Venezuela creates a new national currency affixed on the Petro

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The Venezuelan president Nicolas Maduro is planning to introduce a new currency barely two months after his re-election. According to local reports, Maduro is planning to replace the current national currency, Bolivar Fuerte (VEF) with Bolivar Soberano (Sovereign Bolivar).

Maduro’s new currency will have five zeros less than the existing currency. In addition, the Bolivar Soberano will be anchored to Venezuela’s digital currency, the Petro. President Maduro announced that the new currency would start circulating on August 20.

He added:

“The new currency is to stabilize and change the monetary and financial life of the country in a radical manner…”

Maduro believes by anchoring and reconversion of the new currency to the Petro will create a great hope for the country to develop a productive, sustainable and diversified economy. He said the new currency would help prevent inflation, and shortage of money in the country. He further stated that availability of the new currency would reduce the long lines at ATMs that have become a routine in Venezuela.

The reconversion has started up criticism in various financial circles. An Economist, Maxim Ross claimed that the measures taken by the Venezuelan president will not solve the financial problem in the country.

Angel Alvarado, the Opposition Legislator, and economist critic the decision stating that the new measure will end up increasing inflation rather than putting it to an end. Alvarado claims that taking a few zeros from the old currency is not what Venezuela need to get back on track financially.

Some exporters believe Maduro’s decision to anchor Bolivar Soberano to the Petro will end up driving the country further down the drain. Petro as a currency has not been doing as well as it had been expected. The currency has been rejected by the Indian government and banned by the United States. Some cryptocurrency exchange like Bitfinex refused to add Petro on their platform, claiming that the currency offers limited utility and that listing it on their platform will be violating legitimate sanctions against the Venezuelan government. It also faces opposition from local Opposition officials who claim the currency is actually against Venezuela’s constitution.

Maduro concluded his announcement stating that his government has the correct vision of what the economic future in Venezuela should be and he will work hard to make sure his government achieves it.