Venezuela scraps largest-denomination banknote

13 December 2016

Venezuelans rushed to deposit bank notes or dump their cash savings yesterday, after president Nicolas Maduro announced that he would invalidate the country's biggest bill due to what he termed as an attack on the nation's liquidity.

The socialist leader shocked the country on Sunday with his announcement of the removal of the 100-bolivar note from circulation within 72 hours. The South American nation had, for months, suffered hard-cash shortage as inflation shot 500 per cent, which, according to Maduro was a product of an ''economic war'' and an attempt by his political foes to smuggle currency out of Venezuela.

Maduro claimed last evening, that he was ordering an ''inevitable, necessary, radical'' measure to close his country's border with Colombia for three days while authorities pulled the bills from circulation.

Higher-denomination bills are scheduled to be released this week, after the economy had already been hit by a massive recession marked by triple-digit inflation and rampant shortages of consumer basics.

According to a report by Torino Capital, a New York investment bank, the 100-bolivar notes accounted for over three quarters of Venezuela's cash outstanding and 11 per cent of the nation's money supply. 

According to Maduro, the withdrawal of the bill - worth just 2 US cents was needed to reduce contraband of the banknotes on the Venezuela-Colombia border.

According to state media the 100-bolivar note would be removed in 72 hours as of Tuesday, with new, higher-denomination bills due on Thursday.

Despite the heavy printing of 100-bolivar bills - 2.3 billion this year alone out of 6.1 billion in total, they continued to be in short supply. Also, Venezuela's unpredictable telecoms network meant card readers often collapsed.

Meanwhile, even as many business refused to accept 100-bolivar bills, or warned that they would only do so on Monday, poor people living day to day could not afford to reject cash.

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