Nicolas Maduro speaks in Caracas in 2018.
Photographer: Carlos Becerra / Bloomberg
Photographer: Carlos Becerra / Bloomberg
The government of Venezuela plans to move to a fully digital economy as hyperinflation has practically disappeared worthless bolivar notes and dollarization is spreading through the local financial system.
The US dollar has served as an outlet for Venezuela amid US sanctions and collapsing oil revenues, President Nicolas Maduro said in a televised interview with Telesur on Friday. He said 18.6% of all commercial transactions are in dollars, while 77.3% in bolivars are done with debit cards. Only 3.4% is paid with bolivar notes.
“They are at war against our physical currency. This year we are moving to a more in-depth digital economy, in expansion. I have set the goal of an economy that is 100% digital, ”said Maduro, adding that physical money will eventually disappear.
It is the latest ambitious currency plan from the President of Venezuela, with no guarantee of success. In 2017, with the bolivar in free fall, Maduro vowed that the nation would one cryptocurrency called the Petro, backed by reserves of oil, gas, gold and diamonds. The Petro launched in 2018; the US called it one scam.
Venezuela’s currency has lost 99% of its value during three years of hyperinflation, forcing the country to issue higher denomination notes which in turn become unusable in record time. According to Bloomberg News, inflation has risen 5,790% in the past 12 months Coffee with milk index.
The largest note in circulation now, 50,000 bolivars, is worth about $ 0.04. The government has plans to create a 100,000 bolivar, which would currently be worth less than $ 0.10.
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After previously subsidized fuel prices increased in June, cash is now only used to travel by public transport, and the Caracas metro routinely stops charging passengers due to a shortage of cash.
Since the end of 2019, local banks have slowly begun to offer US dollar accounts and financial products, but these remain limited because there is no clearing system to allow digital transactions in US dollars.
Some banks have had technical meetings with Venezuela’s central bank in an effort to resolve the issue amid high skepticism and caution from US sanctions. But Maduro promised to create “payment formats” that allow for transactions with US dollar savings and checking accounts.
A press official at the Central Bank of Venezuela did not immediately respond to a request for comment.
Despite a promise to expand the use of the US dollar in the economy, Maduro said there would be no formal dollarization. “Venezuela has its currency and we are going to defend it,” he said.
(Updates with background information on previous currency reforms from the fourth paragraph.)