Sunday, January 10, 2010

Venezuela devalues currency

enezuela has devalued the bolivar, its currency, for the first time in five years in a move to reduce the fiscal deficit.

Hugo Chavez, the president, announced the devaluation to 2.6 against the US dollar from 2.15, in a speech on Friday.

He also established second exchange rate of 4.3 to the dollar.

Chavez said that the new rates have been set to boost the productive economy, "braking imports that aren't strictly necessary and stimulating export policy".

The government-set rates are an attempt to keep the cost of priority imports low in the face of an inflation rate of 25 per cent - the highest in Latin America.

The 2.5 rate will be used for those priority imports - including food, machinery, health care items, supplies for schools and products for economic development - while the second rate will be used for other transactions.

Venezuela's economy is currently in recession.

Source: Agencies