Venezuela's 'Default' Crisis Boosts 4000% Inflation

Venezuela's 'Default' Crisis Boosts 4000% Inflation

Bolivar value against dollar, one-27th of last year

The Venezuelan economy, which is facing the default crisis, is suffering from hyperinflation of over 4000%.

Prices have soared as difficulties in procuring essential commodities have been hampered by the flow of foreign currencies due to economic sanctions by the international community, including the United States. The credibility of domestic currency has fallen sharply.

According to CNN, professor Steve Hanke, an economist at Johns Hopkins University, estimated that the price of Venezuela surged 4115% from a year ago. Venezuela 's surge in prices has intensified since the government refused to pay some foreign debt.

There is a shortage of food and medicine in all parts of Venezuela now. In front of supermarkets and cash dispensers, there are long lines of people who want to buy necessities.

Hanke's research results are lower than those of other studies, but other institutions' estimates are also raising the hyperinflation crisis. According to Venezuela researcher Engoanalitica, the inflation rate was 1430% as of last month.

In August, the United States imposed sanctions on Nicholas Maduro's dictatorship to ban new financial transactions between Venezuela and its financial institutions and individuals. The eurozone is also joining sanctions.

A country that is subject to normal economic sanctions and has suffered a disruption in foreign currency production suffers from rapid inflation and a decline in the value of its currency. The government is forced to issue currencies to repay foreign debts, but the procurement of major commodities is becoming increasingly difficult. Zimbabwe, for example, where inflation has risen to 7.9 billion in the mid-2000s.

Venezuelan Bolivar is now virtually handled as a piece of toilet paper. Millions of Venezuelans are frustrated in finding dollars to finance their daily necessities. The official exchange rate announced by the government is considered to be pointless.

Currently, the official statistical value of one dollar is 9.9951 Bolivars. But in reality, you need 84,000 Bolivars to get a dollar. The currency value was devalued to one-tenth of a percent earlier this year (3100 bolivars).

If the Venezuelan defaults continue, the situation is likely to get worse.

Currently, Venezuela's government and state-owned oil company 'Pedevesa (PDVSA)' have more than $ 60 billion in foreign debts. It is also estimated that the size of foreign debts exceeds $ 1,500. However, foreign reserves amount to about $ 10 billion.

The government and Fede Bessa failed to repay some of their debts due on the 14th. International credit rating agencies have demoted Venezuela's credit rating to the "Optional Default (SD)" level. If the default continues, creditors are likely to seize Venezuela's key assets - oil production facilities and transportation equipment. In this case, the cash flow of Venezuela could get worse.