North Koreans are panicking as all shops were ordered closed during the currency reform period and they can no longer use any money they have saved up. Foreign diplomats are meeting with North Korean authorities in efforts to persuade them to reverse the reform, the sources added. The North last week revalued the won at a rate of 100:1.

The North Korean Army is on standby and ready to quell any protests against last week's drastic currency reform, Russian business daily Kommersant last Friday quoted diplomatic sources in North Korea as saying. The sources said authorities had ordered the Army to stand by as outrage grew in cities across the North, with critics describing the reform as daylight robbery.

According to sources in the North, the National Defense Committee has ordered guards on the border with China to shoot at will at anyone who crosses without permission. This is seen as an attempt to thwart defections by people disgruntled by the currency reform.

The sources said there could be a mass defection of middle-class North Koreans who have suddenly been deprived of their money. One South Korean intelligence officer said, "We don't have any information that there'll be a riot or a mass defection, but since North Koreans have never so far taken collective action, they are more likely to choose defection if the situation gets worse."

The Ministry of Public Security has been on emergency alert after old 5,000-won bills carrying the image of Kim Il-sung were found torn or damaged on piles of garbage in Chongjin, North Hamgyong Province, Hamhung, South Hamgyong Province, and Pyongsong, South Pyongan Province. Graffiti and leaflets criticizing North Korean leader Kim Jong-il have also started to appear, the sources added. North Koreans are reportedly reluctant to replace old bills with new ones as a gesture of protest against the currency reform.

The authorities have apparently caved in to some extent by raising the maximum amount of old bills that can be exchanged from 100,000 won per household to 150,000.