North Koreans dare to protest as devaluation wipes out savings

Rush for dollars and Chinese yuan after Kim Jong-il's surprise move to reassert control over economy

The North Korean leader Kim Jong-il is trying to smother his country's fragile free market with a shock currency devaluation that has reportedly sparked panic, chaos and protests inside the isolated Stalinist state.

Monday's devaluation of Pyongyang's nearly worthless currency from 100 to a single won has wiped out the savings of impoverished North Koreans and generated a scramble for dollars and Chinese yuan, say sources behind the bamboo curtain.

Millions of Koreans have been given until next Monday to exchange their savings for the new won following Monday's decree, which has caused "great confusion" and anger, says South Korea's Chosun Ilbo newspaper.

Intelligence services in the South report that Pyongyang has stepped up security around the country of 23.5 million people as a safeguard against possible protests and riots, with army bases placed on standby. Officials are bracing themselves for a furious reaction to news that a deposit of 200,000 won in cash to a North Korean bank will yield just 1,100 won in the new currency. There were unconfirmed reports that brief protests on the streets of Pyongyang had already forced the authorities to slightly increase the amount of currency people would be allowed to exchange.

The devaluation has already sent the price of rice skyrocketing 15-fold, according to Daily NK, an online newspaper sourced by defectors and informers in the North. "This move will do nothing other than destroy the fortunes of the people," it warns.

The significance of the move has divided Pyongyang analysts with some seeing it as an attempt to end inflation. But others believe the ailing Mr Kim is struggling to reassert control over the economy before he hands the keys to power to his son, Kim Jong-un.

Kim Jong-un has already been declared leader-in-waiting, according to Japan's Mainichi newspaper, which claims to have seen official documents confirming the handover. Many believe his father is worried he may not survive the transition unless the North's disintegrating economy improves.

Famine, compounded by a series of natural disasters, is thought to have claimed 2-3 million lives inside the country since the mid-1990s. Mr Kim has responded with a series of limited Chinese-style reforms designed to loosen central control over the economy.

The reforms have increased wealth disparities and incubated a growing class of wealthier farmers and merchants who are evading state controls and using bribery to keep government officials in line, say Pyongyang watchers. In January, the government failed in its attempt to rein in the reforms by limiting or closing private markets.

"Currency reform was probably the only option left to neutralise the wealthy merchant class," a North Korean defector and analyst, Cho Myong-chol, told Chosun Ilbo yesterday. "The latest measure has made everyone poor again and possibly raised the North Korean government's hopes of regaining control over its people."

News of Mr Kim's decree comes amid claims that the North's military has also reasserted control over mines and other areas of the economy in a bid to earn hard currency before the transition of power – likely to be one of the most traumatic periods in the country's troubled history. The army is reportedly selling minerals to China and hoarding the earnings.

Observers say the devaluation will destroy the savings of poorer and middle-class North Koreans while leaving wealthier traders, who have hoarded yuan, dollars and gold, mostly untouched. Analysts in South Korea were warning last night that the move could backfire and even spark revolt.

"Currency reform... will follow in the footsteps of past currency reforms, most likely resulting in further reduced confidence in the North Korean currency and heightened reliance on foreign currency holdings, whilst doing nothing to address the underlying causes of inflation in the highly distorted North Korean market economy," says Daily NK. It said some areas of the North were under curfew and that shops have been ordered shuttered while the currency transition takes place.

"I worked like a dog for two months for the winter, but the money became useless paper overnight," said one man quoted by the Seoul-based support group Good Friends.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Service and Installation Engineer

£22000 - £28000 per annum: Recruitment Genius: A fantastic opportunity has ari...

Recruitment Genius: SEO / Outreach Executive

£20000 - £23000 per annum: Recruitment Genius: Our client is a global marketin...

Recruitment Genius: Junior Estimator

£17000 - £18000 per annum: Recruitment Genius: A fantastic opportunity has ari...

Recruitment Genius: Sales Negotiator - OTE £24,000

£22000 - £24000 per annum: Recruitment Genius: An enthusiastic individual is r...

Day In a Page

A timely reminder of the bloody anniversary we all forgot

A timely reminder of the bloody anniversary we all forgot

Who remembers that this week we enter the 150th anniversary year of the end of the American Civil War, asks Robert Fisk
Homeless Veterans appeal: Former soldiers pay their respects to a friend who also served

Homeless Veterans appeal

Former soldiers pay their respects to a friend who also served
Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing

Scarred by the bell

The downfall of the TV star charged with bar stabbing
Why 2014 was a year of technological let-downs

Why 2014 was a year of technological let-downs

Security breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Cuba's golf revolution: But will the revolutionary nation take 'bourgeois' game to its heart?

Will revolutionary Cuba take 'bourgeois' golf to its heart?

Fidel Castro ridiculed the game – but now investment in leisure resort projects is welcome
The Locked Room Mysteries: As a new collection of the genre’s best is published, its editor Otto Penzler explains the rules of engagement

The Locked Room Mysteries

As a new collection of the genre’s best is published, its editor explains the rules of engagement
Amy Adams on playing painter Margaret Keane in Tim Burton's Big Eyes

How I made myself Keane

Amy Adams hadn’t wanted to take the role of artist Margaret Keane, because she’d had enough of playing victims. But then she had a daughter, and saw the painter in a new light
Ed Richards: Parting view of Ofcom chief. . . we hate jokes on the disabled

Parting view of Ofcom chief... we hate jokes on the disabled

Bad language once got TV viewers irate, inciting calls to broadcasting switchboards. But now there is a worse offender, says retiring head of the media watchdog, Ed Richards
A look back at fashion in 2014: Wear in review

Wear in review

A look back at fashion in 2014
Ian Herbert: My 10 hopes for sport in 2015. Might just one of them happen?

Ian Herbert: My 10 hopes for sport in 2015

Might just one of them happen?
War with Isis: The West needs more than a White Knight

The West needs more than a White Knight

Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

'The day I was shot by the Taliban'

Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
Revealed: the best and worst airlines for delays

Revealed: the best and worst airlines for delays

Many flyers are failing to claim compensation to which they are entitled, a new survey has found
The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

The stories that defined 2014

From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

Disaster looming? Now you know where to head...

Which British city has become the first to be awarded special 'resilience' status by the UN?