By Hyo-Jin Paik
Impunity Watch Reporter, Asia

SEOUL, South Korea – Since North Korea’s recent implementation of a new monetary policy, there have been reports that the currency reform has exacerbated Pyongyang’s chronic problems of food shortages and price inflation.

A researcher in Seoul, Kay Seok, said, “The first public rallies we see in North Korea will not be about freedom or democracy, but…about livelihood.”

In fact, the currency reform has brought about such great public dissatisfaction that thousands of North Koreans began the New Year by holding a rally in the capital of the tightly controlled state.

Pyongyang’s new currency reform would slash two zeroes off its current currency, and the government has imposed limits on how much people can exchange the old currency for the new.  These changes have raised prices for essential goods that the impoverished North Koreans were already having trouble buying because of the existing inflation.

As such, the government is restricting people’s personal wealth, which has angered many North Koreans where there have been reports of people burning money.

In addition, North Korea has decided to stifle its rising merchant class by reclaiming state control over the economy.  For example, the North has decided to ban the use of foreign currency, and this move affects those who operate outside the country’s centrally planned economy, such as those who buy goods in Chinese yuan, US dollars or euros.

North Korean merchants who operate outside the state economy and earn large sums of money risk imprisonment.

Economists Marcus Noland and Stephan Haggard said, “The North Korean currency reform is an economically misguided initiative that will reduce the welfare of North residents…[H]eightened repression is a central feature of the new economic controls.”

Many view North’s new monetary policy as the country’s means to restrict and attacks its emerging market economy and the new businessmen, and a sign of North’s return to its version of socialism.

Park Hyeong-jung at the Korea Institute for National Unification said that the currency reform “has significantly strengthened the regime’s control over the economy and the people.”

Other experts in South Korea have also voiced concerns that this currency reform makes the North Korean regime collapse scenario more probable.
For more information, please see:

BloggingStocks – Inflation Surges on Wealth Destruction in North Korea – 7 January 2010

Jakarta Globe – N. Korean Crackdown On Merchants Risky – 7 January 2010

NPR – North Koreans Upset Over Currency Changes – 8 January 2010