It is also planned to print banknotes with new denominations. Since 2008 the Bolivarian government has implemented three currency changes and in total the Bolivar has lost 14 zeros.
According to BCV, Digital Bolivar will make it easier to use the “modern version of the currency” in daily transactions so that citizens have “more contact” with the Venezuelan currency.
To get started, 5, 10, 20, 50 and 100 notes of Digital Bolivar will be provided.
People are worried about the use of the current notes of the Venezuelan currency, the current currency in October, the sovereign Bolivar will lose its value.
The national currency has many family names. First it was Bolivar, then Strong Bolivar, more recently the sovereign Bolivar, now it is called Digital Bolivar.
With dozens of notes of the current Venezuelan currency, for example, one kilo of rice can be bought, the price of which is about five million bolivars. People prefer to buy instead of depositing money in the bank for fear of losing purchasing power after transferring money.
Venezuela has long been a country of poor millionaires. The prices of most commodities exceed the value of millions of bolivars. The minimum wage, valued at seven million bolivars, is $ 1.75 (or 8.75 rais), but commodity prices are higher than this value.
Everyone earns millions of bolivars, but that does not mean that the population has more purchasing power. Absolutely the opposite. Many Venezuelans could not even afford a basket of basic food.
About 96.2% of the population lives in poverty and 79.3% live in extreme conditions, according to Encovi’s National Survey of National Living Conditions 2019-2020.
Electricity or water supply services, especially in businesses, have values in the billions.
Another problem created by the many zeros on the Venezuelan currency is that the display of calculators or merchants’ cashiers no longer has many digits. Accounting in the country commanded by Nicolas Maduro is complicated.
A few months ago, 500,000, one million and two million Bolivar notes came into circulation. Their use in public transport is almost exclusive.
Home of the Venezuelan Central Bank in Caracas. – Photo: Reuters / Marco Bello
Brazilian Real spreads across Venezuela
There are not enough bolivar tips to pay high value on a daily basis. Instead, the currency used in most payments is the dollar, even if it is not official. Other foreign currencies are used instead of Bolivar. In the city of Santa Elena de Uyran in southern Venezuela, the Brazilian real exchanged the Venezuelan currency.
People seek information to avoid confusion due to the zero cuts associated with currency exchange.
In a statement, BCV announced that “all monetary value will be divided between the one million expressed in the national currency”.
Another hopeful factor is whether the restructuring will resolve the appearance of new zeros linked to prices as a result of rising inflation.
According to the BVC, the move is aimed at “facilitating the use of currency by providing a simple cash flow”.
People expected six zeros to be reduced in the second half of August. However, this deferral coming into effect of the new currency will enable the issuance of new banknotes with updated denominations.
The return of coins for use in Venezuela is another novelty. Coins have not been in circulation in the country for many years. Their value is lagging behind as they are unable to sustain the rapid pace of hyperinflation. According to the BCV, between January and May this year, inflation stood at 264.8%. Cumulative inflation reached 2,959.8% in 2020.
According to economists, cutting zeros in Bolivar is already expected and will make it easier to do the math, but that does not mean that high inflation will end.
According to Jose Kera, economist and vice – chairman of the National Assembly, which was elected in 2015, the new restructuring announced by the central bank is “a makeover” because “it will not reduce inflation”.
Opponent Omar Gonzalez Moreno called Digital Bolivar “a huge factory for the poor.” According to him, the new currency is a “continuation of another economic failure”, referring to the fruitless schemes used by the government in an attempt to restore the strength of the Venezuelan currency.
Other economists agree that the cessation of Bolivar devaluation is related to other economic activities than the cutting of zeros from the national currency. Thus, the implementation of the digital bolivar, without six digits, would be a preventive measure that would not prevent the re-emergence of zeros on the currency as a result of Venezuela’s hyperinflation, which is one of the longest in continental and modern history.