(Caracas) Venezuela will remove six zeros from its currency, the bolivar, on October 1st, as hyperinflation has drained its value and dollarized the economy, the central bank said on Thursday.
Posted on Aug 5, 2021 at 12:59 pm
Andréa Tosta Agence France-Presse
In 13 years the bolivar will have lost 14 zeros.
Former President Hugo Chavez (1999-2013) deleted three zeros in 2008. His successor and current president, Nicolas Maduro, did the same thing in August 2018, removing five zeros.
“From October 1, the digital bolivar will come into effect when a new currency scale is applied that removes six zeros from the local currency,” said a statement from the central bank of a country that has seen the economy growing in recent months.
Most transactions are in US currency, while inflation was over 250% between January and May. Hyperinflation reached 400,000% in 2018, nearly 10,000% in 2019 and 3,000% in 2020.
Venezuela, once a rich oil country, has seen its GDP shrink by 80% since 2013 and 65% of households live in poverty.
The country will be printing new banknotes to accompany the measure as they are almost out of circulation in the country. Most non-dollar exchanges are processed digitally (card payments, bank transfers, or bank transfers).
This decision aims to “facilitate” the use of money by reducing it to “simpler monetary standards”, the text continues.
According to the central bank, “this change in the currency scale, based on the deepening and development of the digital economy, is a historical fact as the country is experiencing an economic recovery after a crisis caused by the brutal attack on our economy and currency initiates and “the criminal and financial economic blockade”.
Measure “necessary” but not miraculous
The government regularly invokes the international sanctions that have been imposed since 2019, especially by the USA, to oust President Maduro from power, even if the crisis has lasted for more than 8 years.
“That was an expected decision. It was necessary, ”economist César Aristimuño told AFP.
Business settlements and bookkeeping processes were almost impossible (with so many zeros).
The economist César Aristimuño
Long before the measure was taken, the street partially “picked up” the new zero suppression, as prices were often advertised or written in thousands and not in millions for practical reasons.
No real cure
If the measure is “practical” […] No economic miracle can be expected, as “this operation” arrives without any fundamental economic measures “that could contain inflation,” Aristimuño estimates.
Venezuela, which was once a major player in the world oil market, produced up to 3.3 million barrels a day, today it is just over 500,000 barrels a day.
Foreign Minister Jorge Arreaza admitted in April that the use of the US dollar, the currency of Venezuela’s main adversary, was “very paradoxical,” after the national authorities had long tried to prevent its circulation.
“With the (American) blockade we had to be more flexible, we learned from the people who started using the dollar […] We had to get behind the reality and make the process easier, ”he said.
The authorities, hoping to return to an economy with the bolivar in the long run, are making the use of the dollar “temporary”.