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Scepticism as Venezuela chops five zeros off currency to curb hyperinflation

1:31 pm, 21st August 2018

Socialist President Nicolas Maduro rolled out his radical new redenomination plan to try to curb spiralling hyperinflation in the oil-rich, cash poor country on Monday.

As new “sovereign bolivar” banknotes were printed the country appeared paralysed as most shops and businesses remained closed after the weekend because it was a bank holiday.

Locals are waiting – sceptically – to see what the effects will be as banks re-open on Tuesday.

The new currency will be anchored to Venezuela’s widely discredited cryptocurrency, the petro.

Each petro will be worth about $60 (£47), based on the price of a barrel of the country’s oil.

On Sunday the government suspended electronic transactions for more than 12 hours to try to avoid further crisis amid the uncertainty over how it will affect the country.

Venezuela’s dire economic crisis, which has plunged the country into four years of recession, has forced more than two million people to flee the country, the United Nations said.

Former bus driver Mr Maduro has taken the extraordinary step of issuing a new currency to show “fiscal disipline” to end the excessive money printing which has been a regular feature of recent years, he said.

The result has been rampant hyperinflation, which has pushed up prices to astronomical levels.

At the moment, the monthly minimum wage is not enough to buy a kilo of meat.

Inflation will reach a staggering 1,000,000% this year, the International Monetary Fund predicts.

As well as the bolivar redenomination, Mr Maduro announced other measures to tackle the widespread poverty blanketing the South American country.

They include a massive 3,400% wage increase – the fifth this year.

US Vice President Mike Pence tweeted that the Venezuelan people will bear the “tragic cost” of the regime’s “rampant corruption and tyranny”.

Economists are sceptical, with Asdrubal Oliverso, director of the Ecoanalitica consultancy, saying: “There will be a lot of confusion in the next few days, for consumers and the private sector.”

“It’s a chaotic scenario.”

And residents, who have been struggling with sky-high food prices, low incomes and unbridled crime, are also dubious.

“Everything will stay the same, prices will continue to rise,” said Bruno Choy, 39, who runs a street food stand.

Angel Arias, a 67-year-old retiree, called the new currency a “pure lie”.

Brazil’s security minister announced on Tuesday he will not close the border with Venezuela, as it is illegal, despite tensions which led to attacks on migrants on Saturday in the border city of Pacaraima which has fives times the number of Venezuelans than Brazilians.

Colombia is worried tightened Ecuadorean and Peru entry requirements for Venezuelans will leave thousands stranded in Colombia.

Three of Venezuela’s leading opposition groups – Primero Justicia, Voluntad Popular and Causa R – have rejected the reform plan and called for a day of protest on Tuesday.

Mr Maduro’s predecessor, Hugo Chavez, stripped three zeroes off the bolivar in 2008, which failed to prevent hyperinflation.