Venezuela will soon remove six zeros from its currency as another effort to save its currency. Wrecked by years of hyperinflation, the South American Nation decided to change to the bolivar from October 1.
All about the Bolivar
The new bills will begin circulation from October 1. However, the bank also encourages people to use a digital version of bolivar since it will simplify everyday transactions. The physical money will include a 1-bolivar coin along with new bills ranging from 5 to 100 bolivars. The largest bolivar bill will be approximately the same cost as $25. However, according to the central bank’s official Twitter statement, the digital currency will be called ‘Bolivar Digital.’
In addition to this, the government led by President Nicholas Maduro vowed to protect the use of this new currency. This is despite allowing the adoption of the USD by the country. And, almost everyone prefers to use the US Dollar. However, bolivars are important for common transactions like paying for groceries, gas, or receiving subsidies from the government.
Why is Venezuela dropping the zeroes?
Dropping zeroes will not solve the problem. However, it will make transactions easy for the time being. The underlying cause behind this is instability and mistrust. In addition to this, the huge public spending does not equate to enough production. However, recovering from a 2,575% rise in inflation is not an easy task. “Removing those zeros does not solve, at all, the reason that originated the problem. Without resolving the root of the issue, we will have the same problem in months,” said Luis Vicente Leon, the president of Datanalisis and an economist.
But, this is not the first time Venezuela has made adjustments to its currency. The governments have cut eight zeroes, apart from the recent decision. But, currency devaluation and inflation have disintegrated its purchasing power. Hence, businesses and consumers end up doing complex tasks for simple everyday transactions.