Inflation in Venezuela!
News has come through that the Venezuelan crisis has just become worse. Venezuela has only $10.5 billion worth foreign reserves and the money is fast running out. As of today Venezuela has outstanding debt payments of $7.2 billion.
The country had $30 billion worth foreign reserves in 2011, then $20 billion in 2015. So its financial reserves are getting lesser and lesser every year and right now, the nation is on its last legs. There is a fear that Venezuela might completely run out of cash.
How much worse can the crisis in Venezuela get? What is the bottom? Is there a bottom? Siobhan Morden of Nomura Holdings, an expert on Venezuela, says, “The question is: Where is the floor? If oil prices stagnate and foreign reserves reach zero, then the clock is going to start on a default.”
The country has resorted to desperate measures to make its debt payments. For example, Venezuela shipped goal to Switzerland to release its gold reserves to the foreign market.
There are massive food shortages in the country, and the medical situation is getting worse. The humanitarian crisis is getting so desperate that unless other countries get involved and do something about it, there seems to be no solution in the present moment.
Inflation in Venezuela has risen to over 1,660 percent and things are becoming really bad. Grocery prices are so high that a significant section of the population is surviving on less than 2 meals a day.
The reason there is such a crisis in Venezuela is clear. Massive spending by the government on various badly thought out socialist policies, a fast declining national currency and a complete neglect of the nation’s infrastructure. Corruption, which has always been a way of life in Venezuela, has become far worse than ever before.
The inflation – already astronomical at 1,660%, is set to get worse, to 2,880% by 2018, as per recent estimates put out by the IMF.
Venezuela is mainly an oil producing country and 90 percent of its total exports are comprised of oil shipments. Over the last 3 years the price of oil has been in a steady decline. This has hurt Venezuela more than any country in the world, given how critical the price of oil is to Venezuela’s economic prospects.
Venezuela has found it very difficult to pay its debts, and pay for basic essentials such as food and medicine. The nation’s imports are down by 50 percent from just a year ago.
But what can be done? People are suffering very badly in Venezuela. Many have been foraging garbage bins, looking for leftovers discarded by others.
Hunger has become such a major problem that over the last 12 months, the average weight of the population has dropped by 19 pounds – this phenomenon is called as the Maduro Diet, after the infamous leader of Venezuela, Nicolas Maduro, who most people blame for their troubles. One can only hope for a miracle for the sake of the long suffering people of Venezuela.
Author: Raghav Hegde – India
source photo: pinterest