Venezuela will remove five zeros from its currency as it attempts to stabilize its failing economy and skyrocketing inflation rates, President Nicolas Maduro announced Wednesday.
Maduro’s government originally planned to remove three zeros from the bolivar, but as the inflation rate is set to reach 1 million percent by the end of the year, the government is scrambling to uphold its socialist economy that’s been in decline since 2014.
“The monetary reconversion will start on Aug. 20,” Maduro said in a televised broadcast, according to a Reuters report.
The International Monetary Fund (IMF) projected a dire economic outlook for Venezuela in a report Monday, which also stated the country’s real gross domestic product (GDP) will fall 18 percent in 2018, marking the third consecutive year of double-digit declines in real GDP.
Maduro announced Wednesday that the currency change would also tie in the bolivar to the state-backed cryptocurrency, the petro.
Due to a lack of confidence in Maduro’s government and its previous track record in handling the economy, cryptocurrency experts say the petro lacks credibility and most likely will not solve the situation, Reuters noted.
The socialist country is currently suffering through a five-year economic crisis that includes a complete breakdown of public goods and services, including deteriorating roads, mass food shortages, disturbing water cleanliness, failed electricity, high crime and a lack of adequate medicine for the sick.
The Venezuelan government has said the U.S. is partially to blame for its position in this “economic war,” as U.S. President Donald Trump issued a new round of sanctions against Maduro’s administration on May 21.
Trump cited Maduro’s creation of the economic and humanitarian crisis, saying Maduro’s “endemic economic mismanagement, public corruption, and ongoing repression of the political opposition” are to blame for the sanctions.
Venezuela’s minimum wage is currently equivalent to about $1 a month, which makes it nearly impossible to live, especially as the price of one cup of coffee skyrocketed to 2,000,000 bolivars this week, equivalent to almost $17 USD, a Bloomberg report said.
Maduro also initiated an overhaul of currency crime laws in an effort to boost the flow of foreign investments, Reuters reported.
The devastating conditions in Venezuela are causing mass migration flows out of the country, the IMF report stated.
This will lead to an intensified spillover effect in neighboring countries.
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