North Korea has devalued its currency in a bid to curb runaway inflation. Photograph: Yonhap/EPA
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According to BBC News, on 30 November 2009, a decree was issued announcing old North Korean banknotes would be swapped for new ones at a rate of 100 to one. North Korean officials announced that this redenomination was in order to “curb inflation and strengthen planned economy.”
However, this sudden redenomination did not quite work as North Korean government intended. In fact, it resulted in skyrocketing price of rice and inflation. According to a North Korean defector, the price of rice per 1kg rose from 20 Won to 600 Won over a month, which is about 3000% increase.
As a result, nearly all of the ‘markets’ in North Korea shutdown. There are black markets and government-approved markets in North Korea. These markets support approximately 30% of North Korean economy. Therefore, it could be said that 30% of North Korean economy is paralyzed.
Although many Chinese merchants trading with North Korea have food supply to sell, they are reluctant in selling because of the inflation. “For this reason, many North Koreans are dying because of starvation,” according to human rights organization. There was a case of few protests against the North Korean government for starvation.
In my opinion, North Korean economy is walking the same road as Zimbabwe, which suffered about 2200000% inflation. North Korea originally intended to “curb inflation and strengthen planned economy,” however it did not work. North Korea is left with two choice: either open up its economy to South Korea, or let the economy collapse.