N.Korea Bans Use of Foreign Currency

      December 23, 2009 09:02

      North Korea is attempting to crack down on the newly rich by banning payment with foreign currency in the markets. The move follows a shock currency reform apparently intended to stifle a nascent market economy the regime sees as a threat.

      A North Korean source on Tuesday said the regime banned foreigners as well as locals from directly using dollars or euros in mid-December. In the past, it was possible to pay with foreign currencies at hotels or markets.

      Authorities have reportedly been urging people on nationwide TV to immediately report anybody using dollars directly. Rumor has it that the exchange value of dollars, which soared immediately after the currency reform, has now stabilized to some extent there.

      According to North Korean defectors, many senior officials and agencies involved in earning foreign currency have long held their cash assets in those currencies, and larger transactions are more likely to be settled in U.S. dollars than North Korean won.

      A former senior North Korean official said the regime banned payment in U.S. dollars to pacify the public since the amount of foreign currency held by senior officials and rich people had become so large that it "can be compared to the national treasury." After the currency reform suddenly devalued their savings at a rate of 100:1, ordinary people complained that really rich people who have dollars did not suffer, he said.

      On the contrary, those with dollar holdings gained from the currency reform, when panic sent the dollar soaring. The regime apparently had no choice but to crack down on the practice since propaganda made out that the currency reform was intended to ensure greater equality.

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