This was announced by the Venezuelan central bank (BCV) on Thursday. The economy of the once rich oil country – Venezuela has the largest oil reserves in the world, more than Saudi Arabia – has collapsed in recent years due to structural financial mismanagement on the one hand and a fall in the international oil price and strong American sanctions on the other.
As a result, the country is currently in its sixth consecutive recession year and has been dealing with screeching hyperinflation since 2016. Although the minimum monthly salary was tripled by the government last May, now, a few months later, it is no longer even enough to buy a kilo of meat. As a result, millions of people live in poverty and the country is actually struggling with structural shortages of almost everything, from food and medicine to even gasoline.
It’s not the first time Venezuela has cut zeros in an attempt to cover up hyperinflation. The national currency, the bolivar, already lost three zeros in 2008 under the late President Hugo Chávez and his successor, Nicolás Maduro, also deleted five zeros in 2018. Both surgeries just didn’t help. In the same 2018, the bolivar broke its own inflation world record and depreciated the currency by more than a million percent.
Symptom control
The Venezuelan central bank (BCV) therefore spoke on Thursday mainly about an attempt to make the currency more user-friendly. Because although the deletion of zeros is primarily a symptomatic relief – you cannot solve the underlying economic problems with it – it can indeed help residents on a practical level. Anyone who wanted to buy a chicken in Caracas in 2018 had to put 15 kilos of banknotes on the counter at a certain point. Almost three kilos of money were needed for a toilet roll. The deletion of zeros also meant: the deletion of weight.
Incidentally, many economists argue that the measure will also make little difference on a practical level, because the bolivar is hardly used in Venezuela anymore. The fixed-value US dollar has now become the most important means of payment, which means that almost all products in stores are currently priced in dollars. The bolivar is almost exclusively used for digital transactions.
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