Venezuela faces a renewed inflationary storm as currency depreciation challenges years of progress in stabilising prices, sources from both the public and private sectors report. The shift comes amid diminishing foreign currency sales, growing import costs, and the government’s silence on its evolving economic strategy.
After battling hyperinflation that soared above 100,000% and enduring severe U.S. sanctions, President Nicolás Maduro’s administration had resorted to stringent fiscal and monetary policies in 2022. These included slashing public spending, tightening credit, maintaining a fixed bolivar-dollar exchange rate, and infusing billions of dollars into the market. This strategy, alongside a controversial election that secured Maduro’s upcoming third term, had seemingly tamed runaway inflation, restoring price levels reminiscent of 2014.
However, a policy pivot in October allowed the bolivar to float, leading to a swift depreciation from 36.5 to 45 bolivars per dollar. This adjustment, while addressing an overvalued currency that stifled local production, has begun fueling inflation, which reached 25% year-on-year through September. Analysts predict the exchange rate could hit 50 bolivars per dollar by year-end, driving inflation to an estimated 35-40%.
Economist Daniel Cadenas highlighted that Venezuela’s exchange system relies heavily on oil revenues, which remain insufficient to stabilise the currency. “The currency peg exposed deep flaws in the system,” he noted, stressing the need for a sustainable foreign exchange inflow.
Central bank dollar injections, which peaked at $800 million in July, halved to $400 million by October, exacerbating the strain on businesses. Vice President Delcy Rodríguez recently urged prudent use of foreign exchange, describing the country as “blockaded” and warning against frivolous spending.
With rising import costs and dwindling inventories, private sector sources warn of worsening supply constraints. Asdrúbal Oliveros, head of think tank Ecoanalítica, remarked, “The government recognises devaluation is inevitable, but it comes with inflationary consequences.”
The unfolding currency crisis underscores the fragile balance of Venezuela’s economic recovery, leaving businesses and consumers bracing for tougher times ahead.
