Venezuela’s Central Bank Stats Show Cash in Short Supply

Ordinary people’s difficulty in getting paper money leads to long lines and more electronic transactions.

By Cira Pascual Marquina
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In Venezuela cash can be purchased paying commissions of 100 to 300 percent. (Archive)
In Venezuela cash can be purchased paying commissions of 100 to 300 percent. (Archive)

Caracas, June 19, 2018 (venezuelanalysis.com) – Recent statistics from Venezuela's Central Bank (BCV) show a radically accelerated growth of the country’s monetary base without a corresponding expansion of its cash supply. The data backs up the reality of cash shortages which Venezuelans have experienced in recent years.

Today the country’s ratio of cash to total money supply -- including circulating cash, reserves, and both public and private bank deposits -- is merely 1.8%. The proportion is the lowest in twenty years. The figure lay between 10 to 12 percent in 2015 before the serious cash-flow shortages began and dropped to 7 percent one year ago.

BCV statistics show the total amount of cash in Venezuela on June 1 this year to be 23 trillion Bolivars, whereas the monetary base reached more than 1200 trillion Bolivars. Experts claim that the ratio of cash to monetary base in a country should not fall below 15 percent, which is thirteen points above Venezuela’s current level.

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Venezuela’s monetary base grew 58,825.8% between January 2013 and March 2018. (BCV data/BancayNegocios)
Venezuela’s monetary base grew 58,825.8% between January 2013 and March 2018. (BCV data/BancayNegocios)

These official statistics reflect what people experience daily in the streets of Venezuela. It has become extremely difficult to acquire enough cash to pay for common goods or services, such as transport, food or parking, which often don’t offer the option of digital or electronic card payments.

To acquire cash, ordinary Venezuelans often have to queue in long lines at the banks -- sometimes visiting more than one a day due to the low withdrawal limits and frequently beginning the process at 3 or 4 am -- or buy cash using their credit cards. Although illegal, this kind of transaction is normally accompanied by commissions of 100 to 300 percent.

Elysa Perez, a retired schoolteacher in a bank queue in Caracas’ Parque Central, told Venezuelanalysis that she sometimes will “stand for hours at the teller’s line.”

Common goods such as eggs and cheese can often be purchased at half the marked price when paid in cash, meaning that the money “goes twice as far” as Perez put it.

However, due to the difficulties of acquiring cash, Venezuelans increasingly rely on debit and credit cards that they use in the countries’ cramped digital terminals, which are often hindered by power outages or collapsed electronic platforms.

The government blames this chronic lack of cash on conspiracy and sabotage, with its spokespeople pointing to the accumulation of Bolivars on the frontier with Colombia. Mafias in this region warehouse huge quantities of Venezuelan bills, which are allegedly used in illicit transactions including currency washing and smuggling.

By contrast, nonofficial voices such as economist Carlos Maldonado argue that the root of the problem is the government's monetary policy.

“The generating of inorganic money by the government goes forward at the same pace as the hyperinflation, but what is really falling behind is the printing of physical bills and change,” Maldonado said. “These bills, which have less value and are seen less every day, are what is really needed by Venezuelans,” he added.

Since April, the Venezuelan government has been planning a monetary redenomination which will lop three zeros off the currency. Originally planned for June, the date for implementing the measure has been recently postponed to August 4.

President Nicolas Maduro argues that the redenomination will help combat inflation. However, many economists are sceptical and claim that the measure must be accompanied by a series of other policies for it to be a success.

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The relation between cash and total liquidity. (BCV data/BancayNegocios)
The relation between cash and total liquidity. (BCV data/BancayNegocios)