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.
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