In a televised-address on February 17, Venezuelan President Nicolas Maduro delivered some crushing news to his country.
To address the fiscal crisis facing the country, the government decided to raise fuel prices by more than 6,000 percent. While that may sound dramatic, it will still leave Venezuela with some of the cheapest fuel in the world. Prices for 95 octane gasoline at the pump will jump from 0.097 bolivars to 6 bolivars. It was the first increase in fuel prices in 20 years.
Also, Maduro devalued the currency, shifting the official exchange rate from 6.3 bolivars per dollar to 10. That rate will remain fixed while a second exchange rate will float. The black market rate is wildly disconnected from the official exchange rate, with one dollar fetching as many as 1,000 bolivars as the world’s worst inflation takes its toll.
“This is a necessary measure, a necessary action to balance things, I take responsibility for it,” Maduro said in his televised speech.
The moves are an acknowledgement that Venezuela’s economic crisis is growing worse. Oil accounts for 95 percent of the country’s export revenue, and with Venezuela’s benchmark crude price down below $30 per barrel, the country’s resources are draining fast.
Perhaps the most damning statistic that President Maduro presented in his five-hour televised address was this: the state-owned oil company PDVSA only took in $77 million for the central bank in January, which is a shocking fraction of $815 million earned in January 2015, which, in turn, was down from $3 billion in January 2014.
Full article: Venezuela Raises Fuel Prices By More Than 6,000 Percent (OilPrice)