North Korea has devalued its currency by 99% as part of a sweeping series of economic reforms, according to unconfirmed reports.

Diplomats in Pyongyang said that North Korea's won is now set at 150 against the US dollar, compared with 2.15 before the reform programme was launched last month.

At the same time, the government has abolished the convertible version of the currency used exclusively by foreigners.

North Korea's highly secretive Stalinist government rarely gives explicit details of its policies, least of all on the economy, where hardline communism has reduced much of the population to penury.

According to widespread reports last month, the government is now experimenting with some forms of market liberalisation, including raising the prices of basic goods long constrained by the rationing system.

Tinkering

The latest changes to the won are largely cosmetic: the currency remains unconvertible and tightly controlled.

The government remains ideologically staunch

For that reason, the devaluation will bring North Korea none of the usual benefits of increased export competitiveness or enhanced purchasing power for holders of hard currency.

North Korean salaries are not fixed in dollars, so the exchange rate is a largely abstract notion for most people.

But the scrapping of the convertible won mirrors policy in China, where a similar foreigners-only currency was dropped in the mid-1990s.

China, which has successfully liberalised economic policy while remaining communist, is seen as the main model for reform in North Korea.

Experiments

Politically, however, North Korea remains far from ready for the sort of economic upheaval seen in China over the past decade.

The country is still loyal to its governing ideology of "juche", a creed of self-reliance formed by former leader Kim Il Sung.

The huge recent hikes in prices - the cost of rice has risen up to 50-fold, for example - are being interpreted more as a crisis measure than a deliberate injection of market economics.

Desperately short of foreign exchange, and with no significant allies outside China, North Korea is believed to be unable even to feed its population.