Reuters – Venezuela on Monday (August 20) slashed five zeros from prices as part of a broad economic plan that President Nicolas Maduro says will tame hyperinflation but critics call another raft of failed socialist policies that will push the chaotic country deeper into crisis.
Streets were quiet and shops were closed due to a national holiday that Maduro decreed for the first day of the new pricing plan for the stricken economy, which the International Monetary Fund (IMF) has estimated will have 1 million percent inflation by year-end.
The price change comes with a 3,000 percent minimum wage hike, tax increases meant to shore up state coffers and a plan to peg salaries, prices and the country’s exchange rate to the petrol, an elusive state-backed cryptocurrency.
Economists say the plan is likely to escalate the crisis facing the once-prosperous nation that is now suffering from Soviet-style product shortages and a mass exodus of citizens fleeing for other South American countries. After a decade-long oil bonanza that spawned a consumption boom in the OPEC member, many citizens are now reduced to scouring through garbage to find food as monthly salaries currently amount to a few U.S. dollars a month.
The new measures have worried shopkeepers already struggling to stay afloat due to hyperinflation, government-set prices for goods ranging from flour to diapers, and strict currency controls that crimp imports. Venezuela’s main business organization, Fedecamaras, on Monday (August 20) slammed Maduro’s economic plan and said it will cause confusion and put the country’s economic activity at “severe risk.”
“Without controlling the hyperinflation, the impact of these increments will be totally counterproductive,” said Fedecamaras President Carlos Larrazabal at a news conference.
Maduro, re-elected to a second term in May in a vote widely condemned as rigged, says his government is the victim of an “economic war” led by political adversaries with the help of Washington and accuses the United States of seeking to overthrow him.
The United States has denied the accusations. But it has described the former bus driver and union leader as a dictator and levied several rounds of financial sanctions against his government and top officials.