Venezuela joins India in demonetizing currency
Taking a page out of India's book, the government of Venezuela announced Monday that the nation's largest denomination banknote — the 100 bolivar bill — will be removed from circulation.
As of Tuesday (Monday was a bank holiday), Venezuelans will have just 10 days to exchange their 100 bolivar notes at the central bank before they cease to be accepted as legal tender, a report from Reuters said. Due to rampant inflation in the country, the notes are nearly worthless already, with a current exchange value of approximately 2 cents on the U.S. dollar.
On Thursday, the government will begin to circulate six new bank notes and three new coins. The largest denomination, 20,000 bolivars, will be worth about about $5.
According to Reuters, Venezuelan President Nicolas Maduro said demonetization of the note was needed to reduce contraband of the banknotes on the Venezuela-Colombia border.
Maduro reportedly has accused Colombian shoppers and organized criminals of buying up the 100 bolivar notes to go on a spending spree in Venezuela, thereby worsening existing shortages of everyday necessities.
The nation's socialist administration also has accused criminals of hoarding 100 bolivar notes abroad in an attempt to bring down the Venezuelan government.
According to Reuters, economists question the value of the demonetization and question whether replacement currency will be ready in time to replace more than 6 billion 100 bolivar notes and coins in circulation.
Topics: Regulatory Issues