VENEZUELA has the world’s largest oil reserves — and no money.
Rampant inflation and depleted reserves of almost worthless bolivar banknotes have created a nightmare — exacerbated by a days-long blackout in 18 of the country’s 23 states, a situation that has resulted in at least 26 deaths.
Venezuela has an inflation rate heading for one million percent — and almost 90 percent of the country’s citizens are now estimated to be living below the national poverty line.
Dollars from the US are illegally filtering into the economy of what was once one of the richest Latin American countries. It has been in hyperinflation mode since 2016, and, says Forbes magazine, is currently the only country in the World in that unfortunate position.
Bolívars are almost impossible to get hold of, according to recent news reports. The country’s mint is just one of many establishments to no longer function in Venezuela, and foreign currency is increasingly seen as the only way to transact.
Public transport and food supplies — and thus the poorest section of the community — have been hardest-hit. Barter, cryptocurrency and online transfers are taking the place of cash transactions. Barter aside, the power outages have left even these stop-gap options severely affected.
ATMs and card-readers in the country no longer work, and US dollars are fast becoming the only functional currency — although, strictly speaking, the greenback isn’t even legal tender in Venezuela. There are reports of would-be shoppers being turned away from shops unless they intend to settle in dollars.
Steve Hanke, professor of applied economics at Johns Hopkins University, has told news organisations that prices being quoted locally in bolívars are based on black market exchange rates. Currency Converter lists the exchange rate at 10,000 bolívars at around three US dollars. Hanke has mooted a conversion to a dollar economy, or pegging the bolivar to a respected international currency, as possible ways out of the morass.
Such is the rate and scale of inflation that experts, including Hanke, say it is hard — even impossible — to monitor. Almost all spending now is on survival: food and necessities. The rate stands, at the time of writing, at an estimated 180,000 percent.
It is not expected to reverse, or even slow, in coming months.