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Posted : 2010-12-13 18:48
Updated : 2010-12-13 18:48

Yeonpyeong shelling causes inflation in Pyongyang

By Kim Young-jin

North Korean merchants are exchanging their local currency en masse as war jitters in the wake of Pyongyang’s attack on Yeonpyeong Island have stoked fears that the won may lose its value in the case of war, a report said.

According to North Korea Intellectuals Solidarity (NKIS), a Seoul-based NGO comprised of defectors with lines into the North, currency exchange rates have skyrocketed since the Nov. 23 incident. One hundred yuan, which before the shelling went for 2,000 won, is now worth 35,000 won, NKIS said in a report released Sunday.

“Merchants have heard rumors that if there is war, North Korean bills will become worthless scraps of paper,” NKIS quoted a source as saying, causing traders to exchange their won while they can.

Price of daily goods have also skyrocketed, the report said, with rice jumping from 900 won per kilogram to 1,600 won. Corn climbed from 4,000 won per kilogram to 6,000 won, it said.

The source said the soaring prices have been caused by jitters in the market over the heightened tensions in the wake of the Nov. 23 attack, saying the North’s military has been in a “quasi state of war” since the incident.

The rumors that the won will lose its value in case of a war have slowed market activities as merchants have raised prices and are waiting to see if further military action is on the cards.

Traders in China, from who markets in the North secure much of their goods, have also become reluctant to make transactions involving North Korean currency and are trading what won they have, the source said.

The price jump comes on the heels of reportedly enormous inflation caused by a botched currency reform last year.

The regime redenominated banknotes at a ratio of 100:1 in November last year in a move to squelch a bourgeoning private sector. But the move led to runaway inflation as the price soared by some forty times within the year, according to reports.

The U.N. estimated last month that some 5 million North Koreans will face food shortages this year due to lack of staple grains, while the economy is believed to be suffering heavily from international sanctions imposed for the regime’s missile and nuclear tests.

Meanwhile, Pyongyang, which claims Seoul instigated the shelling by firing into its territory during a military drill, continued to threaten the South over the weekend, saying, “The army and the people of the DPRK are ready for both an escalation and an all-out war.”

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