Venezuelan president, Nicolas Maduro plans for a pegged exchange rate. He stated that he wants to peg the prices against the country’s cryptocurrency-Petro, as part of the measures to hasten recovery from hyperinflation.
Maduro on Friday said during a nighttime broadcast on state television “I want the nation to recuperate and I have a plan. Trust me.” In addition to this, Maduro set the monthly minimum wage at 1,800 sovereign bolivars, the new currency going into effect on Monday. This translates into a hike of around 3,300 per cent over the wage of about five million bolivars which was pegged in June to the old currency.
In doing so, the socialist leader is trying to rescue the nation’s economy from falling prey to further turbulence, given the reduced U.S financial sanctions and foreign debt crisis. Severe shortages of medicine and food left the country’s second-largest city in the dark last week, further adding to the social tensions.
Maduro had previously declared that Venezuela’s crisis is the result of an “economic war” designed by his enemies and the U.S. to sabotage his administration through overcharging and falling sanctions. Given the current state of affairs, the International Monetary Fund predicts that inflation in Venezuela will reach one million per cent this year.
To deal with the situation, Maduro declared that the government would help industries and small businesses to gain from the wage hike. He also increased the nation’s sales tax from four points to 16 per cent and stated that he is adopting these measures to eradicate Venezuela’s fiscal shortfall, which is expected to be twenty per cent of the gross domestic product.
On Friday, Maduro also said that one Petro would equal $60 which will be equivalent to 360 million bolivars. That suggests a new exchange rate of six million bolivars per dollar, causing ninety-six per cent devaluation compared to the present official DICOM rate of 248,832 bolivars per dollar.
“They’ve dollarized our rates. I am petrolizing prices and salaries. We are going to exchange the petro into the situation that pegs the whole economy’s activities,” Maduro said. He added that the lowest wage would be equal to “half a petro”. Several economists have expressed concerns regarding such measures. Asdrubal Oliveros stated that the aim is admirable but unreal.
“Besides this aggressive devaluation and currency extensions due to bonuses and salaries, we believe a much more violent stage of hyperinflation. It is a chaotic scenario for both the customers and private sectors. In a context where the elimination of massive money printing is not credible. The government is failing to prop up the currency,” added Oliveros.