Author: MOS Finance Team – Leah
CARACAS, Oct 1 (Reuters) – Venezuela launched its second currency redenomination in three years on Friday, slashing six zeros from the Bolivar currency in response to hyperinflation.
Nicolas Maduro’s government had already removed five zeros from the currency in 2018, and the late President Hugo Chavez removed three zeros from the bolivar in 2008. The process of reforming the currency is getting faster and faster, with more and more zeros being removed. But none of these worked against hyperinflation. Web data shows that the average inflation rate in 2020 was already over 2,500%.
The plan was intended to make banks, businesses, and accounting simpler, as these systems can no longer handle the huge numbers. However, the U.S. dollar is commonly used in businesses transactions in Venezuela. According to eyewitnesses, many local people bought groceries, medications, and daily goods at stores using U.S. dollars. The widely accepted U.S. dollar will dilute the existence of the new currency.
Venezuela’s central bank has also launched a digital bolivar. Maduro’s government says 77 percent of Venezuela’s economy was already digitalized in 2020 and is aiming for 100 percent by the end of the year. The digital bolivar is used to make payments and transfers via cell phone applications.
The once prosperous oil-rich OPEC country is suffering from a long-term economic crisis that has caused millions of Venezuelans to emigrate and many more to suffer in poverty and hunger.
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