Nicolas Maduro speaks in Caracas in 2018.
Photographer: Carlos Becerra / Bloomberg
Photographer: Carlos Becerra / Bloomberg
The Venezuelan government is planning to move to a fully digital economy, as hyperinflation has caused the bolívar’s useless notes to practically disappear and dollarization to expand in the local financial system.
The US dollar served as an outlet for Venezuela amid US sanctions and the collapse of oil revenues, President Nicolas Maduro said in a televised interview with Telesur on Friday. According to him, 18.6% of all commercial transactions are in US dollars, while 77.3% are made in bolivars with a debit card. Only 3.4% are paid with bolivar.
“They have a war against our physical currency. This year we are moving towards a deeper, expanding digital economy. I set the goal of a 100% digital economy, ”said Maduro, adding that physical money will eventually disappear.
It is the latest ambitious monetary plan by the President of Venezuela, with no guarantee of success. In 2017, with the bolívar in free fall, Maduro promised that the nation would create a the cryptocurrency called Petro, backed by reserves of oil, gas, gold and diamonds. Petro was launched in 2018; the US calls it blow.
Venezuela’s currency lost 99% of its value during three years of hyperinflation, forcing the country to issue banknotes of higher denomination which, in turn, become useless in record time. Inflation has skyrocketed 5,790% in the last 12 months, according to Bloomberg News Cafe con Leche Index.
The largest banknote now in circulation, 50,000 bolivars, is worth about $ 0.04. The government delayed plans to issue a 100,000 bolivar note, which would currently be worth less than $ 0.10.
Read more: Venezuela’s Cafe Con Leche Index
After previously subsidized fuel prices were raised in June, the money is now used only for public transport, and the Caracas metro routinely stops charging passengers due to a lack of money.
Since the end of 2019, local banks have slowly started offering accounts and financial products in U.S. dollars, but they remain limited as there is no clearing system in place that allows digital transactions in US dollars.
Some banks have technical meetings with the central bank of Venezuela in an attempt to resolve the problem amid high skepticism and caution due to American sanctions. But Maduro promised to create “payment formats” that would allow transactions using savings and US dollar checking accounts.
A press officer for the Central Bank of Venezuela did not immediately respond to a request for comment.
Despite promising to expand the use of the US dollar in the economy, Maduro said that formal dollarization would not happen. “Venezuela has its currency and we are going to defend it,” he said.
(Updates with the history of the previous monetary reform of the fourth paragraph.)