The Venezuelan government introduced a series of measures on Monday to try to stabilise its tanking economy.
Faced with rampaging hyperinflation, the South American country lopped five zeros off its currency: 1 million “strong’’ bolivars became 10 “sovereign’’ bolivars as the week started.
The sovereign bolivar is now also pegged to the new petro crypto currency.
Venezuela’s inflation rate will reach one million per cent this year, according to the International Monetary Fund, while economic output could shrink by as much as 18 per cent.
The reforms had been due to take place on August 4, but banks asked for more time to adapt to it.
Critics say that simply lopping zeros off a currency cannot combat inflation, and a simultaneous move to increase the minimum wage could in fact fuel inflation further: The minimum wage was increased on August 13, from five million strong bolivars to 31 dollars.
The government has also eased currency controls: money can now be changed at 300 official bureaux de change in an attempt to stabilise the exchange rate. President Nicolas Maduro recently admitted that the official exchange rate massively overvalued the bolivar.
The price of petrol, which used to be virtually free, will now also be gradually increased to match international norms.
A drop in the price of oil Venezuela’s main export and years of mismanagement have contributed to a massive economic crisis in the South American country, which is suffering from widespread shortages of basic goods.