President Nicolas Maduro said on Thursday that three zeroes would be lopped off Venezuela`s ailing currency in a revamp of the bolivar to try to combat the world`s highest inflation.
The new currency, to take effect from June 4, essentially divides existing bolivars by 1,000, so a note of that value would be replaced by a new coin worth one bolivar.
Though intended to instil confidence among Venezuelans, the revaluation actually illustrates the plummeting worth of the bolivar, which has fallen 99.99 percent against the U.S. dollar on the black market since Maduro came to power in April 2013.
Under the changes, Venezuela will have two coins of half and one bolivar, plus notes from two to 500. Currently, its largest note is 100,000 bolivars brought in just a few months ago.
Maduro, 55, presented it as a patriotic triumph to protect Venezuela against currency speculators and a U.S.-led "economic war" against the OPEC member country.
"Here you have it: three zeroes less ... the defence of the bolivar which we will now call the `sovereign bolivar`," Maduro said during an event shown live on state TV, flanked by aides and bankers.
Millions of Venezuelans are suffering from shortages of food and medicines during a fifth year of recession that critics have blamed on government incompetence and graft, but Maduro has said it is due to Western hostility plus the fall of oil prices.
Prices in Venezuela rose an astonishing 6,147 percent in the 12 months through February, according to latest estimates by the country`s opposition-led National Assembly, broadly in line with independent economists` figures."ECONOMIC WAR"
A $100 purchase of bolivars when Maduro came to power would now be worth just a single U.S. cent.
"Venezuela has been victim of a brutal, economic war," said Maduro, whose government has been targeted by the United States, European Union and Canada for sanctions over accusations of abusing democracy and rights.
Critics said the currency measure was no panacea for Venezuela`s economic mess while policy fundamentals, including currency controls and lack of incentives for local production, remained unchanged.
"Taking zeroes off the money doesn`t fix a thing while inflation continues unstopped," said opposition legislator and economist Ángel Alvarado.
Venezuela`s government similarly "re-denominated" its currency by knocking off three zeroes a decade ago, baptizing the new currency the strong or "fuerte" bolivar, but Venezuelans quickly joked it was the dead or "muerto" bolivar.
"The previous revaluation cost more than $40 million for the financial system, including publicity and technology changes," local economist Asdrubal Oliveros said. "In current conditions, the bank system doesn`t have capacity for that."
Maduro is running for re-election on May 20 in a vote critics have said is rigged to extend the socialists` rule.
The opposition coalition is boycotting the vote, though one leader Henri Falcon has broken ranks to run against Maduro. He is promising to dollarise Venezuela`s economy as a way to beat hyperinflation and regain investor confidence.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)