North Koreans in shock as cash is 'banned'

[Pastor Dale Morgan]

*Perilous Times*

From Times Online
December 2, 2009
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North Koreans in shock as cash is 'banned'
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Richard Lloyd Parry, Asia Editor


All cash transactions in North Korea have been frozen after the
Government’s shock decision to revalue the won currency in an effort to
crack down on the country’s burgeoning free-market economy.

In the capital, Pyongyang, today only the few shops and restaurants
permitted to trade in foreign currencies, patronised by the privileged
elite and the city’s small foreign population, were open for business.

All other enterprises and services based on cash, including markets,
long-distance bus services, barbers, saunas and bath houses, have been
suspended until the revaluation is completed next week.

There was confusion after the announcement of the measure, which
requires North Koreans to swap existing won notes with new ones at an
exchange rate of one to 100, knocking two zeroes off their value. There
is a cap of 100,000 won (£419) per family, which means that anyone with
significant holdings of cash will have their savings wiped out.

“Loud sounds of weeping in every house have not ceased since the news
was released,” one South Korean news website quoted an inhabitant of the
city of Sinuiju, near the Chinese border, as saying. "Weeping and
fighting between couples has not stopped anywhere. The atmosphere of the
city is terrible now.”

The website, the Daily NK, citing similarly unnamed sources, said that
one elderly couple had killed themselves in North Hamgyong, a province
adjacent to the Chinese border across which much illegal trading is
carried out. It also reported anxiety among local officials that the
currency revaluation would provoke civil unrest.

But a western diplomat in Pyongyang said that, apart from the closed-up
shops, the announcement had had no visible effect on the city. North
Korea is one of the world’s most tightly controlled and brutal
totalitarian states and public dissent is almost unknown.

The announcement was made on Monday via a closed cable broadcasting
system which is piped into all North Korean homes, and reserved for
public announcements and state propaganda.

It has not been reported in the state media, but it was confirmed the
following day in briefings to foreign diplomats in Pyongyang who were
summoned to the country’s foreign ministry at 20 minutes' notice.

“It came as a great surprise to everyone,” one western diplomat in
Pyongyang told The Times. “Everything literally closed – no notice
given. When we made enquiries we discovered it was because the currency
was no longer valid. It’s really quite dramatic.”

Households have been told that if they surrender their cash holdings
this week, they will be given the new notes from next Monday. Some
reports suggested that, after protests from members of the elite, the
limit on cash exchange had been raised to 150,000 won, plus 300,000 won
in bank deposits which would be made available after investigation into
its source.

“One of the worries our North Korean staff have is whether they will
have enough food to get through to next week,” the manager of a foreign
organisation in Pyongyang said. “Our employees have access to foreign
currency, but most people don’t and they could be in trouble.”

Reliable information about the North Korean economy is difficult to come
by, but the move appears to have two purposes. One is to control price
inflation by limiting the amount of cash in circulation. The other is to
destroy the fortunes of black-market traders, money changers, and others
who have been profiting from North Korea’s nascent free-market economy.

Officially, the North Korean state provides for the needs of all its
citizens through the state-run Public Distribution System. But after the
famine of the late 1990s, when several million people starved to death
because of floods and crop failures, North Korea took tentative steps
towards liberalising its economy.

In the early 2000s, large-scale markets were officially established, and
buying and selling by individuals was tolerated. But the benefits of
this were felt unevenly, bringing new prosperity to rural areas but even
greater hardship to those parts of the country such as the northeast
which traditionally relied on now defunct heavy industries.

People in these areas have compensated by smuggling consumer goods
across the porous northern border with China. But in a society that
presents itself as a perfect socialist state, overseen by the paternal
wisdom of the “Dear Leader” Kim Jong Il, the existence of growing
inequality between the poor and a new entrepreneurial middle class is
undermining the Government. Over the past year, the authorities have
clamped down on unofficial buying and selling and closed down the
country’s biggest market in the Pyongsong suburb of Pyongyang.

The revaluation is not expected to affect the small number of foreign
embassies and aid organisations that operate in Pyongyang. Foreigners
are not allowed to trade in local currency and must spend foreign
currency. The official exchange rate is 190 won to the euro, but the
black market rate is 2,000 won and upwards.