The Venezuelan government concentrates its efforts on making the bolivar the country’s reference currency for purchases. However, several economists believe this is a risky bet in a country that has emerged from hyperinflation and is still experiencing high inflation. The imposition of a 3% tax on spending in foreign currencies and cryptocurrencies, on the other hand, has some ramifications.
Venezuela is attempting to fortify its fiat currency.
Following the de facto dollarization described by the country’s president as an “outlet” to overcome the economic crisis five years ago, the government is attempting to establish its fiat currency, the bolivar, as an appealing payment option. A new tax known as the IGTF, which will levy a 3% tax on transactions and payments made in dollars, foreign currencies, and, in some cases, cryptocurrencies, contributes to this goal.
However, such adjustments may not be necessary because Venezuela has experienced hyperinflation, accompanied by a devaluation of its fiat currency, which had to be re-denominated several times. Asdrubal Oliveros, CEO of the consulting firm Ecoanalitica, explained:
It’s a risky bet with lousy timing because the recovery is slow, and the economy suffers from chronic inflation, not hyperinflation. It is challenging to restore trust in the currency overnight.
De-dollarization is currently underway.
However, the measure appears to be influencing Venezuelans’ spending habits. According to data provided by the banking regulator, the use of the national fiat currency has increased since the tax was introduced and implemented. According to the data, digital transactions in the national currency have increased by 21%, while debt payments have increased by 22%.
The use of the bolivar has steadily increased since 2022 when 70% of purchases are made in dollars or Colombian pesos. According to Ecoanaltica surveys, the bolivar and other payment methods are outpacing the dollar, which has now been used in only 44.7 per cent of commercial transactions in the country. This is partly because the country’s central bank stepped in to stabilize the fiat currency, which has been stable this year against the dollar.
INVESTMENTS DISCLAIMER
Although the material contained in this website was prepared based on information from public and private sources that kmdwire.com believesto be reliable, no representation, warranty or undertaking, stated or implied, is given as to the accuracy of the information contained herein, and kmdwire.com expressly disclaims any liability for the accuracy and completeness of the information contained in this website.
This website is distributed for general informational and educational purposes only and is not intended to constitute legal, tax, accounting, or investment advice. The information, opinions and views contained herein have not been tailored to the investment objectives of any one individual, are current only as of the date hereof and may be subject to change at any time without prior notice. kmdwire.com does not have any obligation to provide revised opinions in the event of changed circumstances. All investment strategies and investments involve the risk of loss. Nothing contained in this website should be construedas investment advice. Any reference to an investment’s past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit.
Any ideas or strategies discussed herein should not be undertaken by any individual without prior consultation with a financial professional for the purpose of assessing whether the ideas or strategies that are discussed are suitable to you based on your own personal financial objectives, needs and risk tolerance. kmdwire.com expressly disclaims any liability or loss incurred by any person who acts on the information, ideas or strategies discussed herein.
The information contained herein is not, and shall not constitute an offer to sell, a solicitation of an offer to buy or an offer to purchase any securities, nor should it be deemed to be an offer, or a solicitation of an offer, to purchase or sell any investment product or service.
