December 01, 2009 09:01
North Korea on Monday announced it is replacing its practically worthless currency at a rate of one new won to 100 old won as of Tuesday. The impoverished country has already conducted five currency reforms, the last one in 1992, all of them during transition periods or when it felt it needed to tighten control.
There is speculation that the latest currency reform comes both to tighten the regime's hold and to bring runaway inflation under control amid apparent efforts to prepare for the succession of North Korean leader Kim Jong-il's third son Jong-un.
A source in North Korea said news that the currency replacement will begin at a rate of one new won to 100 old won on Tuesday was suddenly announced throughout North Korea and caused "great confusion." Authorities say they are replacing the currency to remove "economic imbalance" after private farmers' markets mushroomed and the gap between rich and poor widened, the source said.
South Korean intelligence services are analyzing information.
The Daily NK, a news website about North Korea, said provincial branches of the North Korean central bank began replacing the currency. A decree concerning the currency reform was apparently announced through village offices on Monday morning.
Another inside source said the reform probably comes because the currency is worth practically nothing. Prices have soared since timid economic reforms started on July 1, 2002, when a modicum of market freedom was introduced. A third source said the news caused panic, with many people scrambling to exchange their won into yuan or dollars.
The Daily NK quoted a Korean-Chinese engaged in trade with North Korea as saying, "Phone lines are humming now with North Korean dealers trying to obtain yuan."
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