When the new banknotes expressed in “Bolívares soberanos” were announced, it was decided that the current notes would cease to be legal tender the same day the new notes are issued, June 4.
The release of the new notes was later postponed until August 4, which may or may not happen, because these apparently have not yet arrived to Venezuela, which may indicate problems with the printers.
By the time they do arrive these may be practically worthless because of the galloping inflation. When this is written the free market rate is almost 1,900,000 bolívares fuertes per dollar, which makes the largest of the new notes being worth only 26 U.S. cents. Obviously, since the new notes have not yet been issued, a solution to the problem would be setting a new conversion ratio between the new unit and the old. Instead of one VES being worth VEF 1,000 it could be changed to VEF 100,000. At the current free market rate it seems that the printing cost in real terms exceeds the face value of the new notes.
In the meantime the Banco Central de Venezuela has decided yesterday that instead of retiring the old notes at the same time the new ones are issued, both could co-circulate for some time.
Source: Noticias al dia y a la hora
©2018 Monetary Research Institute
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