On Wednesday, President Nicolas Maduro of socialist Venezuela announced an unusual plan for dealing with the gargantuan inflation plaguing his country: lopping five zeros off of the country’s currency, the bolivar. “Five zeroes fewer, so that we may have a new, stable financial and monetary system,” he stated.
Maduro, whose original plans were to cut only three zeros from the currency, as former president Hugo Chavez did in 2008, plans to link the bolivar to the country’s Petro cryptocurrency on August 20, then call the new currency the Sovereign Bolivar. The problem with linking the currency to the cryptocurrency is that the petro has weak credibility because of a lack of confidence in Maduro’s government. According to the International Monetary Fund, inflation will reach one million percent by the end of 2018.
As Bloomberg reported:
Maduro’s initial redenomination plan called for slashing three zeroes from the Strong Bolivar notes to be replaced with the Sovereign Bolivar. This new delay comes after Maduro postponed a planned June rollout until Aug. 4. Maduro also signed a decree to assign the Orinoco Oil Belt’s Ayacucho 2 Block to the central bank as a way of bolstering its international reserves. The Ayacucho 2 block contains 29.3 billion barrels of oil, he said.
In June, annual inflation topped 46,000 percent. The Washington Post noted, “Paper money is hard to get in Venezuela, where the largest bill today is the 100,000-bolivar note, equal to roughly 30 cents. A simple lunch easily costs 3 million bolivars.”