Considering the rising budget deficit, Venezuela had no better option but to devalue its currency by 32% against dollar. It has been confirmed by cancer-stricken President Hugo Chavez that the bolivar would go from 4.3 to the dollar to 6.3 under the official exchange rate.
The announcement was made during a press conference by Planning and Finance Minister Jorge Giordani on Friday. It is expected that it would be able to reduce expenditure, while maximizing results. This would also mean that exports would become cheaper and hence more and more buyers would get attracted to the market.
With budget deficit reaching the mark of 10% of GDP, it is expected that devaluing currency would be able to provide the much needed breather to the economy in near future.
It is to be noted that the economy had grown by 5.5% last year and inflation was seen at shocking 20% in the same year. Venezuela being the South America's largest oil exporter, has known to have the world's largest proven reserves.
Moreover, this move has not gone down well with opposition as Henrique Caprilles, has shown his dissatisfaction over the announcement made, which might badly affect already rising inflation. It would be worth seeing how this measure would be able to change economic story of the country.
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