(Reuters) – Venezuelan President Nicolás Maduro said on Sunday that dollar transactions, which have been growing in the country in recent months, are an “escape valve” that could help the economy in recession, amid U.S. sanctions and ongoing currency controls.
The official currency, the bolivar, has depreciated more than 90% this year, while hyperinflation in the first nine months of the year clocked in at 4,680%, according to the central bank. The runaway inflation has reduced the purchasing power of the minimum wage, which together with food assistance, is equivalent to about $10 per month.
“I don’t see it as a bad thing… this process that they call ‘dollarization.’ It can help the recovery of the country, the spread of productive forces in the country, and the functioning of the economy…Thank God it exists,” Maduro said in an interview broadcast on the television channel Televen.
The president, who at least until 2018 forbid the use of the dollar, added that he is evaluating transactions in dollars, but that the official currency, which will continue to circulate in the country, will be the bolivar.
Since 2003 the official exchange rate has been set by Venezuela’s central bank, but in the past year, that rate has become more flexible.
“There are people who criticize it, no no, here, Venezuela will always have its currency … we will always have the bolivar and we will recover it and we will defend it,” he said in an interview with José Vicente Rangel, a leftist politician and vice president during the government of Hugo Chávez.
Under more severe U.S. sanctions, the central bank has started injecting euros in cash into the economy through banking, which has doubled in recent weeks. Even the government and PDVSA pay contractors with the European currency. The foreign currencies enter the economy largely from the sale of some shipments of crude oil and gold.
Recently, Caracas-based consultancy Ecoanalitica estimated 53.8% of transactions in the first 15 days of October were carried out in dollars, according to a sampling of the country’s seven main cities. That number reached 86% in the oil-rich city of Maracaibo, which has been badly hit by power cuts.
Venezuela faces a deep economic crisis, which has generated a humanitarian crisis and a forced migration of over 4 million Venezuelans, according to UN data.