Venezuela's President Nicolas Maduro has ordered a re-denomination of the ailing bolivar on Thursday, by knocking three zeroes off the currency amid hyperinflation and a crippling economic crisis.
The measure to divide the so-called bolivar fuerte – or “strong bolivar” – currency by 1,000 would take effect from June 4th, the socialist leader said.
The move illustrates the collapse of the bolivar, which has fallen 99.99 per cent against the US dollar on the black market since Mr Maduro came to power in April 2013. A $100 purchase of bolivars then would now have a value equal to just a single US cent.
But Maduro (55), presented the move as a positive development intended to protect Venezuela against currency speculators and a US-led "economic war" against the Opec member.
‘Psychological ploy’
Critics said the currency measure was no panacea for Venezuela’s economic mess and just a psychological ploy to make Venezuelans forget the extent of the hyperinflation.
While the move sounds like a currency revaluation, economists consider it a currency re-denomination instead, as the country is not changing the value of its official exchange rate.
Venezuelans will not need to turn in the currency held in their wallets, but all new currency printed or minted will be in the new denominations.
Millions of Venezuelans are suffering from shortages of food and medicines during a fifth year of recession that critics blame on government incompetence and corruption, but Mr Maduro says is due to Western hostility against him plus the fall of oil prices.
"Venezuela has been victim of a brutal, economic war," said Mr Maduro, whose government has been targeted by the US, EU and Canada for sanctions over allegations of abusing democracy and rights.
Mr Maduro made the announcement during an event shown live on TV, flanked by aides and bankers, to discuss Venezuela’s new petro cryptocurrency.
The Venezuelan government similarly re-denominated its currency by knocking off three zeroes a decade ago.
Prices in Venezuela rose 6,147 per cent in the 12 months through February, according to estimates by the country's opposition-led National Assembly, broadly in line with independent economists' figures.
Mr Maduro is running for re-election on May 20th in a vote which critics say is rigged to extend the socialists’ rule.
The opposition coalition is boycotting the vote, though one leader, Henri Falcon, has broken ranks to run against Mr Maduro. He is promising to dollarise Venezuela's economy as a way to beat hyperinflation and regain investor confidence.
"Amid the biggest economic collapse in the history of Latin America, the government of Nicolas Maduro attempts to hide hyperinflation by knocking zeros off the currency," said Francisco Rodriguez, a Venezuelan economist and Wall Street analyst working as Mr Falcon's chief economic adviser. – Reuters