CARACAS: Venezuela said it was devaluing its currency by 32% 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 Friday at a press conference by the Planning and Finance Minister Jorge Giordani.
He said it will take effect on Wednesday. The goal was to “minimise expenditure and maximise results.”
One effect of 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% of the gross domestic product (GDP).
The economy grew 5.5% last year and inflation was 20%. 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.
Published in The Express Tribune, February 10th, 2013.
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