Why People in Venezuela Rely on U.S. Dollars?

Venezuela is struggling to cope with economic problems. Its currency bolivar is unstable. So, it is not surprising that many people in Venezuela’s capital Caracas prefer not to use it. Many of them are paying for food, medicine, and services in U.S. dollars. 

A report prepared by Anova Policy and the Venezuelan Finance Observatory contains many interesting details. They gathered data from 354 establishments in Caracas. The study found that 34.3% of foreign-currency cash payments accounted for 34.3% of purchases made this month in supermarkets, pharmacies, hardware stores, and other businesses, up from 27.5% in December. 

According to the report, remaining payments in foreign currency were made with cards or via bank transfers. 

Dollars and the country’s economy

The amount of foreign currency in circulation rose since the country’s government relaxed economic controls in 2019. President Nicolas Maduro’s government wanted to help businesses suffering from U.S. sanctions and economic turmoil. 

The report said transactions in the country’s currency continued, even as high inflation eroded its value. The government of Venezuela is hoping to strengthen the bolivar after inflation slowed late last year. It is considering taxing foreign currency transactions, even though analysts and business leaders say such tax would not guarantee the bolivar’s recovery. However, many people still prefer to pay for various goods and services in U.S. dollars.

U.S. dollar and the Russian ruble

On Wednesday, the Russian rouble declined, reversing gains made the previous day and heading back towards 80 to the dollar.

The rouble dropped 0.9% against the U.S. dollar to 79.51 by 10:45 GMT. Moreover, the Russian currency lost 0.9% to trade at 90.23 against the euro. 

The United States, Britain, Australia, Canada, Japan, and the European Union responded to Vladimir Putin’s recognition of separatist enclaves in the Donbas region of Eastern Ukraine. They plan to impose sanctions on banks and elites while Germany froze Russia’s major gas pipeline project.