Venezuela issues new banknotes

Venezuela is going to issue new banknotes to alleviate the shortage of money, we read on the website of the central bank. The new banknotes have a face value of 10,000, 20,000 and 50,000 bolivar and will soon be put into circulation. With these new larger denominations, payments become more efficient and large business transactions can also be carried out more easily.

Due to the extremely high inflation of almost 100,000% on an annual basis, these banknotes will also have a limited shelf life. However, it may provide some temporary relief, because at the moment the 500 bolivar note is the largest. With the new notes, thick stacks of money can be reduced to a limited number of notes. It will also reduce waiting times at shops, banks and ATMs.

Hyperinflation in Venezuela

Venezuela has issued new banknotes several times in recent years. In August last year, the official exchange rate of the bolivar was devalued by 95% and new notes were introduced. With these new bolivar notes, five zeros were also taken off the old banknotes.

Hyperinflation has made paper money scarce in Venezuela. That sounds contradictory, when you see the piles of money people use to make payments. Yet there is a shortage of money, because although the number of banknotes is increasing explosively, the total value of all the banknotes in circulation is falling. That means that the amount of money in circulation is not enough to carry out all transactions.

By putting even larger banknotes into circulation, the shortage of money will be alleviated temporarily, but not structurally. The value of the money will eventually only fall further, as confidence in the value decreases. It is therefore no wonder that the inhabitants of Venezuela prefer to convert their wealth into foreign currency and Precious metals. A few million people have also fled the country because of the economic crisis associated with hyperinflation.

Venezuela can't afford the money

Due to a lack of foreign currency, the government is also increasingly struggling to pay bills. Bloomberg De La Rue, one of the world's largest banknote producers, still has a claim of nearly $23 million on Venezuela. The country can no longer even pay for its banknotes.

In order to get money, the government is now also selling its gold reserves. In a short period of time, the government sold for $570 million of gold bars. She also had gold swaps with Citigroup and Deutsche Bank expiry, allowing the banks to sell the gold sell.