To prevent a collapse, the government of Venezuela devalued its currency by 95 percent, while opponents President Nicholas Maduro, have called for strikes and street protests when shops and retail outlets open after a bank holiday. The holiday was used to implement drastic reforms that are meant to stave off economic collapse. The government is slashing fuel subsidies and raising minimum wage by 3,000 percent.
The IMF reported that annual inflation is running at 80,000 per cent and predicted that it will hit 1 million percent this year. This economy is spinning out of control and feedback from analysts is that policy measures are not being well received. Some are expecting more confusion and possibly social unrest, with rioting in the streets likely. Form a political point of view, Mr Maduro, the president, is in trouble. But how does he get out?
The Bolivar will be pegged to the petro, a state-run cryptocurrency ha launched amid much fanfare in early 2018. There will be 60 new bolivars to the petro which is in turn worth $60. Some analysts are suggesting that hyper-inflation will persist until the government adopted a currency board or accepted dollarization. Clearly the government wants to avoid dollarization as it sees Washington as the root for its current economy woes.
More on Venezuela in our next wave or articles.