Venezuela cuts five zeros from currency in inflation fight

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Venezuela introduced new banknotes on Monday that lop off five zeros from the inflation-hit currency.

The switch from the old bolivar to the new sovereign bolivar appeared to be going smoothly, Vice President Delcy Rodriguez said in an address.

"We can report that 92 percent of the banking platform, both private and public, is active. The sovereign bolivar is working, and there have been more than 400 million point-of-sale transactions throughout the country," Rodriguez said.

To bolster the sovereign bolivar, the government has tied its value to Venezuela's cryptocurrency, the petro, which is backed by the country's rich oil and mineral reserves.

In addition to the redenomination of the currency, the government raised the minimum wage, which goes to 1,800 sovereign bolivars starting September 1.

The minimum wage rise is an increase of 3,000 percent, equivalent to an increase from 50 US cents to 30 US dollars per month.

Government officials met with the social security agency to ensure employee payrolls at private companies are paid according to the new increase.

The government also began the process of granting a so-called "redenomination bonus" of 600 sovereign bolivars, as a form of direct subsidy and "social protection" that will benefit 10 million Venezuelans.

A new official price list for basic goods was to be published on Tuesday, Rodriguez said, asking citizens to "defend the prices of this economic recovery program."

Data from the International Monetary Fund showed inflation in July hit 83,000 percent, a record for a Latin American country. The IMF warned last month that inflation could hit 1 million percent by the end of the year, with the economy forecasted to contract by 18 percent.

Venezuelans welcomed the introduction of the new banknotes on Monday with a mixture of hope and anticipation as to how the move will affect prices.

Near the capital's Plaza Venezuela, Carmen Gonzalez, a nurse, expressed what many residents appeared to be thinking, saying she would take a wait-and-see attitude.

"We are hopeful that things will improve a little bit. We will have to wait and see how prices are this afternoon or tomorrow morning, because today, almost everything is closed," Gonzalez said.

Source(s): Xinhua News Agency