Venezuela, mired in an economic crisis and facing the world’s highest inflation, will pull its largest bill, worth two U.S. cents on the black market, from circulation this week ahead of introducing new higher-value notes, President Nicolas Maduro said on Sunday.
The surprise move, announced by Mr. Maduro during an hours-long speech, is likely to worsen a cash crunch in Venezuela. Mr. Maduro said the 100-bolivar bill will be taken out of circulation on Wednesday and Venezuelans will have 10 days after that to exchange those notes at the central bank.
“I have decided to take out of circulation bills of 100 bolivars in the next 72 hours,” Mr. Maduro said. “We must keep beating the mafias.”
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48% of all currency
Critics slammed the move, which Mr. Maduro said was needed to combat contraband of the bills at the volatile Colombia-Venezuela border, as economically nonsensical, adding there would be no way to swap all the 100-bolivar bills in circulation in the time the President has allotted.
Central bank data showed that in November, there were more than six billion 100-bolivar bills in circulation, 48 per cent of all bills and coins. Jose Guerra, a former director of Venezuela’s central bank and now an Opposition lawmaker, said on Twitter that to switch out 100 bolivar notes in such a short amount of time, the central bank “must have an equivalent amount in notes of greater denominations”, which he did not believe was possible.
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Authorities on Thursday are due to start releasing six new notes and three new coins, the largest of which will be worth 20,000 bolivars, less than $5 on the streets. No official inflation data is available for 2016 though many economists see it in triple digits. Economic consultancy Ecoanalitica estimates annual inflation this year at more than 500 per cent.
The oil-producing nation’s bolivar currency has fallen 55 per cent against the U.S. dollar on the black market in the last month.
High inflation
Mr. Maduro previously has said that organised crime networks at the Colombia-Venezuela border buy up Venezuelan notes to in turn buy subsidised Venezuelan goods and sell them for vast profits in Colombia.
Paying a restaurant or supermarket bill without a debit or credit card can often require a backpack full of cash. However, getting cash in recent months has proven difficult, and the country’s credit-card machines have recently suffered problems, leaving many businesses asking customers to pay by bank transfer.
Strict currency controls introduced in 2003 in the country that had pegged the bolivar to the dollar, coupled with heavy reliance on oil, are seen as the root of the crisis by most economists. — Reuters, AFP