NK Reeling From Hyperinflation, Reduced Economic Activity

NK Reeling From Hyperinflation, Reduced Economic Activity. January. 27, 2010 07:45. kyle@donga.com.

North Korea is suffering from hyperinflation and rapid weakening of economic activities in the wake of its currency revaluation in November last year, a South Korean civic organization said yesterday.

Good Friends, a group fighting for human rights in North Korea, said, “The price of rice is reaching a new high every day,” adding, “Chongjin in North Hamkyong Province saw the biggest rise in rice prices. The price of a kilogram of rice there based on the (North’s) new currency tripled to 650 won Jan. 22 from 240 won a week before, and rose again to 1,100 won Sunday in the city’s Sunam Market.”

Before the North’s currency revaluation last year, rice went for 2,200 won in the old currency. Given the ratio of the old and new currency is 100 to one, the value of 1,100 won in the new currency is 50 times that of 2,200 won in the old currency.

A Good Friends source claiming to have recently spoken to a North Korean official in a third country said, “I was told that North Korea is suffering from the adverse effects of a spate of policies aimed at recovery of its planned economy.”

Economic activity in the North has severely weakened since factories and businesses used raw materials and energy allocated for this year for the 150- and 100-day “battles,” or campaigns to raise productivity.

Pyongyang banned market activity despite slowed production, causing trade to decline and prices to soar, the source said.

“Those who have goods are reluctant to sell them on the market. Even barbershops are said to have closed to wait for service fees to rise,” the source said. “Cold weather in North Pyongan Province led to bad crops last year, significantly contributing to soaring food prices.”

Nicholas Eberstadt, a political economist with the Washington-based American Enterprise Institute, said in a Jan. 11 contribution to the Wall Street Journal, “North Korea appears to be approaching the brink of hyperinflation.”

He said South Korean intelligence believes the communist regime`s heir apparent, Kim Jong Un, was the mastermind behind the currency revaluation. “If the intelligence is accurate, it raises disturbing questions about the judgment of the rising generation of North Korean leadership,” he added.