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Venezuela takes three digits off currency amid hyperinflation crisis

Venezuelan President Nicolas Maduro speaking next to gold ingots in Caracas on March 22, 2018.

Venezuelan Presidency handout/AFP/Getty Images

Venezuelans said on Friday they lacked confidence in President Nicolas Maduro's decision to knock three digits off the country's ailing bolivar currency amid soaring hyperinflation.

The measure to divide the bolivar by 1,000 will take effect from June 4, the leader announced on Thursday. New notes will be issued although there will be no change in the bolivar's value.

Critics said the move would have no impact on the crisis-wrecked economy and just covers up soaring prices and a collapsing currency.

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Millions in Venezuela earn just a dollar or two a month at black market rates and suffer food and medicine shortages. Prices rose more than 2,600 per cent in the last year, according to the National Assembly. There is a severe cash crisis.

"An authoritarian government does anything it wants. This is not going to stop inflation," said Jose Vasquez, 46, selling coffee at the exit of a subway station in the eastern part of Caracas.

The bolivar has fallen 99.99 per cent against the U.S. dollar on the black market since Maduro came to power in April 2013. A $100 purchase of bolivars then would now be worth just a single U.S. cent.

If inflation continues as it has over the last year, another redenomination will be required in 20 months.

"It's a cosmetic measure, which does not impact the bottom line," said local economist Asdrubal Oliveros.

"After a few months you will have to continue issuing new bills or decide to remove more zeros (from) the currency," added Oliveros.

Maduro blames Venezuela's economic crisis on Washington and the country's opposition. He faces re-election in May, though is likely to win against an opposition that has largely boycotted the vote.

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Central bank president Ramón Lobo told state television that the measure seeks to "attack inflation and reduce the shortage of cash."

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