to the
government, and those who fear punishment will have to bury their illegally
earned money. There will be less cash circulating in the market and more
government control of the people."
hkim@yna.co.kr
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