The North Korean government announced this week that it would be redenominate their current currency and replace old banknotes with new ones of a drastically lesser value.
Though the currency will keep the same name (the won) one hundred old won is now only worth one won – 1/100th of their previous worth.
The government made the announcement on Monday, and has informed citizens and foreign embassies they have until this coming Sunday to exchange old bills for new ones:
“Bills that were not exchanged during the period and our currency that has been illegally taken outside the country will become entirely invalid,” said an official from the country’s Central Bank.
But there is a stringent limit on the amount of currency people can exchange – only 150,000 won to be precise. The rest must be deposited into government-run banks or else it will be rendered useless in the coming weeks, said South Korean media outlets.
Businesses throughout the country have been shut down for the week while the transition takes place and Pyongyang residents are rushing to the black market to convert their cash savings into foreign currencies.
Under current black market rates, 150,000 won is worth about $60 US.
The government said the reason for the change in currency and its rates is because of the countries decade-plus run of economic hardship and the increasing evidence of runaway inflation.
While critics agree that tough economic times have been no stranger to North Korea, some, as the American Press reports, believe this change is more complex:
“The government is retaking control of the economy from the hands of merchants, analysts said.
‘This is aimed at rooting out the budding private sector and strengthening the government’s control of the economy,’ said Jeong Kwang-min, a research fellow at the Institute for National Security Strategy in Seoul.
He said the move has a broader goal in mind: to pave the way for Kim Jong Il to turn over power to his youngest son, Kim Jong Un, and to ensure he inherits a stable economy.”
Good Friends, a Seoul-based civic group has said the main goals of the conversion are to target the struggling middle class and to crack down on private markets that have stoked capitalism.
The group also reported this week that authorities have threatened “merciless punishment” for anyone violating the rules of the currency exchange.
Morrison World News: “North Korea switched currency, 100 to 1 rate”
Yonhap News Agency: “N. Korea confirms currency reform, vows to normalize economy”
Yonhap News Agency: “New N. Korean banknotes feature Kim Il-sung, his birth home”
Penny Stock and OTCBB News: “Activists: Despair in N. Korea over currency exchange (AP)”
The Morning Star: “DPRK devalues currency to ‘fight inequality’”