International news agencies and informants inside of North Korea are reporting that North Korea issued an order yesterday morning to redenominate the won, North Korea's currency. The Central Bank of the Democratic People's Republic of Korea (DPRK) has slashed two zeroes off of its currency and has placed limits on how much of the old currency can be converted into new bank notes.
Choi Soo-young, an expert on the North Korean economy at the government-financed Korea Institute for National Unification in Seoul, said: “The primary aim is to control inflation. But the North also wants to stop the [black and unofficial] market[s] from prospering too fast.”North Korea's black market in both currency conversion and goods have flourished over the last decade years as the government turned a blind eye to their presence. But, the government has begun shutting down unofficial food and goods markets across the country as it tries to reassert its control over the economy. The DPRK also reinstituted its rationing policy in 2005. Under this rationing policy, the government runs stores where North Koreans go to purchase their necessities at low, state-subsidized prices. One reason the government has sought to reassert its power over the domestic food and goods markets,
is that the mix of state and private activity has fueled inflation, partly by drawing goods that would otherwise be sold at low, state-subsidized prices into more lucrative private markets.