New N.Korean Currency Sees Runaway Inflation

Choson Ilbo

North Korea’s currency reform has apparently failed to tame inflation. The state has paid the first salaries since the shock currency reform late last year, with the State Security Department and the Ministry of Public Security, the frontline agencies dedicated to protection of the regime, paying soldiers 6,000 won each — 3,000 won in average monthly pay plus a 3,000 won bonus.

Soldiers usually received about 3,000 won in the old currency. That this effectively doubled means the currency reform, which exchanged old won for new at a rate of 100:1, has not been able to stop inflation.

Money is also apparently being distributed to workers on collective farms, who had a hard time last year because they failed to raise vegetables and other produce from their own patches to scrape a living for their families due to the “150-day struggle,” a campaign aimed at spurring them to work harder at farms.

According to recent defectors, cooperative farms distributed more than 100,000 won to each household in the new currency late last year to settle accounts and distribute profits. Workers at state-run enterprises were also given 1,000 to 2,000 won each, even though most of their operations are suspended.

One Korean Chinese, who visited Pyongyang recently, said, “Department store shelves are stacked with goods that the state confiscated from market traders in return for nothing on Jan. 1, and they are selling those goods at prices readjusted at the exchange rate of 100 old won for one new won. Huge crowds rushed to buy them, so they ran out of stock immediately.”

But commodity prices skyrocketed. Inflation is soaring as market traders are hoarding goods, anticipating that the real value of the new currency will plummet. According to a North Korean source, 1 kg of rice cost about 30 won right after the currency reform but is now closing in on 1,000 won. The U.S. dollar was exchanged at the rate of 75 won to the greenback right after the currency reform but soared to 400 won in late December. There is speculation that it is now only a matter of time before the rate will reach 3,000 won, the same as the unofficial exchange rate of the old won.

Market traders are angry as they have realized that they were robbed of nearly everything they earned. A former senior North Korean official said, “The latest currency reform is more cruel than the previous reform in 1992. It’s tantamount to the state confiscating 99 percent of people’s money.”

Authorities have been handing out food rations in Pyongyang and other regions since December, but North Koreans already know that the food cannot last them more than a month or two. Urban residents are experiencing particular hardship.


Comments are closed.