Page last updated at 08:52 GMT, Wednesday, 3 February 2010

North Korean official 'sacked' over currency chaos

North Korean banknotes on display in South Korea
North Koreans rushed to convert money when changes were announced

A top North Korean finance official has been sacked following a chaotic currency revaluation, South Korean media has reported.

The revaluation, announced in November, wiped out some people's savings and caused food shortages.

Pak Nam-Ki, the Communist Party's director for planning and finance, has reportedly been absent from public activities since early January.

South Korea's Intelligence Service said it could not confirm his sacking.

But an intelligence official told the Associated Press news agency it had been closely monitoring Mr Pak's whereabouts and he had recently disappeared from view.

Currency chaos

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 leader Kim Jong-il inspects apples in undated photo

But the amount of currency people were allowed to exchange was reportedly restricted. Any cash held above that would be worthless - effectively wiping out people's savings.

Many reacted with anger and panic, and the changes are reported to have wrought havoc to distribution networks and sparked chaos in shops and markets.

Organisations with contacts in the North said some people had attacked security agents patrolling markets.

The moves also led to spiralling inflation. According to traders quoted in the South Korean newspaper Chosun Ilbo, $1 fetched 98 won at the beginning of the revaluation whereas it is now worth between 300 to 500 won.

"Mutual recriminations are rampant within the North's power circles over the failure of the redenomination, [and] Director Pak who led the reform has been sacrificed," a diplomatic source in Beijing told Chosun Ilbo.

Yonhap news agency, quoting traders in the Chinese city of Dandong near the North Korean border, said Mr Pak had been sacked and was awaiting trial.

Middle class

The revaluation was apparently an attempt by North Korean leader Kim Jong-il to reassert state control over the economy and curb free-market activity.

North Korea introduced limited market reforms in 2002, which allowed people to buy and sell goods at free markets.

These markets have become increasingly important to ordinary North Koreans, with a wide range of goods on offer, such as imported fruit, clothes and electronics unavailable in state shops.

Some analysts say the main reason for the currency revaluation was rein in the newly emerging middle class, many of whom have made money trading in the free markets.

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