By Kim Sue-young
Staff Reporter

A North Korea watcher said Tuesday that Pyongyang's reported revaluation of its currency was aimed at increasing the wealth of the nation and beefing up state-run companies.

According to reports, the secretive state suddenly removed two zeros from the nominal value of banknotes Monday to curb inflation and black marketeering. The adjustment was the first in 17 years.

The South Korean Ministry of Unification declined to confirm the report.

``An individual is reportedly allowed to exchange up to 100,000 won (about $86) for the new banknotes,'' said Park Hyeong-jung, a senior research fellow at the Korea Institute for National Unification (KINU).

The measure negatively affects the middle class who possess the North Korean currency and only benefits those who have foreign currency, he told The Korea Times.

He continued: ``The currency revaluation appears to seek to enrich the nation by sacrificing individuals.''

Park said the impoverished state may seek to lessen its dependence on China through the currency reform.

``The nation can fill up the state coffers and release money to state-run companies. Then, the strengthened domestic economy can help reduce Pyongyang's dependence on China,'' he said.

Park added that the currency revaluation was not likely to affect inter-Korean projects and the joint Gaeseong Industrial Complex.

Jeung Young-tae, another senior research fellow at the KINU, said the measure seems to be aimed at regulating black marketeering.

``Brisk black marketeering can be a threat to the regime. The North can snatch money from wealthy market dealers and subsequently, regulate market activities,'' he said.

A North Korean foreign trading official based in China reportedly said the reclusive state set the exchange rate as 100 to 1 and accordingly, the old denomination of 1,000 won is replaced by the new 10 won.

According to North Korea's fixed exchange rate before the revaluation, a U.S. dollar was equivalent to 135 North Korean won.

``Black markets in Pyongyang have turned chaotic as people rushed to convert the local currency into Chinese yuan or the U.S. dollar,'' the official was quoted as saying by Yonhap News.

The new bill will likely be put into circulation from this Sunday, according to a report.

On the North's alleged revaluation, the South Korean government said that neither an official announcement nor a report had been made so far.

There were some tip-offs on the revaluation but the government was unable to confirm them, he added.

Pyongyang used to announce its currency revaluation through the Rodong Shinmun newspaper he noted.

ksy@koreatimes.co.kr