Inflation, weak currency weigh on N.K.

Unusual data attributed to costly political events, hoarding supplies, point to further decline of N.K. economy


North Korea’s rice prices and currency exchange rates have sharply risen in recent months, data showed Sunday, threatening its already crumbling economy.

According to Daily NK, a specialized online news outlet, the price of rice in Pyongyang more than doubled from 2,600 North Korean won a kilogram on April 25 to 5,300 won on July 13.

The prices also maintained an upward slide in two other large cities, surging more than 79 percent and 65 percent during the 80-day period to 5,000 won in Hyesan and 4,300 won in Sinuiju.

The local currency ticked down versus the greenback in all three cities. A dollar traded at about 5,400 won in Pyongyang as of July 13, gaining more than 30 percent during the same period. That beat the level seen following a botched currency reform in 2009, which resulted in rampant inflation and a severe food crunch.

In the frail North Korean economy, rice prices tend to soar between May and autumn harvest time. The numbers usually swing wildly due to such factors as weather, state food rationing, Chinese imports and political events.

Still, analysts say that the uphill trend is atypical even when seasonal factors are considered.

“The steady increase in rice prices throughout North Korea is attributable to rice dealers who hoard stocks rather than take it to the market as rumors spread that there will soon be a new policy on economic reform,” the website said.

“Also, the rapidly declining value of North Korean currency against Chinese yuan and U.S. dollar appears to have instigated inflation.”

Among other factors is a record-breaking drought between April and June, they added. Though recent rainfalls have somewhat soothed the situation, the crops are likely to have already been devastated, cutting supplies.

The dry weather, particularly in the U.S., has also affected international grain prices. On Friday, soybean and corn futures hit record highs on the Chicago Board of Trade. Wheat prices also nudged toward their highest level since 2008.

Some observers ascribed the price spikes to the effects of the communist regime’s recent lavish political events such as an April rocket launch, the funeral of late leader Kim Jong-il and the 100th anniversary of the birth of its founder, Kim Il-sung.

“Farmers continue to perish with hunger in the inland provinces of Hwanghae, South Pyongan and Gangwon,” Good Friends, a North Korea human rights group, said last week. It also cited a report that those who starve for a whole day account for more than half of the residents in some counties in South Hwanghae.

“The harvesting season for potatoes came after June 20 in the western coastal areas, but growers are eating their hearts out with drought damage.”

Higher prices of staples, coupled with chronic shortages of power and food, are likely to weigh heavily on the bulk of the 24 million North Koreans living in the countryside on a paltry income from small-scale farming.

A depreciating currency could also make it harder for them to buy goods from bustling marketplaces in border regions amid shriveling rations.

Food shortages are forecast to intensify in the coming months with up to 3 million people estimated by the U.N. World Food Program to be at risk of starvation. During the worst famine in the 1990s, at least 2 million North Koreans are believed to have died from hunger.

The crippling inflation has also deepened economic polarization, increasing the crime rate the Seoul-based Good Friends noted.

It said early this month that “many residents are so badly off that various crimes occur even in broad daylight,” citing a series of bike theft, robbery and looting.

“I can’t say it all but a robbery is not too bad. Probably because things are tough these days, there are lots of horrific crimes like murder. Such crimes are noticeably increasing, arising from bread and butter issues,” a police officer in the northeastern port city of Chongjin was quoted as saying by the organization.

By Shin Hyon-hee (heeshin@heraldcorp.com)