Venezuelan President, Nicolas Maduro on Sunday announced to withdraw the country’s highest denomination, the 100 Bolivar bill, from circulation in its latest attempt to tackle the world’s worst inflation crisis. The 100 Bolivar bill, which currently worth around 2 US cents on the black market, will be scrapped out. Venezuela thus becomes second nation in recent months to pursue demonetization after Prime Minister Narendra Modi declared 500 and 1000 rupee notes to be invalid last month in India.
Central bank data suggests there are more than six billion 100-bolivar notes in circulation, making up almost half of all currency. Maduro said the move was necessary after a Venezuelan investigation found that billions of bolivars, in bills of 100, were stashed away by international mafias, mainly in Colombian cities but also in Brazil. Maduro also told that the surprise move was needed to help stop criminal gangs profiteering on Venezuela’s border with Colombia.
He said that part of the plan was to block any of the 100-bolivar notes from being taken back into the country so the gangs would be unable to exchange their hoarded bills, making them worthless. Venezuela will close its borders on land, water and air for 72 hours to stop the inflow of bills by the mafia.
Venezuela has been battling extreme inflation which has led to significant depreciation of their currency in recent times. International Monetary Fund (IMF) has estimated that the the inflation might go as high as 2000%.
However, critics said that the latest move was impractical and would not tackle the root cause of the country’s financial crisis. Analysts say the move is likely to worsen the cash crunch in Venezuela. It also risks prompting a repeat of scenes witnessed in India last month when the withdrawal of highest value rupee notes prompted huge queues at banks and ATMs.
Venezuelan citizens have only been given 10 days to exchange their 100-bolivar notes for new coins and bills ranging from 500 to 20,000 bolivars are due to be introduced from 15 December.
Information source: bbc