By IANS
Caracas : Venezuelans introduced Tuesday a new currency, the ‘strong bolivar’, which the government of President Hugo Chavez touts as an effective means to contain runaway inflation, Spain’s EFE news agency reported.
While the old currency bolivar trades at 2,150 to the US dollar, the strong bolivar is to have a value of 2.15 to one dollar.
The arrival of the new currency, which for at least six months will be used together with the present bolivar, was preceded by an intense campaign by Venezuela’s Central Bank (BCV) and a controversy over its effectiveness at controlling inflation – currently 18.6 percent.
Finance Minister Rodrigo Cabezas said Sunday that revaluing the currency is a “historic decision that closes a cycle of price instability.”
In announcing the monetary reform last Feb 15, Chavez said that the measure sought to slash inflation.
Revaluation will allow Venezuela’s currency “to recover all the ground it has lost to the dollar, the euro and all the currencies in the world,” the socialist president said.
Local economists have warned that the strong bolivar runs the risk of rapid weakening in the midst of an unstoppable price surge, which is encouraged by policies as soaring public expenditures and the exchange and price controls in effect since February 2003.
Revaluing a currency “always carries a risk” because it has “immediate effects that are unpredictable,” said former Central Bank chief Domingo Maza Zalava, who has constantly warned the government about the need to rein in excessive public expenditures.
Between last January and September, the government’s ordinary expenditures reached 86 trillion bolivars ($40 billion), some 12 percent more than in 2006, while special expenditures rose to 8.2 trillion bolivars ($3.8 billion), according to BCV figures.
The economy of Venezuela, the world’s fifth largest oil exporter, grew this year by 8.4 percent, maintaining the upward trend it has shown for “17 consecutive quarters, with an average year-on-year increase of 11.8 percent,” the BCV announced Sunday.