Venezuelans have just three days to exchange their high value 100 bolivar banknotes, following an announcement by President Nicolas Maduro.
The central bank of Venezuela is about to release their new banknote series which will consist of increased value denominations – the 500, 1000, 2000, 5000, 10000, and 20000 bolivar banknotes and three new coins of 10, 50 and 100 bolivars.
The change in the coin-note boundary means that the highest value banknote currently circulating, the 100 bolivar, will instead become a coin.
The country’s President announced that people have just three days from the day the new banknotes are issued (reportedly the 15 December) to use their 100 bolivar banknotes, after which they will become illegal tender. After this time, people can reportedly exchange their notes at bank branches until the 24 December 2016. The move is intended to stop gangs from smuggling banknotes out of the country. Subsequently, the country borders will be closed to restrict this.
The Venezuela economy is in crisis. The bolivar currency has crashed – the high value 100 bolivar banknote today is worth just US $0.02.
The country is experiencing the highest inflation rate in the world of around 500%, with predictions of it rising to 1,660% in 2017 according to the International Monetary Fund. Shortages of food and medicine are being reported, and paying for groceries using non electronic payments requires rucksacks full of cash.
The new banknote series will help to curb this situation, being of much higher value denominations.
The sudden move by the Venezuelan government echoes that which occurred in India during November, whereby the top two denominations were immediately withdrawn as part of efforts to curb corruption and illegal cash holdings.