Venezuela devalues bolivar, links to cryptocurrency
As Venezuela’s economy continues to take a bashing, President Nicolas Maduro took the dire step over the weekend of devaluing its currency, the bolivar, by 96%. The new currency called the “sovereign bolivar” will be linked to the government’s cryptocurrency, the petro.
Maduro made the announcement on Friday that the country would have a single exchange rate pegged to the petro saying, “I want the country to recover and I have the formula. Trust me.” Maduro also announced he would increase minimum wage by over 3,000%, raise the corporate tax rate and end subsidised gas prices.
However, experts and analysts remain sceptical and say the new economic policy is likely to be unsuccessful. The International Monetary Fund has predicted inflation could rise to 1,000,000% this year in the country which faces a cash shortage and US sanctions.
The petro, which was launched earlier this year, is pegged to movement in oil prices. In turn, salaries and pensions and prices will also link to the government’s cryptocurrency. One petro is valued at around $60 or 360m bolivars by the Venezuelan government which approximates an exchange of 6m bolivars per dollar.
There has been much confusion surrounding the move as details have yet to filter through as to how the government will carry out the announced changes. According to CNBC, Maduro said “They’ve dollarized our prices. I am petrolizing salaries and petrolizing prices.”
He added, “We are going to convert the petro into the reference that pegs the entire economy’s movements.”