Inflation crisis in Venezuela: Macroeconomic

Perspectives

•Submitted by:
•Aniruddha R Batni 21067
•Guru Pranesh S 21077
•Naman Subha Shchandra Vora 21089
•R Srinivas Prasad 21100
•Swapnil Anand 21113
What is hyperinflation?
 Venezuela
Economy

• Largest crude oil reserves in

world
• With population of 2.8 Cr
Venezuela GDP stands at $44.89
Billion in 2022
• 95% of revenue coming from oil
exporting
• 2013 onwards economy started
collapsing & hyperinflation took
place in Venezuela
• GDP fell from $352 Billion Dollar
to $45.89 Billon in span of 7 years
What happened to Venezuela

• Venezuela country is located at the northern coast of South América and covers a land
area of 916,444 km² and is officially known as the Bolivarian Republic of Venezuela.
Venezuela has tremendously high biodiversity
• In 1830 Venezuela became a fully independent country and later faced Economic shocks
in the years 1980 and 1990 which lead to a series of political crises such .
• Venezuela was an underdeveloped exporter of agricultural commodities such as cocoa
and coffee but after the discovery of oil in the 20th century the country became the
world's top exporters of oil and is known for having the world's major oil reserves, hence
oil became the major part of government’s revenue and dominated the exports.
• The oil glut of the 1980s caused a crisis of external debt and lead to a long-term
economic downturn.
Forex Reserve
•Forex reserve are cash and
other reserve assets such as a
gold held by central bank
•In 2008 Venezuela saw
highest forex reserve of $32.6
bn USD
•Declining of forex reserve
shows imbalance between
economy and its stability
•Venezuela Gold reserve also
fell 7% percent due to US
sanctions in 2018
Café Con Leche Index

• The index just follows one thing: a cup of

hot coffee served in an eastern Caracas
bakery. Its value has risen by 2,651% in
the last year, from 1,00,000 Bolivars to
27,51,054 bolivars.
• Although the measure is not as
sophisticated as a conventional consumer
price index (CPI), it has its own merits: it is
tangible; it is regularly tracked; and, since
it measures a product that Venezuelans
use on a daily basis, it provides a rare up-
close look at inflation in the country.
 • Commodity Based Economy

Reasons for • Import Dependence

• National DEBT
hyperinflation • Forex Reserve Policies
• FDI Outflow
The Impacts of
Hyperinflation…….
GDP Unemployment

Govt Debt to GDP Crime Rate

Refugee Crisis Shortage

Protests Food & Water

2.2 kg Chicken - 14,600,000 bolivars / 2.2 USD 1 kg of rice - 2,500,000 bolivars

Toilet Roll - 2,600,000 bolivars.

3 Million bolivars 1 kg of tomatoes- 5,000,000 bolivars

Sanitary Pads- 3,500,000 bolivars 1 kg Cheese - 7,500,000 bolivars.

Diapers- 8,000,000 bolivars 1 kg meat - 9,500,000 bolivars.

Decisions taken to mitigate
• Devaluation of Currency
• New Bolivar
• Petro Currency

Venezuela Interest rate from 2014 to 2022

Currency usage in February 2020
Euros
and
Colom-
bian
pesos
28%
Bolivar
36%

Dollar
36%

Dollarisation Minimum Monthly wages

The way forward for Venezuela
•Here it is all about identifying the problems and identifying the key interventions aimed at
addressing the crisis as well as redirecting the country on the path of sustained and
inclusive economic growth.
• Addressing the Population’s urgent needs-
• Income and Support for Consumption
• Health
• Education
 Restoring Access to basic Services-
 
• Electricity
• Water
• Transportation 

Generate the institutional framework needed for reconstruction-

• Restoring a market economy

• Restoring the role of the financial sector.
• Facilitation of trade and investment.
• Rebuilding of state capacity.