Venezuela money sup­ply surges 10% in one week

Kuwait Times - - BUSI­NESS -

In a por­tend of steep­en­ing in­fla­tion in cri­sis-stricken Venezuela, money sup­ply surged 10 per­cent in just one week ear­lier this month, its largest sin­gle-week rise in a quar­ter of a cen­tury.

Venezuela is un­der­go­ing a ma­jor eco­nomic cri­sis, with mil­lions suf­fer­ing food short­ages, monthly wages worth only the tens of US dol­lars, and soar­ing in­fla­tion­though no of­fi­cial data is avail­able.

The cen­tral bank said late on Fri­day the to­tal amount of lo­cal cur­rency in cir­cu­la­tion-known as M2 by econ­o­mists - as of July 21 was 27.3 tril­lion bo­li­vars, up 9.66 per­cent from the previous week.

In Oc­to­ber 1992, the fig­ure rose 10.84 per­cent in a sin­gle week. The ex­po­nen­tial rise in M2, the sum of cash, to­gether with check­ing, sav­ings, and other de­posits, means an ex­po­nen­tial rise in the amount of cur­rency cir­cu­lat­ing.

Venezuela’s money sup­ply is up 384 per­cent in the last year. In con­trast, the United States’ money sup­ply is up 5.5 per­cent in the same pe­riod. Cou­pled with a de­cline in the out­put of goods and ser­vices, that has ac­cel­er­ated in­fla­tion. While M2 may seem an ob­scure tech­ni­cal in­di­ca­tor, the fig­ure was rou­tinely pub­lished by news­pa­pers in Venezuela, whose oilde­pen­dent econ­omy has been dogged by in­fla­tion in the past.

Venezue­lans are forced to carry huge bun­dles of cash to make ba­sic pur­chases - if they can af­ford to do so given weekly price rises on many goods. This week also saw Venezuela’s black mar­ket ex­change rate surge past 10,000 bo­li­vars per dol­lar. When Pres­i­dent Ni­co­las Maduro came to power in April 2013, it was at 24 per dol­lar. A thou­sand dol­lars’ worth of lo­cal cur­rency then would be worth just over $2 now. Maduro says he faces an “eco­nomic war” waged by the op­po­si­tion and Washington. The last year for which of­fi­cial in­fla­tion data is avail­able from the cen­tral bank is 2015, when con­sumer prices rose 181 per­cent.— Reuters

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