Venezuela demonetises Bolivar 100 banknotes

To this end, President Maduro ordered the complete shutdown of the Colombian border in order to prevent the “mafias” from exchanging their illicit bills in Venezuela.

According to Venezuelan investigative news site Misión Verdad, up through last week 100 bolivar bills were being regularly bought and sold for as much as 140 bolivars in bills of lower denominations. Still, the biggest bill on the unofficial rate is still only worth $5.

Some Venezuelans are going to border towns in Colombia to exchange their currency, the bolivar, for US dollars or to spend their money – while they still can – in Colombia where food, toiletries and other basics are plentiful.

Critics slammed the move, which Maduro said was needed to combat contraband of the bills at the volatile Colombia-Venezuela border, as economically nonsensical, adding there would be no way to swap all the 100-bolivar bills in circulation in the time the president has allotted. According to the new rule banknotes and coins will be issued with values nearly 200 times the 100 bolivar note. On Thursday, authorities are due to start releasing three new coins and six new notes, which will range from 500 to 20,000 worth of bolivars.

Venezuela has banned the circulation of the country’s largest banknote, 100 bolivars, in a bid to fight “mafias” who have stashed billions of these currencies in Colombia.

The move did not come without criticism.

“I have made a decision to remove 100 bolivar notes (one dollar is equivalent in Venezuela to 4,254 bolivares fuertes) in the next 72 hours and allow a reasonable time period for those who have such notes to declare them before the public bank and before the Central Bank (Central Vank of Venezuela)”, he said. The 100 Bolivar bill will now be a coin, with the larger bills now allowing Venezuelans to carry more cash without needing hundreds of bills.

The huge shortage of toiletries led to many hotels asking guests to bring their own supplies. Card machines have also had problems in recent weeks, making bank transfers one of the few options to pay for food or any other items.

As in India, Venezuela’s demonetisation is likely to hit the country’s largely cash-based economy – already struggling as the country’s currency continues a dramatic slide on the currency markets.

The border closure comes as Maduro is trying to curb Venezuela’s galloping inflation and roll out a new range of bank notes after announcing on Sunday that the government would pull from circulation a 100-bolivar bill.