The Venezuelan government is currently focused on trying to establish the bolivar as the main currency for purchases in the country. According to some economists, this could be a risky bet in a country that has just experienced hyperinflation and still suffers from high inflation. However, the introduction of a 3% tax on spending in foreign currencies and cryptocurrencies has some impact.
Venezuela is looking to strengthen its fiat currency
After defacto dollarization, which the country’s president called a “lifeline” from the economic crisis Venezuela faced five years ago, the country is now looking to strengthen its fiat currency, the bolivar, as an interesting choice for payments. A new tax called the IGTF, which aims to tax transactions and payments in dollars, foreign currency and cryptocurrency at a rate of 3% in some cases, seems designed to help achieve that goal.
However, this may not be the time for such adjustments yet, as Venezuela has just emerged from a period of hyperinflation, which was also combined with a devaluation of the fiat currency, which had to be revalued a couple of times. Asdrubal Oliveros, a national economist who runs the consulting firm Ecoanalitica, said:
This is a risky bet with poor timing because the recovery is very weak and the economy is still suffering from chronic inflation, not hyperinflation, but chronic inflation. There is a very high probability that confidence in the currency will be restored from one day to the next.
{Dedollarization in progress
However, the measure seems to be having a real impact on the spending patterns of Venezuelans. According to data provided by the Banking Authority, the use of the national fiat currency has increased since the tax was introduced and began to be applied. Figures show that digital transactions in local currency increased by 21% and debit payments by 22%.
The use of the bolivar has grown steadily since 2021, when 70% of purchases were made in dollars or Colombian pesos. Ecoanalitica surveys now show that the bolivar and other payment methods are overtaking the dollar, which is now used in only 44.7% of commercial transactions in the country. This is due in part to the intervention of the country’s central bank in stabilizing the fiat currency, whose volatility against the dollar has stabilized this year.
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