IMF Says Venezuela Will Suffer 750% to 1200% Inflation

Venezuela has been economically embattled for some time, and the future does not appear any brighter. The International Monetary Fund (IMF) recently projected that the nation’s inflation rate will spike somewhere between 750% and 1200%.

Venezuela has been economically embattled for some time, and the future does not appear any brighter. The International Monetary Fund (IMF) recently projected that the nation’s inflation rate will spike somewhere between 750% and 1200%.

The Latin American nation’s problems have been caused by a combination of authoritarian socialism, gross mismanagement and corruption, and a general breakdown of law and order. The nation’s healthcare system has virtually collapsed, food shortages have occurred, and many other problems have threatened the country’s economic wellbeing.

The result: a dozen eggs now cost the equivalent of US$62, but are in such short supply it is often impossible to find them on store shelves. Black markets have developed for usually common and legal items, so that those same dozen eggs could cost as much as US$208. Some Venezuelans spend as much as half of their salaries each month simply procuring groceries.

As if this situation were not already bad enough, the IMF predicts that inflation will hit 720% growth this year. Worse, they say that level of increase may be optimistic, and that some analysts think it could go as high as 1200%.

Another problem is the nation’s lack of faith in its own currency. The official exchange rate for the Venezuelan bolivar is 10 bolivars to one US dollar. The Venezuelan people, however, have such little faith in their own currency or the government’s ability to recover from this economic crisis, that a single US dollar can often fetch more than 1000 Venezuelan bolivars. To put that in perspective, if someone took home the equivalent of $2,700 per month, the unwillingness to honor the national currency would cause that to equate to just US$27.

As a result, the most affordable goods are usually found in government stores where prices are regulated and the nation’s fiat currency is accepted at face value. Unfortunately, that leads to lines that people must queue up for overnight in order to get in before the store sells out of products. Similarly, theft is rampant, as those who do not make it into the store or cannot afford to pay for goods simply take what they need from others.

Some Venezuelans have been pushed so far that they must resort to picking through trash looking for food to survive. Many lack access to medical care, leaving them to suffer through chronic illness. The government has cut its own employees down to mere two-day workweeks in an effort to preserve funds.

Without taking radical steps, the nation’s economy will continue to collapse, as might its social and political establishment as well.