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Reports: North Korea Revalues Currency

  • Kurt Achin

N. Korea has sharply raised the value of its currency, causing confusion, and a sudden spike in demand in for Chinese yuan and US dollars

North Korea has apparently revalued its currency, in a move that may be aimed at tightening domestic market activity.

South Korean media quoted unnamed North Korean sources Tuesday as saying the North has sharply raised the value of its currency. If accurate, this would be the first North Korean currency reform in 17 years.

China's state news agency Xinhua also reported the revaluation, saying embassies in Pyongyang had been informed about it.

According to the reports, Pyongyang announced that old North Korean won notes are to be exchanged for new notes at the rate of 100 to one. Citizens will reportedly be ordered to trade in old 1,000-won bills for new 10-won notes this week.

The reports say the announcement has caused confusion, and created a sudden spike in demand in North Korea for Chinese yuan and U.S. dollars, an apparent flight to stable currencies.

South Korean Unification Ministry Spokesman Chun Hae-sung downplayed the reports, saying his ministry has seen no announcements from Pyongyang.

He says in the past, North Korean media announced such directives on the same day they came from the officials who issued them.

Cho Bong-hyeon is a researcher specializing in the North's economy at the Industrial Bank of Korea. He says a revaluation could be aimed at tightening control over the economy.

He describes the reform as a strategic card, which North Korea is playing to punish wealthier North Koreans while pumping money into government.

North Korea has experienced severe shortages of food, medicine, and other basic needs for two decades, due to the government's economic mismanagement and isolation. North Korea scholars say a black market now flourishes, mainly across the border with China. A number of North Koreans are believed to cross into China regularly to trade and work. This week's currency reform may be aimed at flushing out earnings from such activities.

Cho says the reform also is likely to stunt domestic markets that have emerged in North Korea since Pyongyang introduced limited reforms in 2002.

He says North Korean wholesalers and other business people will need to re-price products, but have no guidelines for how to do it. As a result, says Cho, they are likely to hoard their inventories for at least the time being, which will chill market activity.

Cho also points out that the currency reform is unlikely to keep pace with North Korea's rapidly rising consumer prices, meaning impoverished citizens may find it even harder to purchase basic goods.

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