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Last Updated : Jun 01, 2017 08:30 AM IST | Source: PTI

Venezuela devalues currency in crisis

Crisis- hit Venezuela devalued its currency by 64 percent to a dollar.

Crisis-hit Venezuela devalued its currency by 64 percent in a dollar auction that aimed to stabilise its foreign exchange market, officials said.

Under an overhauled official exchange system, the government let investors bid for the dollars at a new higher rate in what President Nicolas Maduro said was an effort to undermine the black market.

It was the latest in a series of moves to ease a country stricken by soaring inflation and shortages of food and medicine.

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The US bills sold 2,010 bolivars per dollar, said Pedro Maldonado, president of the central bank's Currency Auction Committee.

He told reporters the rate was "an unequivocal indication that we are beginning a process of economic recovery."

But the rate represented a sharp devaluation compared to 721 bolivars under the previous system and still far below the black market rate.  it is currently around 6,000 bolivars per dollar.

The central bank sold USD 24 million overall, mostly to companies importing foreign goods.

"The amount assigned was laughable. It shows the lack of currency," economist Jesus Casique told Agence France-Presse (AFP).

The result was announced after an outcry over US bank Goldman Sachs's decision to buy $2.8 billion in bonds issued by Venezuela state oil company PDVSA.

The opposition said that move gave a lifeline to Maduro.

Casique said the dollar auction "will not boost productivity, that is why they decided to cash in the PDVSA bond with a discount of 69 percent, to give the official exchange rate a breathing space."

Essential foods and medicines in Venezuela are priced at a special low fixed dollar exchange rate. But due to shortages, many other items are only available on the black market at a much higher rate.

The crisis has prompted unrest in street protests by Maduro's opponents demanding elections to remove him from power.

Maduro says the crisis is the result of an "economic war" backed by the United States.

Venezuela's economic collapse has been driven by the fall in prices for its crucial oil exports since 2014.

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First Published on Jun 1, 2017 08:00 am
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