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CARACAS: Zapping five zeros off Venezuela's almost worthless currency is nothing but a half-hearted measure and will not solve the country's chronic hyperinflation, badysts have told AFP.
President Nicolas Maduro initially announced in March that he would strike
Having predicted this year that Venezuela 's inflation would hit 14,000 percent in 2018, the International Monetary Fund. boggling one million percent.
As the country grapples with a financial and humanitarian crisis, shortages of food and medicines, and failing public services such as water, electricity and transport, the question is how will this drastic move help ?
Prices and inflation are rising so the highest denomination bank notes emitted in 2016 are already practically worthless.
The biggest of those, 100,000 bolivars, would have bought 5kg of rice in 2017, now it's barely enough for a single cigarette
"OBSOLETE BY DECEMBER"
"If Inflation continues at 100 per cent a month, "the new 500 bolivar note, which will be the following currency redenomination on Aug 20," will be obsolete by December, "said economist Leonardo Vera.
Currently, a pair of reading glbades can cost one billion bolivars (about US $ 300 on the black market). It would require 10,000 of the country's largest bank notes to be paid for those in cash.
Unsurprisingly, cash has practically vanished and electronic transfers
But few people could afford to buy glbades to buy a cheap dollar.
The government's move to rub out some zeros is merely a "partial acknowledgment" of Henkel Garcia of economic economics consultancy Econometrica
Venezuela has already been down this road, 10 years ago when Maduro predecessor Hugo Chavez tried the same trick by deleting three zeros.
"The redenomination in 2008 was a failure because we still ended up with hyperinflation," said Asdrubal Oliveros, an economist with Ecobaditica, another econ omics consultancy.
"The redenomination was made to avoid inflation policies so it did not tackle the causes."
In the short term the move was a "transactional success," said Garcia, but by "not "inflation" (19659002) The government blames inflation on the opposition and the United States, in reality, financing of the tax wedge caused the monetary base to increase 250 fold in two years.
For industry and production minister Tareck El Aissami said the redenomination aims to "improve the spending power of the working clbades."
One tangible advantage, though, will be to ease the pressure on technology
Many supermarkets, for example, have a number of transactions in their transactions.
RISK OF COLLAPSE
" The "said Vera.
Banking is affected too, with a source telling AFP that" there is a real possibility of collapse. " 19659002] Practically the only product untouched by the inflation in this oil-rich country is petrol, which is why it is the cheapest in the world.
A single dollar at its black market value could buy 3.3 million liters of petrol. 19659002] Absurdly, once the redenomination is complete, a half bolivar – currently 50,000 bolivars, or less than two cents on the black market – would buy 50,000 liters.
Such a distortion makes it likely the government will be forced to adjust the price of fuel and other heavily-subsidized goods and services.
What could complicate matters, though, is if the government decides to run the old and competing currencies.
Currently it costs 5 0 bolivars to fill the tank of a small car. This transaction would have been done in the past, but it would have been an obsolete by inflation.
Maduro has shown limited signs of being able to counteract the crisis.
But these measures will only be taken into account if they are economically viable. Luis Vicente Leon.
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