Caracas: Venezuela said it was devaluing its currency by 32 per cent against the dollar on the orders of cancer-stricken President Hugo Chavez, in part to trim a bloated budget deficit.
The bolivar will go from 4.3 to the dollar to 6.3 at the official exchange rate. The move was announced on Friday at a press conference by planning and finance minister Jorge Giordani. He said it will take effect on Wednesday.
The goal is to 'minimise expenditure and maximise results." One effect of a devaluation is to make a country's exports cheaper and thus more enticing to buyers.
But another effect is to cut the deficit, which in Venezuela last year was estimated to be nearly 10 per cent of GDP.
The economy grew 5.5 per cent last year and inflation was 20 per cent. That was down seven points from the previous year and hit the government target, but was still the highest official inflation rate in Latin America.
Venezuela is South America's largest oil exporter and has the world's largest proven reserves. Its oil transactions are dollar-denominated, so the bolivar-value of those sales will now be higher, boosting state revenues on paper.
The change had been widely expected by analysts.