North Korea revalues currency

North Korea reportedly revalued its currency, marking its first monetary reform in 17 years, in an apparent attempt to curb inflation and crack down on black market trading.

North Korean traders working in China were quoted as saying by Yonhap News that the currency reform took place at 11 a.m. on Monday and exchange for the new currency began three hours later.

The exchange rate for the new currency is 100 to 1, in which 1,000-won notes are exchanged for new 10-won notes with a cap of 100,000 won per household.

The sudden currency reform caused confusion in Pyongyang and those with hidden assets rushed to the black markets to exchange their money for the Chinese yuan or the U.S. dollar, the sources said. The yuan and dollar jumped as a result.



China`s Xinhua News Agency also reported from Pyongyang yesterday that foreign diplomats in the North Korean capital were told that the old currency will no longer be used.

Citing a North Korean foreign ministry official, Xinhua said the diplomats were told to exchange the old currency for the new one between Nov. 30 and Dec. 6.

Shops in Pyongyang have closed as they wait for product prices to be reset based on the new currency, according to Xinhua.

North Korea had undergone four currency reforms before -- three 1:1 exchanges in 1947, 1979 and 1992, plus a 100:1 exchange in 1959.

The latest revaluation appeared mainly intended to bring the inflation under control. The value of the North Korean currency plummeted after the country issued large denomination bills in July 2002 as part of economic reform measures to make wages and prices more realistic.

Pyongyang may also be seeking to pull out money stashed in homes to stimulate the economy. The reform measures in 2002 increased commerce, allowing individuals to own more money, but most North Koreans kept the money at home as they didn`t trust state banks.

The currency revaluation would allow the North Korean government to discover who has secretly amassed wealth and hunt down those who have done so illegally.

It may also have an impact on inter-Korean economic cooperation.

"Once the currency reform is completed, North Korea is likely to set new exchange rates for the U.S. dollar and the euro," said Cho Bong-hyun, a researcher at the Industrial Bank of Korea.

"This could result in adjustment of the wages South Korean companies pay to North Korean workers in the Gaeseong industrial park."

South Korean businesses in the North`s border town pay local workers` salaries in U.S. dollars. The companies in Gaeseong were not informed by North Korean authorities on the currency revaluation as of yesterday.

The South Korean government said it was unable to confirm the currency revaluation as it was not officially announced by Pyongyang or reported in its state media.

In the past, a currency reform was always reported by the Rodong Sinmun, the state newspaper published by the North`s Workers` Party, on the day it was implemented.

"There have been no reports so far on currency reform in the North Korean media," said Unification Ministry spokesman Chun Hae-sung.

"We have acquired some information through other sources, but it is yet to be verified."

(sophie@heraldm.com)







By Kim So-hyun