North Korea admits drastic currency reform, is silent on protests

Reports of protest, violence emerged from North Korea after a drastic currency reform that sets an exchange rate of 1,000 old to 1 new . A North Korean paper in Japan confirmed the reform.

The Chosun Sinbo/Yonhap/REUTERS
This undated picture shows the front of a new North Korean 50 won note. The secretive state has revalued its currency, reports say, a move that analysts said was aimed at curtailing a burgeoning market economy and clamping down on merchants.

North Korea has confirmed a drastic reform of its currency in what's widely viewed as an attempt to control a growing black market and curbing runaway inflation.

Amid recent reports of protest and violence in Pyongyang among members of a small but restive middle class, a North Korean newspaper in Japan on Friday quoted an official with North Korea's central bank as confirming for the first time reports of currency reform instituted early this week.

North Korea's elite – a narrow band of those close to leader Kim Jong-il and his inner circle of family members, top aides, senior members of the armed forces, the Workers' Party, and the government – are assumed to have large caches of foreign currency, dollars, euros, or Chinese yuan. And the vast majority of North Koreans have almost no money of their own. That leaves the middle class feeling the sting the most.

"People are mad at Kim Jong-il," says Ha Tae Keung, head of Open Radio for North Korea, which broadcasts two hours a day of news from Seoul into North Korea. "Suddenly your wealth is gone, and you have nothing. It is very difficult."

The question, he asks, is "whether the protest is organized or random."

'Easier for normal transactions'

The North Korean newspaper, Choson Sinbo, published in Tokyo, quoted a bank official identified as Jo Sang-hyon as saying the currency was devalued in order to raise the value of North Korea's currency and make it easier to use in a normal transactions. The paper, with an office in Pyongyang, is widely viewed as a North Korean mouthpiece.

The newspaper carried photographs of new North Korean currency notes, all bearing images of the late Kim Il-sung, the North Korean leader who ruled for nearly half a century before dying in 1994 and passing on power to his son, Kim Jong-il.

A leader of South Korea's ruling Grand National Party told Yonhap, the South Korean news agency, that the currency reform was "a desperate bid to maintain the regime." He also described the reform as motivated by the need "to consolidate the ground" for succession of power from Kim Jong-il, believed to be recovering from a stroke that he suffered more than a year ago, to his youngest son, Kim Jong-un.

Stashes of old currency become worthless

North Korea, until the article appeared in Choson Sinbo, had been silent on currency reform, or the protests against it, but South Korean organizations with contacts in the North have been reporting rising concerns mainly among traders and others with stashes of old currency that is now nearly worthless.

Daily NK, which produces regular reports based on its contacts in the North and advocates for defectors, cited incidents of violence, including murder, suicides, and kidnapping. Good Friends, another group, dedicated to helping defectors, quoted one trader as saying the currency reform meant this year "is the year of disaster."

Chosun Ilbo, a major conservative newspaper here, cited accounts of "people loudly cursing the government" – an offense that has generally meant jail sentences, torture, and possibly execution.

As a result of the protests, according to Daily NK, North Korea has had to raise the amount that people can exchange from old to new currency. Under the current rule, it is possible to change old for new North Korean won at a rate of 100 to 1 for only the first 100,000 won, after which the old won can be changed at a rate of 1,000 to 1.

Pyongyang's Korean Central News Agency appeared to be commenting indirectly on the unrest in a commentary praising "the Korean people" for "demonstrating their mental power of self-regeneration and fight against hardships" by "strenuous efforts to build a strong, prosperous and powerful socialist nation."

The commentary made an unusual acknowledgement, saying "there are quite a few things that are still in shortage" but declaring, "Nothing is impossible" for people united by "a self-reliant economy" around the ruling Workers' Party.


What country do Americans see as the biggest threat to US security? One is North Korea.

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