According to data from the Central Bank of Venezuela (BCV), inflation was 686.4 percent last year. In the country, where the highest monthly inflation rate was recorded as 46.4 percent in January 2021, the condition of inflation below 50 percent for 12 consecutive months, which was accepted as the condition to exit from hyperinflation, was met.
In Venezuela, which entered the hyperinflation process with monthly inflation exceeding the 50 percent threshold in November 2017 and had to delete 11 zeros from its currency in order to maintain the value of its national currency, Bolivar, for the next 50 months, it has been the last 4 months, not only according to official figures, but also according to independent institutions. single digit inflation.
According to economist Maria Diaz from the Central University of Venezuela, although Venezuela is technically out of hyperinflation, the inflation problem and economic crisis in the country continues.
Speaking to VOA Turkish, Diaz says that practices such as BCV’s controlling the circulation of money by increasing the deposit rates that banks should keep in the central bank, removing zero from money, supplying cash dollars to the market, reducing public expenditures and increasing tax revenues are the main factors that restrain inflation.
The fact that almost all of the products on the shelves, including basic consumer goods, are imported in Venezuela, whose economy is dependent on oil income, causes exchange rate increases to be directly reflected in prices.
Diaz said, “As the currency could not be stopped, street prices were indexed to the dollar, and when everyone with bolivars started to buy dollars, the economy was actually dollarized. BCV used the mechanisms to collect the bolivar in the banks, and the removal of the barriers to access to the dollar through the banks, provided relative control of the exchange rate and prices,” he said.
Experts state that BCV intervened in the market 68 times last year to control inflation and took approximately 1.5 billion dollars in cash, and the country’s reserves decreased by 485 million dollars as of November 21. In Venezuela, the dollar had risen nearly 17 times in 2020 and 4.4 times last year.
Diaz states that the Venezuelan economy has structural problems and that the government’s economic policies risk deepening the current crisis. Pointing out that one of the main mistakes that led Venezuela to the hyperinflation process in 2017 was the government’s use of printing money to finance the budget deficit, Diaz states that there are still very high inflation conditions in the country and that policies to ensure fiscal discipline should be implemented to combat this.
“The economic crisis continues”
Although hyperinflation has ended, according to official data, Venezuela continues to rank first in the world inflation rankings.
Experts report that the most effective way to combat inflation in Venezuela is to increase oil production and the purchasing power of the people. While oil production in Venezuela was over 3 million barrels a day in 2013, this figure remained below 600 thousand tons a day last year. In addition, one of the most concrete indicators of the complete meltdown of the purchasing power is that the minimum wage has depreciated by about 99 percent in the last 10 years; Likewise, in the country where the lowest salary was $267 in 2011, today the minimum wage is below $3 per month.