North Korea Devalues Its Currency

SEOUL — North Korea slashed the official exchange rate for its currency last week as the latest step in a new reform program aimed at reviving the moribund economy, foreign residents said.

The official value of the won dropped from 46.5 cents to just two-thirds of a cent, the residents reported, speaking on condition of anonymity. That’s still overvalued compared to the black market, where a won is worth half a cent.

The reforms by the Communist regime, which began July 1 with pay raises and the loosening of price controls, are viewed as significant because they include elements of a market-based economy in one of the world’s most tightly controlled countries.

Observers say other changes are a partial dismantling of North Korea’s rationing system, a pillar of its economic policy since the 1950s.

After details of the initial changes leaked out, analysts had said North Korea would have to devalue the won to reflect the realities of its economy, which has been wrecked by years of mismanagement and famine in the last decade that is believed to have killed hundreds of thousands.

The regime in Pyongyang did not make an official announcement of the devaluation, in keeping with the secrecy surrounding its reform campaign. Despite the market-based elements, North Korean officials have described the reforms as a way to make central planning more efficient, not dismantle it.

The devaluation is unprecedented in North Korea, where the government long argued that the state distribution system meant residents had no need for money. But as the economy broke down, North Koreans became desperate for hard currency.