Venezuela to adopt petro as second national currency

August 15, 2018
Chris Wheal

Nicolas Maduro, Venezuela’s President has announced that the oil-producing nation will use its petroleum-backed cryptocurrency as unit of account to supplement its plummeting bolivar currency.

Venezuela is to adopt the oil-backed petro as a second unit of account

In a television address on Tuesday, reported by ABC International, Maduro said state oil company PDVSA would use the petro to help prop up the ailing sovereign bolivar currency by indexing the latter to the former.

Second accounting unit

“As of next Monday, Venezuela will have a second accounting unit based on the price, the value of the petro,” the president said.

“It will be a second accounting unit of the Republic and will begin operations as a mandatory accounting unit of our PDVSA oil industry.”

He added that the nation’s oil workers would receive a new petro-based salary that would mean “a substantial improvement in the income of the workers”, and would ensure maximum retail prices reappear.

Hyperinflation

By running the petro alongside the domestic currency, it is hoped that an eventual revaluation will take five zeros away from the bolivar and arrest the collapse of the country’s economy.

The nation’s economy has been steadily worsening since oil prices fell sharply below $100 a barrel in 2014. Hyperinflation has pushed the sovereign currency from around 3,000 bolivars to the dollar to nearly 250,000 bolivars despite some fancy revaluations that took several zeros off notes earlier in the year.

The IMF said last month that it expected inflation to reach 1,000,000% by the end of the year, putting it on a par with Germany in 1923 or Zimbabwe in the late 2000s. The latter’s answer to its hyperinflationary crisis was simply to dump its own sovereign dollar and replace it with stable US dollars.

Venezuela’s move to adopt the petro alongside its sovereign currency will be accompanied by publication of official figures by the central bank showing the value of the bolivar only in petros while the value of the petro will take on the international role.

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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