CARACAS Dec 11 Venezuela, mired in an economic
crisis and facing the world's highest inflation, will pull its
largest bill, worth two U.S. cents on the black market, from
circulation this week ahead of introducing new higher-value
notes, President Nicolas Maduro said on Sunday.
The surprise move, announced by Maduro during an hours-long
speech, is likely to worsen a cash crunch in Venezuela. Maduro
said the 100-bolivar bill will be taken out of circulation on
Wednesday and Venezuelans will have 10 days after that to
exchange those notes at the central bank.
Critics slammed the move, which Maduro said was needed to
combat contraband of the bills at the volatile
Colombia-Venezuela border, as economically nonsensical, adding
there would be no way to swap all the 100-bolivar bills in
circulation in the time the president has allotted.
Central bank data showed that in November, there were more
than six billion 100-bolivar bills in circulation, 48 percent of
all bills and coins.
Authorities on Thursday are due to start releasing six new
notes and three new coins, the largest of which will be worth
20,000 bolivars, less than $5 on the streets.
No official inflation data is available for 2016 though many
economists see it in triple digits. Economic consultancy
Ecoanalitica estimates annual inflation this year at more than
The oil-producing nation's bolivar currency has fallen 55
percent against the U.S. dollar on the black market in the last
Maduro previously has said that organized crime networks at
the Colombia-Venezuela border buy up Venezuelan notes to in turn
buy subsidized Venezuelan goods and sell them for vast profits
While smuggling of this sort is an issue at the border, it
cannot account for nationwide shortages of the most basic goods
from food to medicine, which have left millions hungry and
doctors crying out for help.
"I have decided to take out of circulation bills of 100
bolivars in the next 72 hours," Maduro said. "We must keep
beating the mafias."
Paying a restaurant or supermarket bill without a debit or
credit card can often require a backpack full of cash. However,
getting cash in recent months has proven difficult, and the
country's credit-card machines have recently suffered problems,
leaving many businesses asking customers to pay by bank
Strict currency controls introduced in 2003 that pegged the
bolivar to the dollar, coupled with heavy reliance on oil, are
seen as the root of the crisis by most economists. Maduro has
blamed an "economic war" being waged against his government by
the opposition and the United States.
Money supply, the sum of cash and checking deposits as well
as savings and other "near money" deposits, was up a staggering
19 percent in the three weeks to Dec. 2 and the curve has been
exponential since Maduro's predecessor Hugo Chavez came to power
(Reporting by Girish Gupta, Diego Ore and Corina Pons; Writing
by Girish Gupta; Editing by Will Dunham)