SEOUL, Dec 4 (Reuters) - A pro-Pyongyang newspaper confirmed on Friday the secretive North has revalued its currency, a move analysts said was aimed at curtailing a burgeoning market economy and clamping down on merchants.
The communist North's official media has kept mum over widespread reports that it had lopped two zeroes of the value of its currency this week, a move that instantly cut the worth of savings by a hundredth unless, according to one report, they are deposited in state banks.
The revaluation squeezes merchants who have acquired cash from outside the official economy and could face punishment if they reveal hoarded wealth by converting currency.
The Chosun Sinbo (http://www.korea-np.co.jp/main/main.aspx), a Japan-based publication with close ties to the North's leaders, said the move went into effect at the end of November and quoted North Korean central banker Jo Sung-hyun as saying people were changing currency at hundreds of locations.
'The reason for this is to promote currency distribution and building a stonger country. Also it will support the rights of the labourers and better their lives,' Jo was quoted as saying.
Jo said the move will strengthen order inside the country and denied it was a move to encroach on the free market system.
The move has left most analysts puzzling over what exactly North Korea's hardline leaders hope to achieve by such a dramatic change which, on the face of it, looks hard to implement and runs the risk of stoking inflation, even triggering unrest.
The move has been met with massive discontent, led to a sharp drop in external trade and caused sharp increases in prices for essentials such as rice, South Korean media and aid groups reported sources inside North Korea as saying.
The market system in North Korea gained strength after a famine in the late 1990s that killed an estimated 1 million of the North's then 22 million people.
Citizens, realising the central government's distribution system had broken down, turned to barter and trade across the border with China to acquire goods sold at markets across the country that mostly operate outside the official economy.
(Reporting by Jon Herskovitz, Christine Kim, Rhee So-eui and Jack Kim; Editing by Jonathan Thatcher)
((jon.herskovitz@reuters.com; +822 3704-5510;, Reuters Messaging: jon.herskovitz.reuters.com@reuters.net)) Keywords: KOREA NORTH/CURRENCY (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The communist North's official media has kept mum over widespread reports that it had lopped two zeroes of the value of its currency this week, a move that instantly cut the worth of savings by a hundredth unless, according to one report, they are deposited in state banks.
The revaluation squeezes merchants who have acquired cash from outside the official economy and could face punishment if they reveal hoarded wealth by converting currency.
The Chosun Sinbo (http://www.korea-np.co.jp/main/main.aspx), a Japan-based publication with close ties to the North's leaders, said the move went into effect at the end of November and quoted North Korean central banker Jo Sung-hyun as saying people were changing currency at hundreds of locations.
'The reason for this is to promote currency distribution and building a stonger country. Also it will support the rights of the labourers and better their lives,' Jo was quoted as saying.
Jo said the move will strengthen order inside the country and denied it was a move to encroach on the free market system.
The move has left most analysts puzzling over what exactly North Korea's hardline leaders hope to achieve by such a dramatic change which, on the face of it, looks hard to implement and runs the risk of stoking inflation, even triggering unrest.
The move has been met with massive discontent, led to a sharp drop in external trade and caused sharp increases in prices for essentials such as rice, South Korean media and aid groups reported sources inside North Korea as saying.
The market system in North Korea gained strength after a famine in the late 1990s that killed an estimated 1 million of the North's then 22 million people.
Citizens, realising the central government's distribution system had broken down, turned to barter and trade across the border with China to acquire goods sold at markets across the country that mostly operate outside the official economy.
(Reporting by Jon Herskovitz, Christine Kim, Rhee So-eui and Jack Kim; Editing by Jonathan Thatcher)
((jon.herskovitz@reuters.com; +822 3704-5510;, Reuters Messaging: jon.herskovitz.reuters.com@reuters.net)) Keywords: KOREA NORTH/CURRENCY (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.