Written by Silvia Hristova, 24/11/2016
Venezuelan bolivar devalued even below the levels that analysts predicted only a few weeks after the limited supply of USD fails to satisfy the increasing money supply. The currency lost 45% of its value so far this month, at exchange rate of 2753 Bolivar per dollar. This is the largest monthly decline in the history of the currency.
According to the economists, the Venezuelan bolivar will likely end the year at around 2327 Bolivar for the dollar on the black market after the currency began to weaken in October after six months of relative stability. The government injected bolivars in the financial system very quickly, so on the market there are many bolivars and people can choose between buying goods or dollars and they choose to buy dollars.
The inflation will probably start to pick up in some sectors that are sensitive to the courses on the black market, such as alcoholic beverages, restaurants, electronics. The inflation is likely to increase to 400% in 2016, according to the median assessment of the economists. The individual responses vary from 257% to 1500%.
The money supply in Venezuela increased by 127% last year, according to latest data of the Central Bank in Caracas.
Venezuela maintains strict controls on the currency since 2003 and currently has two legal exchange rates – known as Dipro and Dicom, from 10 and 661 Bolivar per dollar used to import priority. On the black market, where people and businesses refer when they can not get government approval for the purchase of dollars on legal courses bolivar has lost 69% last year.
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