Venezuela’s President Nicolas Maduro announced a radical new plan to curb the spiralling hyperinflation that has thrown their oil-rich, cash-poor nation into turmoil. He has launched new bank notes and lopped off five zeroes off the crippled Bolivar.
President Nicolas Maduro declared Monday as a national holiday to mark the introduction of a "sovereign bolivar" which will be in circulation alongside the old currency during a transitional period, which in turn will be pegged to the country's state-backed cryptocurrency, the petro.
Each petro will be worth about $60, based on the price of a barrel of Venezuelan oil. In the new currency, that will be 3,600 sovereign bolivars, which is a massive devaluation for Venezuela’s currency.
Other measures — revealed by Maduro in a speech to the nation late on Friday — include a massive minimum wage increase, the fifth so far in 2018. The socialist president also announced a curb on heavily subsidised fuel in a bid to prevent oil being smuggled to other countries.
As it stands, the monthly minimum wage will be fixed at 1,800 sovereign bolivars. That works out at more than 34 times the previous rate, based on the black market valuation of a U.S. dollar in the country. For Venezuelans, devastated by inflation and the aggressive devaluation of the bolivar, the monthly minimum wage is still not enough to buy 1kg of meat.
The International Monetary Fund predicts that inflation in Venezuela will hit a staggering one million percent this year.
Fuel subsidies have cost Venezuela $10bn since 2012, according to oil analyst Luis Oliveros, but without them, most people would not be able to buy fuel. Oil production accounts for 96% of Venezuela’s revenue — but that has slumped to a 30-year low of 1.4-million barrels a day, compared with its record high of 3.2-million 10 years ago.
The reform plans are the latest attempt to halt the oil-rich country's ongoing economic collapse, caused by years of populist policies which have ultimately destabilized the country's economy.