Nicolas Maduro speaks in Caracas in 2018.
Photographer: Carlos Becerra / Bloomberg
Photographer: Carlos Becerra / Bloomberg
The Venezuelan government plans to move to a fully digital economy, as hyperinflation has virtually wiped out worthless bolivar notes and dollarization is expanding through the local financial system.
The U.S. dollar has functioned as Venezuela’s escape valve amid U.S. sanctions and falling oil revenues, President Nicolas Maduro said in a televised interview with Telesur on Friday. He said 18.6% of all business transactions are made in dollars, while 77.3% are made in bolivars with debit cards. Only 3.4% is paid with bolivar tickets.
“They are at war with our physical currency. This year we move to a deeper, expanding digital economy. I have set the goal of a 100% digital economy, ”Maduro said, adding that physical money will eventually disappear.
It is the last ambitious foreign exchange plan of the president of Venezuela, without guarantees of success. In 2017, with the bolivar in free fall, Maduro promised that the nation would create one cryptocurrency called Petro, backed by reserves of oil, gas, gold and diamonds. The Petro was launched in 2018; the US called it a scam.
The currency of Venezuela has lost 99% of its value during three years of hyperinflation, which has forced the country to issue notes with higher denominations which in turn become useless in record time. Inflation soared 5,790% in the last twelve months, according to Bloomberg News Cafe with Milk Index.
The largest ticket now, 50,000 bolivars, is worth about $ 0.04. The government has delayed plans to issue one 100,000 bolivars, which would currently be worth less than $ 0.10.
Read more: Venezuela’s Cafe With Milk Index
After previously subsidized fuel prices rose in June, cash is now only used to travel on public transportation and the Caracas metro is no longer routinely charging passengers due to lack of cash.
Since the end of 2019, local banks have slowly begun to offer accounts and financial products in US dollars, but they remain limited as there is no clearing system that allows digital transactions in US dollars.
Some banks have had it technical meetings with the central bank of Venezuela in an attempt to resolve the issue amid high skepticism and caution due to US sanctions. But Maduro promised to create “payment formats” that would allow transactions through savings and current accounts in US dollars.
A press officer at the Central Bank of Venezuela did not immediately respond to the request for comment.
While promising to expand the use of the U.S. dollar in the economy, Maduro said no formal dollarization would occur. “Venezuela has its currency and we will defend it,” he said.
(Background updates on the previous monetary reform of the fourth paragraph.)