New banknotes of a higher denomination began circulating sporadically in Venezuela this week, part of an attempt by the government to address the cash crisis, when hyperinflation and a recession by the South American country persist.
Bills of 200,000 bolivars, equivalent to 10 cents at the exchange rate estimated by the Central Bank, have been distributed to banks since Monday, according to Reuters witnesses. The Venezuelan issuer this month announced that it also considers denominations of 500,000 and 1 million bolivars, which together add up to less than a dollar.
Until last week the highest ticket was 50,000 bolivars. With inflation of 2.665% per annum, cash shortages have become more acute, and economists have pointed out that creating new banknotes is an insufficient measure to alleviate high prices for goods and services.
“These bills in a few months will be worthless because in this country prices go up very fast,” said Rafael Alvarez, a health worker leaving a banking office and carrying a 200,000 bolivar bill and four of 50,000 bolivars, the equivalent of 0.2 cents.
In Venezuela, the cash crisis has led the authorities to pressure local banks to accelerate digital means of cancellation, but the plan, dubbed by President Nicolás Maduro as “digital bolivar,” is not going so fast.
Cash bolivars were no longer used in routine purchases and three-quarters of the paper currency circulating in the country is used to cancel public transport. Sometimes many turn to their currencies for payments in shops and pharmacies, in an informal dollarization of the economy, but denominations under $20 are also scarce.
“These new bills don’t solve the cash crisis, they’re going to pay for public transportation,” said Evelyn Mendoza, a 47-year-old cook, while in a long line in front of a banking office in southern Caracas.
Venezuelans can withdraw a maximum of 400,000 bolivars at bank offices.
“On Thursday I go back to the bank to withdraw more money,” Mendoza added, who works three days a week at a foundation and when he goes to his office he spends an average of 1 million bolivars on transportation payment.
The government maintains a quarantine regime by COVID-19 that allows bank offices to open one week yes and one week does not. Many Venezuelans come to the banks for cash on those five days in a row.
The Central Bank did not respond to requests for comment on the distribution of banknotes.