NORTH KOREA REVALS

North Korea sharply revalues currency

AFP
AFP Global Edition

Dec 01, 2009 01:49 EST

North Korea has sharply revalued its currency, Chinese state media and South Korean reports said Tuesday, in a surprise move apparently aimed at curbing inflation and clamping down on black-market trade.

The hardline communist government implemented the change on Monday, causing panic and confusion in the markets, Yonhap news agency and other South Korean media reported.

The exchange rate between the old and new bills is 100 to one, China's Xinhua news agency reported from Pyongyang, quoting a North Korean foreign ministry notice to embassies.

It was the first time in 17 years that the North has revamped its currency.

"No reasons were disclosed for the sudden change," Xinhua reported.

Current won bills can be exchanged for new ones from Monday to Sunday, it said, adding that state-run shops in the capital were closed Tuesday morning.

Xinhua quoted a saleswoman as saying they would reopen one week later after the government sets new prices.

Yonhap, reporting from the northeastern Chinese city of Shenyang, said old-denomination 1,000-won notes are being replaced by new 10-won notes.

"Many citizens in Pyongyang were taken aback and in confusion," it quoted a North Korean trader with China as saying.

"Those who were worried about their hidden assets rushed to the black market to exchange them for (Chinese) yuan or US dollars. The yuan and the dollar jumped."

Seoul's unification ministry said it was checking the reports.

Cho Bong-Hyun, a specialist on the North's economy at Seoul's IBK Economic Research Institute, said the move was to tackle corruption and tame inflation.

"The sudden and bold manner the move was implemented indicates the government's intention to identify and send a warning to those who have amassed wealth illegally and unfairly," Cho told AFP.

Officially the North Korean won trades at 135 to the dollar. Cho said the current black market rate is between 2,000-3,000 but could soar to 20,000 if there is an acute dollar shortage.

The North issued new banknotes in 1949, 1959, 1979 and 1992 but the denominations remained unchanged except in 1959 when new notes were exchanged for old at a 100-to-1 rate.

Yonhap said the main aim appeared to be curbing inflation because the currency's value had slumped since economic reforms were introduced in 2002.

The reforms, to make wages and prices more realistic and introduce limited market freedoms, were largely rolled back in 2005. Authorities have lately been clamping down on free markets in an apparent attempt to reassert the regime's control.

Yonhap said the North may also have wanted to flush out funds from the underground economy.

Yang Moon-Soo, of Seoul's University of North Korean Studies, said the authorities aim both to tame inflation and to trace citizens who have amassed wealth either legally or illegally.

Those who feared punishment would have to bury their illegally earned money, he told Yonhap. "There will be less cash circulating in the market and more government control of the people."

Seoul-based Internet newspaper Daily NK, in a story datelined Shenyang, said the caused alarm in markets. "When the news spread in the jangmadang (markets), people panicked," it quoted a source in the northeastern province of North Hamkyung as saying.

A source in the western city of Sinuiju, on the border with China, told the paper: "Traders gathered around currency dealers. Chaos ensued when currency dealers tried to avoid them."

Chosun Ilbo said the revaluation was to curb inflation and tighten control over society before an eventual power transfer from leader Kim Jong-Il to his son Jong-Un.

"Prices have gone up too high since the economic reform measures taken on July 1, 2002," a source told Chosun. "The North Korean currency has been devalued too much, apparently causing the currency change."

S. Korea trying to verify report on N. Korea currency revaluation
Associated Press, by Staff Posted By: PapaEd- Tue, 01 Dec 2009 03:23:52 GMT South Korea is trying to verify a report that North Korea has revalued its currency for the first time in 17 years, a Unification Ministry spokesman told reporters. (snip) Yonhap quoted unidentified sources as saying the exchange rate is 100 old won to 1 new won, meaning North Koreans have to replace their old 1,000 won bills with new 10 won notes.

North Korea Revalues its Currency (Update)
Tuesday, December 1, 2009

According to China's Xinhua News Agency, the North Korea foreign ministry apparently orally confirmed to the foreign embassies stationed in Pyongyang today that it did, indeed, revalue its currency, with the exchange rate between the old and new notes being 100:1.

Here are some of the updated information from South Korea's Yonhap News Agency on the revaluation:

*According to the North's fixed exchange rate before the adjustment, a U.S. dollar was equal to 135 North Korean won.

*"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 and the fifth since its government was founded in 1947. In the first reform in 1947 and the third in 1979 and fourth in 1992, currencies were exchanged 1 to 1 with no adjustment of denomination values. Only the second reform in 1959 raised the exchange rate to 100 to 1 as in the reported latest move.

*The latest reform appeared to be mostly aimed at tackling inflation as the local currency value has nosedived since the country made economic reforms in 2002 to make payments and prices more realistic and introduce market freedom. North Korea also may have sought to flush out money hidden in the underground economy, some stashed by citizens working abroad.

*South Korean officials said they could not yet confirm the report, as North Korea has yet to make an official announcement as it did all in its previous reforms. A currency reform was always reported by the country's official media, led by the Workers' Party newspaper, Rodong Sinmun, on the day it was implemented as a decision by the Cabinet or a central government committee headed by then President Kim Il Sung.

*"There have been no reports so far of a currency reform in North Korean media," Unification Ministry spokesman Chun Hae-sung said. "We checked the state media today, including the Rodong Sinmun, but there was no such report."

*No signs of currency reform were detected yet in joint industrial projects, such as the factory park in the North Korean border town of Kaesong, where South Korean investors pay North Korean wages in dollars, the spokesman added.

*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.

Take notes. This could be the U.S. years down the road. First will come exchange controls and the end to fluctuating exchange rates, and then the devaluations will come.

So should we hold'em?

well said Peg...Thnx CK!!