This was announced by the Central Bank of Venezuela (BCV) on Thursday. The economy of the formerly oil-rich country – Venezuela has the largest oil reserves in the world, more than Saudi Arabia – has collapsed in recent years due to structural financial mismanagement on the one hand, low global oil prices and heavy US sanctions. On the other hand.
As a result, the country is in its sixth consecutive year of recession, and has been experiencing hyperinflation since 2016. Although the government tripled the minimum monthly salary in May, you can no longer buy a kilogram of meat that much. As a result, millions of people live in poverty and the country suffers from a structural shortage of almost everything, from food and medicine to gasoline.
This is not the first time that Venezuela has cut zeros in an attempt to cover up hyperinflation. The national currency, the bolivar, actually lost three zeros in 2008 under the late President Hugo Chavez and his successor, Nicolas Maduro, cutting five zeros in 2018. Both interventions were unsuccessful. In the same 2018, the Bolivar broke its own world record for inflation and a devaluation of more than one million percent.
The Central Bank of Venezuela (BCV) on Thursday mainly talked about an effort to make the currency more user-friendly. Because even though removing zeros is basically symptom relief – you can’t solve basic economic problems with it – it can help the population. Anyone who wanted to buy a chicken in Caracas in 2018 had to put 15 kilograms of banknotes on the table at a certain time. Deleting zeros means deleting weight.
However, many economists argue that this measure will not make much difference, since the bolivar is rarely used in Venezuela. One of the most important means of payment is fixed-value US dollars, which means that all products in stores are priced in dollars. Bolivar is used almost exclusively in digital transactions.