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United States Institute of Peace: North Korea’s Currency Redenomination: A Tipping Point?

December 3, 2009

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The United States Institute of Peace examines the impact of the recent redenomination of the won on the North Korean people and regime.

Background

On Nov. 30, the North Korean government redenominated the country's currency, the won, and imposed restrictions on the quantity of old bills that people could convert for the new ones. Pyongyang's revaluation means that 100 won is now worth 1 won. This sudden government action raises many questions about the impact of the redenomination on the North Korean people and the regime.

What are the main explanations among North Korea watchers regarding the Democratic People's Republic of Korea (DPRK) government's rationale for implementing this redenomination?

An early explanation was that the DPRK government was seeking to curb inflation by knocking off two zeros from the currency. A more compelling explanation is that the redenomination is a major measure designed to consolidate the government's control over the economy as it works towards unveiling the DPRK as a "strong and prosperous nation" (kangsong daeguk) in 2012. Defectors had noted that the market activity sprouting out over key parts of the country had been eroding discipline--corruption among officials had been increasing significantly, fueled by a growing group of prosperous market traders. This trend had the effect of decentralizing the DPRK regime's power. Through this currency measure the regime appears to be seeking to centralize and consolidate its power again.

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