MARACAIBO, Venezuela (Reuters) – Venezuelan President Nicolas Maduro has refused to recognize the country’s hyperinflationary problem and has no plan to address it, a former finance minister, who served under the late socialist leader Hugo Chavez, said in an interview.
Venezuela’s President Nicolas Maduro holds a bank note of the new Venezuela’s currency Bolivar Soberano (Sovereign Bolivar) as he speaks during a meeting with ministers at Miraflores Palace in Caracas, Venezuela July 25, 2018. Miraflores Palace/Handout via REUTERS
The South American nation’s annualized inflation topped 46,000 percent in June, and the IMF estimates it will surge to 1 million percent by the end of the year as the socialist economic system continues to unravel.
Maduro, who says his country is the victim of an “economic war,” this week said the government was cutting five zeroes off prices, a move that critics say will do nothing to rein in soaring prices or ease chronic shortages of food and medicine.
“Ending any hyperinflation requires a monetary program, Venezuela will not escape it through rhetoric,” said Rodrigo Cabeza, who during his term as minister led an effort to remove three zeros from the country’s currency.
“What the government needs to realize is that hyperinflationary situations are created by governments,” he said, adding that indicates the root problem is indiscriminate expansion of the money supply.
Cabeza was named finance minister in 2007, at a time when rising global oil prices were swelling the OPEC nation’s coffers and allowing Chavez to provide generous subsidies for the poor and to finance imports of consumer goods.
The 2014 collapse of oil prices left the country unable to maintain that system, with the economy in free fall and Venezuelans increasingly emigrating to escape the crisis.
Cabeza comments come in the run-up to a congress of the ruling Socialist Party that starts this weekend, in which Maduro has promised to discuss new measures to improve the economy.
“There is no professional management of Venezuela’s economic policy,” said Cabeza, who says he has distanced himself from the Socialist Party’s leadership.
Venezuela stopped publishing inflation figures three years ago. Maduro says opposition businesses leaders are arbitrarily increasing prices as a way of undermining his government.
Writing by Corina Pons and Brian Ellsworth; Editing by Bernadette Baum