Venezuelan government to launch sweeping economic reforms, which are unlikely to stave off crisis

Massive Venezuelan economic reforms, including a new currency, will come into effect today in an effort to combat the nation’s escalating hyperinflation.

Venezuela’s financial woes are rooted in its reliance on oil production, which accounts for 96% of the country’s revenue and has fallen to a 30-year low. Sanctions and a cash-strapped government has led to skyrocketing inflation, which the IMF predicts will hit one million per cent by this year’s end.

The new currency, dubbed the Sovereign Bolivar, is based on the country’s cryptocurrency, which in turn is tied to the price of a barrel of oil—about $60. This is a devaluation of nearly 96% compared to the current Bolivar. The minimum wage will also be hiked from just 50 cents monthly to nearly $30—a staggering increase which economists predict will throw thousands more into unemployment.

In the short-term expect businesses to close as they find it impossible to pay the minimum wage. As a result, people will likely be forced to emigrate to surrounding countries, thus worsening regional stability. Additionally, the reforms fail to address root problems, such as corruption and fiscal indiscipline. As such, expect hyperinflation to continue, causing even the long-term to look grim.