Author: James Lister, Korea Economic Institute

Free elections are not part of North Korea’s political fabric, but Kim Jong-Il and his advisors are undoubtedly aware that the regime’s legitimacy will be challenged if it fails to meet its promise of achieving a strong and prosperous nation by 2012, particularly if it faces a leadership transition. The November 30 announcement of currency reform, entailing redenomination of the North Korean won such that 100 old won = 1 new won, appears to be a gamble that it can achieve that objective in an ideologically acceptable manner. It is a huge bet.

As clarified and adjusted over the course of the subsequent weeks (according to press reports, as official announcements remain lacking) the measures required residents to exchange old won for new won currency up to a limit of 500,000 old won per individual—equivalent to US$200 or less at unofficial market rates. Read more…