The International Monetary Fund, IMF, praised Venezuela for the recent devaluation of its currency saying it is a positive attempt to reduce macroeconomic misbalances but also called on the government of President Hugo Chavez to continue eliminating the exchange rate distortions.
“We celebrate the measures announced by the Venezuelan authorities…which can help to reduce the macroeconomic misbalances” said the IMF spokesperson Gerry Rice during a press round.
The devaluation came into effect last Wednesday when the US dollar officially jumped from 4.30 to 6.30 to the US dollar (almost 32%) and geared to alleviate the fiscal deficit that stands at 16% of GDP. The devaluation means the Venezuelan government will have more Bolivar from the sale of oil, the country’s main export and source of 96% of all hard currency.
However it will also have an impact on inflation and the family’s basic basket since Venezuela is a huge importer of food which must be purchased at a subsidized exchange rate to contain the impact of the increase.
Since 2003 Venezuela has a strict money exchange control established by Hugo Chavez in an attempt to impede the outflow of capital but the local currency has also been devalued five times.
“We believe more can be done and encourage the authorities to continue with their efforts to remove all distortions from the exchange rate system”, added Rice.
Finally the IMF expects further actions “to reduce the economic vulnerabilities and improve the business climate, and thus reach sustained economic growth”.
However despite the strong devaluation, given the political uncertainty in Venezuela because of the still unknown true health condition of President Chavez, the gap between the official dollar and the so called “green lettuce” remains in the range of 300%, between 20 to 22 Bolivar to the greenback.
Before last week’s devaluation the dollar was selling at 19.50 Bolivar, according to “Lechuga-verde” a site in internet which gives the daily rates of the several exchange rates in Venezuela and its two main trade partners, the US and Colombia.
Since last May local media have been banned from talking about the exchange rate of the Bolivar, which has been circumvented by several internet options, the most famous precisely ‘Lechuga verde’
In related news the Central bank announced that inflation in January accelerated to an annualized 22.2%, the fastest pace in eight months, led by a jump in food prices, the central bank said. Prices in January climbed 3.3% in the month while food prices leaped 5.3%.
Shortages of imported goods ranging from toilet paper to poultry have increased as the government more than halved the supply of dollars at official rates since winning the election last October.
Along with food prices, which account for 37% of the inflation index, restaurants and hotels pushed prices up 4.2% last month, the central bank said.
Vice President Nicolas Maduro has appeared several times on state television in recent weeks, ordering the National Guard to seize producers it says are hoarding food supplies and promising to make life difficult for “bourgeoisie” businesses he accuses of trying to sabotage the economy.