To tackle the world’s worst inflation, Venezuelan Government announced demonetisation of Bolivar Fuerte 100 banknotes. The demonetisation will be effective in next 72 hours.
President Nicolas Maduro on 11 December 2016 announced that the Bolivar 100 banknotes, worth only two US cents on the black money, will be withdrawn from the market on 14 December 2016. He also gave 10-days time to Venezuelans to exchange the notes at the central bank of the country.
In addition to this demonetisation of the country’s biggest banknotes, Venezuelan President also ordered the closure of the border with Colombia for 72 hours. This closure would help him in cracking down on currency smuggling by what he has called mafias trying to destabilise the socialist-run economy.
The border closure comes as Maduro is trying to curb Venezuela's galloping inflation and roll out a new range of bank notes after announcing that the government would pull from circulation a 100-bolivar bill.
He warned that people would not be allowed to bring back bolivar 100 notes from outside Venezuela to convert them in new bank notes.
Economic consultancy Ecoanalitica estimates suggests that at present Venezuela’s inflation rate is estimated at 500%. This inflation has led to shortages in food and medicine in the country of 30 million population.
Bank data of the country’s central bank released in November 2016 suggests that more than 6 billion Bolivar 100 notes are in circulation in the country.
Apart from this, Maduro government will be introducing six larger notes and three new coins from 15 December 2016. Of these, the largest will be of Bolivar 20000, which will be less than USD 5 in the market.
Comment: Critics say that this impractical move will repeat the chaos that is visible in India that withdrew its highest value rupee notes, i.e. Rs 500 and Rs 1000.