Venezuela Debuts New Currency, Six Zeros Less
3 Min Read
Venezuela introduces a new currency with 6 fewer zeros to facilitate cash transactions.
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Kids playing with bolivars in Puerto Concha, Venezuela, September 9, 2021 (AFP)
Venezuela is set to debut a new currency that will feature six fewer zeros, on Friday, in response to years of some of the world’s worst inflation.
The highest bolivar note was one million bolivars, currently worth a little less than 25 cents.
As of Thursday, the highest denomination for the new currency will be 100 bolivars, worth a little less than $25.
Upon announcing the currency change in September, Venezuela’s central bank said the bolivar “will not be worth more or less; it is only to facilitate its use on a simpler monetary scale”.
Fewer zeros, simpler transactions
The change is meant to make cash transactions and accounting simpler, as they were often confusing with almost endless strings of zeros.
“The most important and fundamental reason is that the payment systems are already collapsed because the number of digits make the payment systems and doing the math practically unmanageable,” said Jose Guerra, an economics professor at the Central University of Venezuela.
“These debit card payment processing systems or an accounting system for companies... are not intended for hyperinflation, but for a normal economy,” he explained.
A soda bottle for millions of bolivars
Under the old system, a 2 L bottle of soda pop could cost more than 8 million bolivars — and many of those bills were scarce, so a customer might have to pay with a thick wad of paper.
Moreover, Banks allowed customers to withdraw up to 20 million bolivars in cash per day, or sometimes less if the branch was running short.
When Venezuela’s Central Bank announced the currency change last month, officials said payment systems will be modernized to expand the digital use of the bolivar.
Sanctions on Venezuela continue
Venezuela, which has been under strict economic sanctions, is facing the worst crisis in its modern history, with seven years of stagnation, hyperinflation, and declining purchasing power. Prices rose 265% between January and May.
In May, the government tripled the minimum wage, but even with this increase, it was still not enough to buy one kilogram of meat.
The country is struggling with severe international sanctions, especially by Washington, which has been seeking to oust President Nicolas Maduro since he was re-elected for a second term in 2018.
