Venezuela (officially Bolivarian Republic of Venezuela) is a federal republic located on the northern coast of South America, that has the world’s largest oil reserves contributing to about half of its annual income and nearly 95% of its total exports. Earlier an exporter of agricultural commodities like coffee and cocoa, oil significantly began to overtake the exports and the government’s revenue. Since then, the country has been facing an economic imbalance which no other country would want. After the oil glut of the 1980s and the subsequent external debt crisis and economic crisis, poverty rate began to increase significantly and the country saw one of the world’s highest inflation rates peaking 100%.
Finally, in 2000, the recovery of oil prices gave Venezuelan government enough funds to implement certain policies. But due to its only dependence upon oil and having no substitute, inflation and poverty began to rise in 2010 and the country witnessed a shortage of basic necessities like toilet paper, milk, flour, etc… Due to this, the government devalued its currency in 2013. There was seen a serious rise in crime and corruption rate and in October 2016, Fox news latino reported the consumption of 3 fellow inmates by the other 40 due to the ongoing food shortage. In the midst of such political imbalance, the decision of demonetisation of the top currency note to counter international mafia and corruption by Venezuelan Government seemed to increase the problems of the citizens.
The government’s decision to take out 100 Bolivar (about Rs. 678.69) out of service and introduce new currency notes of 500 and 20,000 Bolivar was seen as to create a situation of new cash crisis among the ongoing economic recession with the country facing an inflation rate of 180%. While the country’s 77% of cash is in the form of 100 Bolivar, introducing a new currency note worth 200 times the nation’s most valuable banknote was opposed from toe to head by the public. The IMF has projected the country’s inflation rate to reach 475% after the move.
Within hours after the announcement of demonetisation by the President, people stormed the shops and reports of loot were heard from all over the country. The reason behind this was that the new currency notes had not reached the ATMs and there was a cash crunch faced by the people just before the much awaited Christmas holidays. After 2 days of unrest and heavy protest against the move following 1 death, President Maduro announced that the measure will be taken back and the process will be postponed until 2 January 2017. While President Maduro like PM Modi hoped to transform the country’s economy into digital, the sudden decision among the ongoing recession was responsible for the failed move of demonetisation.