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(LEAD) N. Korea's official media silent about currency reform

All Headlines 18:13 December 02, 2009

(ATTN: TRIMS slug, UPDATES throughout with a possible hint from N. Korean quarterly, quotes on market chaos)
By Kim Hyun

SEOUL/DANDONG, China, Dec. 2 (Yonhap) -- North Korea remained silent to the outside world on Wednesday over its reported currency revaluation that is believed to have thrown its market into disarray and weakened confidence in the local won.

North Korea's official media has yet to announce its first currency reform in 17 years that reportedly took effect Monday. The exchange rate for new denominations was 100 to 1, a deflation process meant to raise the value of the currency amid soaring commodity prices.

"The inflation problem was so serious that I guess there would have been no other way but the currency reform, but it just strengthened people's distrust in the North Korean won," a North Korean trade worker in Dandong, a Chinese gateway for trade with North Korea, told a Yonhap reporter.

"People's preference rose for the U.S. dollar or the Chinese yuan. The value of foreign currency will go up, so will North Korea's dependence on them," the North Korean said, requesting anonymity.

A Chinese trade worker said his North Korean partners were withdrawing their purchase orders because they could not pay in yuan or dollars, which have become scarce at home.

"A North Korean trade worker who had ordered 100 gold rings canceled it," the Chinese said, requesting anonymity. "I asked him to get me some seafood, and he said all commercial trading was halted, and that there was nothing he could do."

South Korea could not yet confirm the reported revaluation north of the border, although officials said they had such intelligence beforehand. In previous currency reforms, including the latest in 1992, North Korean media made an official announcement as a decree by the Cabinet or the legislature.

Internally, North Korea was disseminating the reform through a wire radio network, "Third Broadcasting," whose service is only available domestically, according to Good Friends, a Seoul-based aid group that has sources inside North Korea. Residents listen to the broadcast through speakers installed in homes, farms and public buildings.

"Central broadcasts are not carrying the news, but the revaluation continues being disseminated to the people," Lee Seung-yong, a lead staffer with Good Friends, said. "I don't know why they are not making an announcement to the outside world.

A Seoul source well-versed in North Korea said North Korea gave what could be a remote hint at the monetary reform in a quarterly published in the fall. The publication titled "Economic Review" carried an article that warns of the "idolization of currency," the source said.

Good Friends, citing sources inside North Korea, said the maximum amount of the new currency allowed for exchange was limited to 100,000 won per household. The average monthly household income is believed to be 4,000 to 5,000 won.

A kilogram of rice was set at 44 won at state-run markets in the North's 2002 economic reform, but the price has now spiked to 2,500 won in free markets, according to Good Friends.

Shops, public bathhouses and restaurants in the North were mostly closed, the aid group said, and public anger has mounted over the sudden reform that has rendered old denominations into "useless paper overnight."


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