Financial reforms aim to halt Venezuela economy’s downward spiral

World Today

Venezuela’s inflation is expected to skyrocket by the end of this year, but the government is making a bold move.

It has converted its currency by removing five zeroes from the value of existing notes. This change is part of a project that President Nicolas Maduro said will represent a new economic future. However, critics said the numbers do not add up. CGTN’s Stephen Gibbs reports.

The last day of the old currency. On Sunday, people in Caracas were queuing to spend their bolivars, in the hours before every million became ten.

The currency conversion is part of what President Maduro said will be an “economic revolution” to confront this country’s spiraling inflation.

Maduro is linking the newly-branded cryptocurrency to the value of what’s called a petro-a government-produced digital money which the President said is worth a barrel of oil, or 60 dollars.

On Friday, Maduro announced a 35-fold increase in minimum salary, from 5,196,000 Bolivars ($20.8 and $1.30, under the country’s dual exchange rate) to 180 million Sovereign Bolivars, a new currency that will replace the older one on Monday and in which five zeros will be removed under the new process and the cost of Venezuela’s currently almost free gasoline, and sales taxes will also rise.

However, some economists argued that the sums don’t add up.

“He’s doing very badly at the moment, but this moment, this decision, is worse than anything in the past. Because it is impossible to do that,” said opposition politician and economist Angel Alvarado. “I think it is a Utopian way of life: ‘I want a better place, better wages, I want a better economy.’ I also want the same. But you have to work.”

A liquor store in one of Caracas’ poorer neighborhoods gives a glimpse of life and business under hyperinflation. Cash in this country ran out months ago-everything is bought with debit cards.

Marco Villegas, the owner of the store, has a note he keeps on his fridge: a reminder of the cost of a case of beer. Every week the price goes up. Every three weeks it doubles and he said the idea that he would have to pay his workers 35 times more was alarming

“It’s impossible to pay that salary to a worker,” Villegas said. “This will lead to a massive reduction in the workforce.”