Venezuela’s Hyperinflation: Causes & Effects

Venezuela’s Hyperinflation: Causes & Effects

Amid a massive political and economic crisis, Venezuela has decided to print new banknotes in order to cope up with the effects of hyperinflation. For the uninitiated, this South American country has been trapped in a vicious cycle of hyperinflation since 2016.

In the year 2014, the inflation rate was 69% — the highest in the world. And since then, the economy has been consistently spiralling downwards with inflation rates reaching an estimated 815,000% in May 2019. Most of these are estimates, however, since Venezuela refuses to publish its statistics anymore. In order to tackle this, different organizations and institutions have come up with various methods to measure Venezuela’s inflation. Bloomberg, for instance, created the Venezuelan Café Con Leche Index to track Venezuela’s hyperinflation statistics. The index uses the price of a single cup of coffee, hence the name.

The Venezuelan economic crisis was partially triggered by the drop in the global oil prices along with the deteriorating oil production in the country, given that the Venezuelan economy is heavily dependent on its oil exports. President Maduro tried to tackle this crisis by printing more money which further aggravated the situation. The people, too, contributed equally in pushing the economy towards this colossal crisis. With the rapid decline in the value of the Venezuelan Bolivar, people’s savings started eroding away. This prompted them to exchange the local currency for US Dollars which inflated the exchange rates and further devalued the Bolivar.


The new notes of 10,000, 20,000 and 50,000 bolivars came into circulation on June 13 — about the same time as the discontinuation of the 100-bolivar currency. The 50, 000-bolivar banknote is, in fact, higher in value than the minimum wages of 40,000 bolivars a month. The government has introduced new banknotes for the second time in less than a year after having cut 5 zeros off the Venezuelan currency and prices last year. Before these new banknotes came into circulation, the highest value banknote had been the 500-bolivar note. This steep hike in the face value of the banknotes only signals the scale of the Venezuelan crisis.

Credits :

Conten: Prachi Prafull

Graphics: Pradatta Nigamanshu 

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