Wed, Dec 16, 2009 - Page 5 News List

Pyongyang backtracks on currency


North Korea has backtracked on details of its shock currency revaluation following a riot by market traders that led to 12 executions, a report said yesterday.

South Korea’s Chosun Ilbo newspaper said the hardline communist state had taken a series of steps to placate its people over the 100-to-one revaluation announced two weeks ago.

It said the concessions followed a riot by merchants in the city of Hamhung on Dec. 5 and Dec. 6 which stirred public sympathy. Twelve “masterminds” of the unrest were later executed, the paper said.

It was not possible to confirm the riot or executions, but there have been accounts of widespread anger since the regime revalued its currency this month, requiring old banknotes to be exchanged for new ones at the rate of 100 to one.

Analysts said the move was aimed at curbing inflation and clamping down on a growing free-market economy to reassert the regime’s control.

The initial limit of 100,000 won on the total cash that each person could exchange effectively wiped out many people’s savings in the impoverished nation.

On Sunday authorities raised the limit to 500,000 won, Chosun said, quoting sources in the North.

One hundred thousand won in old money was equivalent to US$30 to US$40 at the previous black market rate.

The North also announced that eventually citizens would be allowed to exchange all their old bills for new ones if they deposit the money in banks, Chosun reported.

People reportedly shun banks because they fear investigations into the source of their savings, or restrictions on withdrawals as in the past.

Chosun said authorities promised no probe into savings of up to 1 million won and unlimited withdrawals if savings of more than 1 million are properly explained.

The newspaper quoted a high-level North Korean source as saying authorities “are backtracking under pressure from market forces.”

“We’re now living in an era where it’s not as easy as it used to be to deal so recklessly with people’s property,” the source said.

Free markets sprang up after the state food distribution system collapsed during famines in the 1990s.

In 2002 the regime introduced limited wage and price reforms, causing prices to rise sharply.

The reforms were rolled back three years later and in recent years officials have been cracking down on trading in street markets.

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