‘NK’s Currency Revaluation Intended to Control Wealth’

North Korea`s currency revaluation is intended to control private wealth in the communist country, a senior South Korean official said yesterday.

“Pyongyang took the measure to control wealth, something that the North Korean government couldn’t manage effectively,” the official said.

“The move constitutes a return to the situation before the North’s announcement of a plan on economic management on July 1, 2002, and is far from being intended for reform and opening.”

On why the North did not formally announce the revaluation, the official said, “North Korea had no market or underground economy before previous rounds of revaluation (four times through 1992). But Pyongyang made the move to prevent North Koreans from learning of the revaluation in advance and taking preemptive measures since the underground economy has expanded.”

Another Seoul official said, “The move also surprised the South Korean government.”

Another theory is that the revaluation was a drastic measure to mobilize resources for the North`s national projects ahead of next year, which Pyongyang has designated as the “Year for Opening the Door to a Strong Country.”

In other words, the North Korean government can exchange old banknotes with new ones and scrap the old bills. It can then raise the value of the new banknotes to secure funds needed for state projects without fear of inflation.

The latest revaluation is apparently part of Pyongyang’s bid to raise control over its planned economy that began in October 2007. The latest issue of the quarterly journal Economic Research, which is published by a North Korean maker of science encyclopedias, said, “The aspiration for banknotes could expand banknote-based relationships and thus damage socialist economic relations.”

The move also apparently seeks to reduce the purchasing power of international traders and lower the inflow of Chinese goods into North Korea, thereby protecting North Korean industries.

In South Korea, the Daily NK, an online news media specializing in North Korea, said, “North Korea conducted a national currency revaluation from 8 a.m. Dec. 2,” adding, “The exchange of banknotes will continue through Dec. 6, and new bills will start circulating from Dec. 7,” quoting sources knowledgeable on North Korea.

“Pyongyang also allowed the exchange of older banknotes exceeding 100,000 won under a ratio of 1,000 won per one won.”

The latest issue of NK In & Out published by the Network for North Korean Democracy and Human Rights in Seoul said, “The new 100-won banknote contains a portrait of the late North Korean leader Kim Il Sung.”

zeitung@donga.com