Venezuela: Government plans to issue higher denomination bills to tackle soaring inflation
November 3, 2016
Given the lack of official data for inflation in Venezuela, different indicators from official and non-official sources are used as proxies to measure the evolution of price levels.
FocusEconomics Consensus Forecast panelists estimate that inflation jumped from 368.1% at the end of Q2 to 448.8% at the end of Q3. Indicators from official sources point to mounting price pressures at the start of the fourth quarter. According to the Central Bank, the money supply increased by 113.7% in September, up from 104.3% in August. The government has resorted to printing money to finance the deficit as oil output has declined to multi-year lows. In October, the government announced a 40% hike in minimum wages to keep up with soaring prices. This is the fourth wage increase this year and according to President Maduro, minimum wages have increased by 454% since the start of this year.
The government stated that larger denomination bills will start circulating in the economy at the end of the year. In a tacit recognition of ballooning inflation, the government will print 20,000 VEF banknotes, 200 times higher than the current largest denomination of 200 VEF bills. The move aims facilitate daily economic transactions in the crisis-struck country.