Inflation-hit Venezuela pulls largest bill from circulation, residents withdraw ‘backpacks full of cash’

www.abc.net.au
12th Dec 2016

Photo: People line up with large satchels to withdraw money from automated tellers across Venezuela. (Reuters: Ueslei Marcelino)

Venezuela, mired in an economic crisis and facing the world’s highest inflation, will pull its largest bill — worth two US cents on the black market — from circulation this week ahead of introducing new higher-value notes, President Nicolas Maduro said.

Key points:

  • Venezuela is pulling the 100-bolivar bill from circulation
  • Citizens have 10 days to exchange the notes
  • Residents need to carry large physical quantities of notes to make everyday purchases

The surprise move, announced by Mr Maduro during an hours-long speech, is likely to worsen a cash crunch in Venezuela.

Mr Maduro said the 100-bolivar bill will be taken out of circulation on Wednesday and Venezuelans will have 10 days after that to exchange those notes at the central bank.

Critics slammed the move, which Mr Maduro said was needed to combat contraband of the bills at the volatile Colombia-Venezuela border, as economically nonsensical, adding there would be no way to swap all the 100-bolivar bills in circulation in the time the President has allocated.

vencashless2

Central bank data showed that in November, there were more than 6 billion 100-bolivar bills in circulation — 48 per cent of all bills and coins.

Authorities on Thursday are due to start releasing six new notes and three new coins, the largest of which will be worth 20,000 bolivars — less than $US5 on the streets.

No official inflation data is available for 2016 though many economists see it in triple digits. Economic consultancy Ecoanalitica estimates annual inflation this year at more than 500 per cent.

The oil-producing nation’s bolivar currency has fallen 55 per cent against the US dollar on the black market in the last month.

“When ineptitude governs! Who would possibly think of doing something like this in December amid all our problems?” two-time opposition presidential candidate Henrique Capriles wrote on Twitter, referring to the upcoming Christmas holiday.

Photo: Santa Claus brings joy to children in a slum in Caracas; the cash crisis has worsened through the year. (Reuters: Ueslei Marcelino)

‘Backpacks full of cash’

Mr Maduro previously has said that organised crime networks at the Colombia-Venezuela border buy up Venezuelan notes to in turn buy subsidized Venezuelan goods and sell them for vast profits in Colombia.

While smuggling of this sort is an issue at the border, it cannot account for nationwide shortages of the most basic goods from food to medicine, which have left millions hungry and doctors crying out for help.

“I have decided to take out of circulation bills of 100 bolivars in the next 72 hours,” Mr Maduro said.

“We must keep beating the mafias.”

Photo: A cashier receives Venezuelan bolivar notes at a market in downtown Caracas. (Reuters: Ueslei Marcelino)

Paying a restaurant or supermarket bill without a debit or credit card can often require a backpack full of cash.

However, getting cash in recent months has proven difficult, and the country’s credit-card machines have recently suffered problems, leaving many businesses asking customers to pay by bank transfer.

Strict currency controls introduced in 2003 that pegged the bolivar to the dollar, coupled with heavy reliance on oil, are seen as the root of the crisis by most economists.

Mr Maduro has blamed an “economic war” being waged against his Government by the opposition and the United States.

Reuters

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Posted on December 15, 2016, in ConspiracyOz Posts. Bookmark the permalink. Leave a comment.

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