In an effort to bring Venezuela’s economic crash to a slowdown, on Monday Venezuelan Nicolas Maduro will enact major fiscal overhauls.
The original old bolivar will be replaced with a new currency, the sovereign bolivar. This one will be linked to the petro, which is Venezuela’s cryptocurrency. The exchange will be 10,000 old bolivars for one sovereign. Maduro hopes this will combat the nation’s skyrocketing inflation which, according to the International Monetary Fund (IMF), is expected to hit 1 million percent by the end of the year (CNBC)
“You won’t find the IMF’s claws or ill-gotten prescriptions here,” Maduro said in a speech Friday on state television, referring to the International Monetary Fund. “No experts were involved who do not feel the clamor of the people.”Bloomberg
In addition, Maduro is raising the national minimum wage more than three thousand percent, to a level roughly equivalent of $30 per month. Even with the new increase it still will not cover one kilogram of meat (South China Morning Post). He pledged the government would subsidize the rate increase for small and medium sized businesses for 90 days (Euro News). This will be Venezuela’s fifth minimum wage increase in 2018.
Earlier this week Maduro announced an end to Venezuela’s fuel subsidies. With the old prices, Venezuelans were able to fill their tanks for less than a cent. After the changes, fuel prices will reflect the international rate. An exception will be made for citizens registered for a “Fatherland I.D.” card (BBC). The deadline to register for the card to be eligible for fuel subsidies has been extended until August 30th.
Additionally, there will be an increase in the luxury item tax from 12 percent to 16. A new tax of up to 2 percent will be added to financial transactions.
Henkel Garcia, director of the Caracas consultancy Econometrica, said the announcements amounted to a head-scratcher. “This series of measures is a mix of incoherent and contradictory ideas,” he said by telephone. “It is a worrying contraption that generates a lot of uncertainty about how it will be executed.”Bloomberg
In the wake of the uncertainty of these measures, many stores and fuel stations were closed over the weekend. Those open are reported to have drained stock and long lines.