CARACAS, Venezuela (Reuters) — Venezuelan President Nicolas Maduro on Wednesday (February 17) devalued the currency and raised heavily subsidized fuel prices in an effort to stem a widening economic crisis, though critics of the socialist leader quickly dismissed the moves as insufficient.
The measures are meant to help shore up the OPEC nation’s finances as plummeting oil prices and a collapsing state-led economic model have left the country with a severe recession, triple-digit inflation and chronic product shortages.
The measures devalue the strongest official exchange rate by 37 percent to 10 bolivars per dollar from 6.3, and streamline the previous three-tiered system into a dual exchange rate mechanism. The weaker of the two rates will be a free float based on an existing system that currently sells dollars at around 200 bolivars, Maduro said.
“The secure system that is running at 6.30 (bolivars per dollar) – we will put it to 10 bolivars to the dollar. And we will have as our mission to protect our people in fundamental issues of health, medicine – the missions and large missions of food,” Maduro said in a speech to the nation, referring to the social programs known as “Boliviarian missions” implemented under the late president Hugo Chavez.
The reforms risk fueling triple-digit inflation at a time when millions are struggling to make ends meet, and comes two months after the ruling Socialist Party suffered a blistering defeat in parliamentary elections due to anger over the crisis.
The price of premium gasoline will rise by 1,329 percent, but fuel is so heavily subsidized that fueling a small car will still cost about half the price of a soft drink, or about $0.23 based on the black market exchange rate.
“Gasoline 91 [referring to 91 octane] will cost one bolivar and gasoline 95 [referring to 95 octane] will cost six bolivars per litre. If you have a 40 litre tank and use 91 octane gas, it will cost 40 bolivars [to fill the tank],” said Maduro.
Critics say the only solution to Venezuela’s economic problems is to entirely dismantle the 13-year-old currency system created during the government of late socialist leader Hugo Chavez.