N. KOREA: North Korean Official Fired Over Inflation

02.03.10, 12:08 AM EST

By HYUNG-JIN KIM, Associated Press

SEOUL, South Korea -- North Korea fired a senior communist party official who headed the country's recent currency reform after the measure caused severe inflation, a South Korean newspaper reported Wednesday.

In late November, the North redenominated its national currency, the won, for the first time since 1959 as part of its efforts to resolve worsening inflation and reassert control over the country's nascent market economy. The measure, however, reportedly sparked despair and frustration among many North Koreans left with piles of worthless bills.

It also "paralyzed" street markets that have sprung up in recent years and led prices to skyrocket, Seoul's mass-circulation Chosun Ilbo newspaper said, citing a source in Beijing it did not identify.

The North's power elite was embroiled in arguments over who should be responsible for the aftermath and Workers' Party finance and planning department chief Pak Nam Gi, who spearheaded the currency revamp, was subsequently sacked, the paper said.

Dong Yong-sueng, a senior fellow at Samsung Economic Research Institute in Seoul, said the currency revamp was largely aimed at flushing out money traded on the black market to reinvest in the public sector. But inflation surged because the limited supply of goods in the state-run distribution system couldn't keep up with demand. The problem was compounded by shortages in the remaining private markets.

"This kind of phenomenon was expected," Dong said. "Logically speaking, it cannot help occurring," he added, though said he was not sure if the North Korean authorities had expected such a development.

South Korea's Unification Ministry and National Intelligence Service_ the country's main spy agency - said they couldn't confirm the Chosun Ilbo report. But an NIS official - speaking on condition of anonymity citing office policy - said his agency has been closely monitoring Pak's whereabouts as the North's state media has carried no reports on him since early January.

Communist North Korea has relied on outside food handouts since the mid-1990s, when the economy collapsed due to natural disasters and mismanagement, and aid from the former Soviet Union dried up after the bloc's collapse.

The regime introduced economic reforms in 2002, including street and farmers' markets. But the government backtracked in 2006 after the reforms failed to revive the economy and resulted in an influx of foreign goods.

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