North Koreans starving after currency move: reports

A farm tractor moves along a farm road in Gijungdong propaganda village, North Korea, in this picture taken from the South Korean observation post at the truce village of Panmunjom in the demilitarised zone (DMZ) separating the two Koreas in Paju, about 55 km (34 miles) north of Seoul, February 19, 2009.

SEOUL (Reuters) - North Koreans are starving to death and unrest is growing due to a currency revaluation last year that crippled markets and led to the sacking of a senior cadre, reports said on Wednesday.

The news comes as the destitute North is under growing pressure to end its boycott of international nuclear disarmament talks, where it can win aid for reducing the security threat it poses in economically vital North Asia.

Assistant U.S. Secretary of State Kurt Campbell said after meeting officials in Seoul that North Korea must return to the six-country talks and live up to pledges it made to take apart its nuclear weapons programme.

"Sanctions will not come off before that," he told reporters.

North Korea last year announced a revaluation of its currency where old notes of its won currency would be changed for new ones at a rate of 100 to one.

The move was a further blow to the North's wobbly economy, already hit by U.N. sanctions imposed after its nuclear test last year to halt its lucrative arms sales.

North Korean Workers' Party finance director Pak Nam-gi, who led the currency revaluation aimed at breaking up markets in the socialist state, has been removed from his post, the Chosun Ilbo newspaper said quoting diplomatic sources in Beijing.

"Markets have come to a grinding halt following the currency revaluation and prices have soared," the source said.

After the currency moves, fewer goods were available for an already impoverished public and prices rose sharply.

The North's woes may be pressuring leader Kim Jong-il to return to the nuclear talks in the hopes of winning aid and to mend ties with the South, which once provided assistance equal to about 5 percent of the North's yearly economy, analysts said.

WIPING OUT CASH

The currency revaluation was aimed at wiping out the cash holdings of a burgeoning merchant class, who risked exposure for illegal activities outside the centrally planned economy if they exchanged their old cash or deposited their wealth in banks.

The merchants traded in hard currency in China for food and items not properly provided by the central government. Imports ground to a halt after the currency revaluation and a separate crack down on foreign cash holdings.

The North's impoverished citizens have increasingly turned to markets for essentials not provided by the broken distribution system after a famine in the late 1990s that killed about 5 percent population.

Another leading South Korean daily, Dong-A Ilbo, reported ethnic Koreans on the Chinese side of the border as saying there have been reports of starvation in Sinuiju, a North Korean border city that has typically fared well because of trade with China.

There has also been rare civil unrest in the authoritarian state with North Koreans fighting security agents trying to stop people from smuggling or trading food, Daily NK, an online site run by activists, reported sources in North Korea as saying.

The South's Unification Ministry said separately the North has agreed to a meeting next week on resuming tours for South Koreans to a resort and an ancient city north of the border.

The tours, which earned the North's leaders tens of millions of dollars a year in hard currency, were suspended due to political wrangling and the shooting death of a South Korean tourist by a North Korean soldier.

(Editing by Jon Herskovitz and Sanjeev Miglani)