Venezuela’s epic shortages are nothing new at this point. No diapers or car parts or aspirin -- it’s all been well documented. But now the country is at risk of running out of money itself.
In a tale that highlights the chaos of unbridled inflation, Venezuela is scrambling to print new bills fast enough to keep up with the torrid pace of price increases. Most of the cash, like nearly everything else in the oil-exporting country, is imported. And with hard currency reserves sinking to critically low levels, the central bank is doling out payments so slowly to foreign providers that they are foregoing further business. Venezuela, in other words, is now so broke that it may not have enough money to pay for its money.
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The story began last year when the government of President Nicolas Maduro tried to tamp down a growing currency shortfall. [......]Last month, De La Rue, the world’s largest currency maker, sent a letter to the central bank complaining that it was owed $71 million and would inform its shareholders if the money were not forthcoming. The letter was leaked to a Venezuelan news website and confirmed by Bloomberg News.
“It’s an unprecedented case in history that a country with such high inflation cannot get new bills,” said Jose Guerra, an opposition law maker and former director of economic research at the central bank. Late last year, the central bank ordered more than 10 billion bank notes, surpassing the 7.6 billion the U.S. Federal Reserve requested this year for an economy many times the size of Venezuela’s.
World’s Highest Inflation
The currency crisis sheds light on the magnitude of the country’s financial woes and its limited ability to remedy them as Oil -- the mainstay of its economy -- continues to flatline. Venezuela’s inflation, the world’s highest, is expected to rise this year to close to 500%, according to the International Monetary Fund.
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