Unrest reigned Thursday among Venezuelans as Friday's monetary reconversion which will remove six zeros from “sovereign bolivars” loomed over, prompting the exchange rate with the US dollar to skyrocket.
The introduction of the new monetary cone named “digital” is to become the third such move by the Bolivarian regime and economists have warned its effects could last just months if additional measures are not applied to contain hyperinflation.
Venezuela accumulates year-on-year inflation of 1,743%, according to the Finance Observatory, but in the International Monetary Fund's (IMF) assessment, hyperinflation will reach 5,500% by the end of 2021, the highest worldwide.
Venezuelans have gone on a spending spree to get rid of their last bolívares, fearing they may lose most if not all of their value with the introduction of Friday's measures.
According to reports, the greenback went up 4.68% just Thursday and the bolivar has depreciated 72.54% so far in 2021.
The new monetary cone will consist of bills worth 5, 10, 20, 50, and 100 “digital” bolivars and a 1 bolivar coin that will coexist with the current cone bills ranging from 10,000 to 1 million bolivars.
Executive Vice President Delcy Rodríguez said, the entire banking and financial system, public and private, is ready to remove 6 zeros from our currency and boost the digital bolivar.
Venezuela's financial authorities planned an operational pause,” at 8 pm Thursday followed by a gradual resumption of activities starting at 6 am Friday when “the digital services of the bank will be gradually reactivated, with more ease and simplicity in operations, Rodríguez added.
Three currency reconversions since 2008 have resulted in the elimination of 14 zeros from the local currency. Venezuela will thus become the Latin American country to have eliminated the largest number of zeros from its currency, while the country has been going through a de facto dollarization for months. Analysts believe transactions in dollars make up for at least 70% of the country's operations.
In regions neighboring the Colombian border, pesos from that country are also used for retail purchases in an attempt to bring along some stability, particularly with regards to small change which cannot be handled in US dollars. There are no figures for the amount of Colombian pesos that circulate in the Venezuelan economy.
Venezuelans hardly use bolívares other than for debit card operations. The move has also been fueled by a chronic shortage of cash, bolivar bills being good for little other than mementos or playthings for children.