Venezuela to Slash Six Zeros From Its Currency to Facilitate Payments

Venezuela’s government is currently studying a mathematical redenomination for its currency, the sovereign bolivar. This will make it easier to pay large companies. The redenomination would reduce six zeros to make it easier for companies to calculate high amounts of payments. Although there is no official announcement, Bloomberg reported that three people who are familiar with the subject commented.

This new measure is intended to help companies that had to pay large amounts in bolivars. Consumers who pay in bolivars at POS terminals will also benefit from this new measure. They no longer have to swipe their cards multiple times because of system limits. This measure is a sign that the government has failed to control inflation and the devaluation. The bolivar currently trades at approximately. 3,200,000 VES per Dollar (or 3.2 redenominated USD).

Digital payments are the norm in Venezuela. This means that the government doesn’t have to print bills to replace the cash available on the market. According to estimates by Econometrica (a national consulting agency), only 1.9% of Venezuela’s money is cash. The highest note, which has a value equivalent to $0.30, is used only for paying bus fares.

It’s not the first time

This is not the first instance of such a move by Venezuela’s central bank. This process has been repeated twice by citizens. In 2008, the first event of monetary conversion occurred and saw three zeros removed from the bolivar. The country was in a different place at that time with an interannual inflation rate of just 20.44%.

The second conversion was , which was applied in 2018 and removed five zeros. Venezuela was facing severe economic difficulties and a hyperinflationary situation. Sanctions were also being imposed on Venezuela. As a way to combat this, the government created Petro as its official cryptocurrency.

In less than 15 years Venezuela will have eliminated 14 zeroes from its currency. However, the current situation is too complicated to combat inflation without effective measures.