Venezuela launches new currency to take on hyperinflation

Venezuela has introduced a new currency named the ‘new sovereign bolivar’, in a bid to take on hyperinflation. 

The Venezuelan government unveiled the new bank on notes on Friday, which will have five zeros slashed from the bolivar.

Venezuelan President Nicolas Maduro declared Monday a national holiday to mark the launch of the new currency, which is linked to Venezuela's contraversial cryptocurrency, the petro. The new notes will function alongside the old currency during the initial transition period, until a complete phase-out.

Maduro described the change as a ‘historic moment’ for the country, with more changes to the minimum wage hike taking effect as early as September, including a more than 3,400 % minimum wage hike and a rise in the price of fuel.

“We need a complete economic revolution, like the one I have already activated and at the centre of it is work, the payment and protection of work,” Maduro said in a video posted to Facebook.

Analysists are questioning if the move will change anything, with the country already facing one of the worst hyperinflations in history. Prices have already been rising rapidly, sometime twice a day over the past 7 months.

The introduction to the new currency hasn’t come without criticism. Economists have raised concerns things could worsen, with the International Monetary Fund (IMF) predicting inflation could rise to 1 million % by the end of 2018.

US President Donald Trump passed sanctions on Venezuela within 24 hours of Maduro’s presidential election in May 2013, attempting to control the government from borrowing against, public assets.

Maduro accused the US of waging an ‘economic war’ on Venezuela, saying the sanctions were an attempt to force the country to default on its debt.

According to the IMF, Venezuela’s gross domestic product (GPD) has dropped by 45% since Maduro was elected in May 2013.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IG Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.

Find articles by writer

Find out more about