Economic reforms including the introduction of new notes that lop five zeros off Venezeula’s fast-depreciating currency are set to come into force as the country battles hyperinflation.
Banks will close on Monday as they prepare to release the new “sovereign bolívar” amid warnings from International Monetary Fund economists that Venezuela’s inflation rate could exceed 1m% this year.
Later reforms include a rise of more than 3,000% for the minimum wage and an increase in the price of petrol, currently the world’s cheapest, to international levels in an attempt to curb cross-border fuel smuggling.
Queues at a Caracas street market at the weekend were longer than normal as people stocked up due to uncertainty about what will come this week. Many were frustrated by card-readers that were slow to register or that failed altogether, forcing some to leave their goods and walk away empty-handed.
“You have to be patient,” a shop worker selling grains told a growing line of customers. Many other stores remained closed, uncertain what prices to set for their goods.
Opposition leaders have called for a nationwide strike and mass protests against Nicolás Maduro’s ruling party on Tuesday, something they have failed to achieve in over a year.
Economists say the package of measures is likely to accelerate hyperinflation rather than address core economic troubles such as oil production plunging to levels last seen in 1947.
“The bolívar’s redenomination will be like going under the knife of one of Caracas’s famed plastic surgeons,” Johns Hopkins University economist Steve Hanke wrote on forbes.com . “Appearances change, but, in reality, nothing changes. That’s what’s in store for the bolívar: a facelift.”
Venezuela was once among Latin America’s most prosperous nations, holding the world’s largest proven oil reserves, but is now in economic and political crisis.
Inflation has made it difficult to find paper money. The largest note under the outgoing cash system was the 100,000-bolívar note, equal to less than 2p on the commonly used black market exchange rate. Last month, a cup of coffee cost more than 2m bolívars.
The new paper bills will have two coins and paper denominations ranging from 2 up to 500. The lowest note represents the buying power of 200,000 current bolívars while the highest stands in for 50 million.
The old and new currencies will remain in circulation together during a transitional period.
The government made a similar move in 2008, when then-president Hugo Chávez issued a new currency, the “strong bolívar”, that eliminated three zeros to combat soaring inflation.
Adding to the confusion, Maduro has said he wants to peg wages, prices and pensions to the petro — a cryptocurrency announced in February. He said one petro would equal $60, with the goal of moving toward a single floating exchange rate in the future, tied to the digital currency.