It just did.
With the situation in the country deteriorating faster than expected, the IMF has not got a much more severe prognosis, saying that Venezuela's hyperinflation is poised to shoot for the stars by year's end, reaching annualized rate of 1
The inflation rate is set to catapult the socialist Venezuela further to the list of a rogue's gallery of nations.
Venezuela's "one of the most severe hyperinflation situations that we have known since the beginning of the 20th century," said Robert Rennhack, deputy director of the IMF's Western Hemisphere Department.
According to a study by Steve H. Hanke, a professor of applied economics at Johns Hopkins University, Venezuela's inflationary spiral as of May ranked as the 23rd highest recorded. But it's quickly rising. The worst case scenario continues after World War II, when inflation ran so rampant that prices doubled every 15 hours. More recently, Zimbabwe in the late 2000s and the former Yugoslavia in the mid-1990s saw peaks to calculators to sort out snowballing rates.
Venezuela's inflation is soaring as the economy has broken down, failed socialist policies and a collapsing oil industry where it has gone down in the 1950s. In addition, President Nicolás Maduro – the anointed successor of Hugo Chávez, who died in 2013 – has sought to cling to power by destabilizing institutions, rigging the courts and, his critics say, stealing elections.
Bills of the near-worthless local currency, the bolivar, are incredibly scarce – with the government having a hard time even paying for the paper needed to print them. Rather than in cash.
Maduro has thrown a few attempted fixes at the proverbial wall to see what might stick. He even created a cybercurrency, the Petro, which is theoretically backed by oil supplies. But nothing has worked, in part because hyperinflationary spirals are not hard to stop once they start.
The most extreme solutions in the past have included abandoning local currencies. dollar. Yet such a move may be considered anathema in Venezuela, where Maduro has decried the United States as "the empire" to destroy his nation.
The country may be out of options, however. The inflation rate is so bad that Venezuelans are abandoning their nation in droves. An estimated 2 million will leave this year, bringing to 3.8 million the total who have left since 2016. A week ago, dishwasher soap cost 3,800.00 bolivares; today, it's 4,900,000. A kilogram of chicken – or 2.2 pounds – cost 3,300,000 last week; today's, 4,200,000.
Yaimy Flores, a 30-year-old Caracas housewife whose husband, a janitor, earns the minimum of 5,196,000 bolivares a month – worth about $ 3 at the black market rate of rice and a pound of cheese each month. They receive lentils, corn flour and a few other items via a government program.
"We now have a tiny bit of soap left," Flores said. "What we do is how much we should use. I do not know what our plan is when we finish that soap.
With hyperinflation soaring, Maduro has reason to worry. History indicates that bouts of hyperinflation can be hazardous to the health of dictators and strongmen, leading to revolutions, coups and other forms of ouster. But Venezuela's leader can also take cold comfort in the longevity of Zimbabwe's Robert Mugabe, who's clinging to power for a good decade after his country's epic battle with inflation, which shot up to find heights in 2007 ] The IMF may even underestimating the severity of Venezuela's hyperinflation. Ecoanalitica, a Caracas-based financial firm, predicts that the inflation rate will shoot well past 1 million, reaching 1.4 million by December.
For a country that was once South America's richest per capita, "it means a brutal cycle of impoverishment , "Said Asdrúbal Oliveros, director of Ecoanalitica. "For a majority of Venezuelans that depend on their jobs and do not have dollar savings or receive help from their family members abroad, at inflation like this one, that's more than 1 million, condemns them to poverty in a drastic way.
Rachelle Krygier contributed to this report.