Venezuela To Launch New Petro-Backed National Currency Next Month

Announcements, News | July 26, 2018 By:

Venezuela’s President Nicolas Maduro has announced that the country’s new national currency will start circulating next month.

Maduro said the new currency, the Bolívar Soberano (Sovereign Bolivar), will be tied to the oil-backed cryptocurrency Petro, which was launched by the government earlier this year. The government will reportedly remove five zeroes from the bolivar currency rather than the three zeroes originally planned, in an effort to keep up with inflation projected to reach 1 million percent this year.

“The economic reconversion will start on August 20 definitively with the circulation and issuance of the new Sovereign Bolivar, the new monetary cone [sic] that is going to have a new method of anchoring the Petro.”

The measure, Maduro said, will help with inflation, shortage of cash, as well as mitigate the long lines at ATMs that have become routine for Venezuelan residents. He also said that the Petro “will end up being consolidated technologically and financially” and will embrace “all the national and international economic activity.”

According to the opposition-run Congress, annual inflation this month topped 46,000 percent. Earlier this week, the International Monetary Fund (IMF) said that it could hit seven digits this year. A group of leading Venezuelan universities also said that poverty climbed to 87 percent in 2017 and extreme poverty to 61 percent. The government refutes those numbers, claiming extreme poverty is at only 4.4 percent.

Venezuela is dependent on its oil exports that account for 96 percent of revenues, but the Organization of the Oil Producing Countries reported that output has dropped to its lowest level in 30 years – 1.5 million barrels a day, from 3.2 million in 2008.

Specialist Henkel Garcia of economics consultancy Econometrica said that the country needs to boost industry, currently running at 30 percent capacity, and dismantle controls over prices and the exchange rate, which give the government a monopoly on foreign currency.

The president blames hyperinflation on what he calls a “war” against the currency including exporting it to other countries such as neighboring Colombia.