Venezuela to remove five zeroes from ailing currency

In this file photo taken on June 20, 2018 a man counts 1000-Bolivar-bills to buy groceries at the municipal market of Coche, a neighbourhood of Caracas. (AFP)
Updated 26 July 2018
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Venezuela to remove five zeroes from ailing currency

CARACAS: Venezuela will remove five zeroes from the bolivar currency rather than the three zeroes originally planned, President Nicolas Maduro said on Wednesday, in an effort to keep up with inflation projected to reach 1 million percent this year.
The OPEC nation’s economy has been steadily collapsing since the 2014 crash of oil prices left it unable to maintain its socialist economic system that for years provided lavish subsidies while enforcing strict price controls.
Annual inflation in June topped 46,000 percent, according to the opposition-run Congress. The IMF said this week it could hit seven digits this year, putting it on par with the crises of Zimbabwe in the 2000s and Germany in the 1920s.
“The monetary reconversion will start on Aug. 20,” Maduro said in a televised broadcast, showing new bills that are to be released next month.
He said the overhaul would tie the bolivar to the recently launched state-backed cryptocurrency called the petro, without offering details.
Cryptocurrency experts have said the petro suffers from a lack of credibility because of a lack of confidence in Maduro’s government and the mismanagement of the country’s existing national currency.
The government has said it is the victim of an “economic war” led by opposition leaders with the help of Washington, which last year levied several rounds of sanctions against Maduro’s administration and a group of top officials.
The country’s high inflation rate has made it nearly impossible to obtain cash.
Venezuela’s minimum wage is now about the equivalent of $1 a month, which has left citizens across the country unable to eat properly or obtain basic medical care — fueling an exodus of Venezuelans seeking to escape the economic crisis.
The government had been prepared to cut three zeroes off the currency in June but postponed the measure at the request of banking industry leaders who said the financial system was not ready for the measure.
Maduro on Wednesday proposed an overhaul to the currency crimes law in order to improve the flow of foreign investments.
Economists routinely identify the exchange controls as a major hindrance to economic growth. The issue will be taken up by the country’s all-powerful Constituent Assembly, Maduro said.
He also said he was transferring a concession bloc of the vast Orinoco heavy oil belt to the central bank, which he said would help shore up the bank’s international reserves.


China opens up finance sector to more foreign investment

Updated 20 July 2019
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China opens up finance sector to more foreign investment

  • China will remove shareholding limits on foreign ownership of securities, insurance and fund management firms in 2020
  • Beijing has long promised to further open up its economy to foreign business participation and investment

BEIJING: China lifted some restrictions on foreign investment in the financial sector Saturday, as the world’s second largest economy fights slowing growth at home and a damaging trade war with the US.
China will remove shareholding limits on foreign ownership of securities, insurance and fund management firms in 2020, a year earlier than originally planned, the Financial Stability and Development Committee said in a statement posted by the central bank Saturday.
Foreign investors will also be encouraged to set up wealth management firms, currency brokerages and pension management companies, the statement said.
Beijing has long promised to further open up its economy to foreign business participation and investment but has generally dragged its feet in implementing the moves — a major point of contention with Washington and Brussels.
Saturday’s announcement followed a Friday meeting chaired by economic czar Liu He where policymakers focused on tackling financial risk and financial contagion and pledged new steps to support growth, according to a state council statement.
Additional measures include scrapping entry barriers for foreign insurance companies like a requirement of 30 years of business operations and canceling a 25 percent equity cap on foreign ownership of insurance asset management firms.
Foreign owned credit rating agencies will also be allowed to evaluate a greater number of bond and debt types, the statement said.
US President Donald Trump has launched a damaging tariff war in an attempt to force Beijing to further open up its economy and limit what he calls its unfair trade practices.
The US and China have hit each other with punitive tariffs covering more than $360 billion in two-way trade.
Trump and Xi Jinping agreed to revive fractious trade negotiations when they met on the sidelines of the G20 summit in Japan on June 29 and top US and Chinese negotiators have held phone talks this month.