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A customer pays a mobile mechanic in US banknotes in Caracas on April 25. Photographer: Carlos Becerra/Bloomberg

Venezuela floods banks with dollars to contain bolivar’s drop

A customer pays a mobile mechanic in US banknotes in Caracas on April 25. Photographer: Carlos Becerra/Bloomberg

Venezuela’s central bank is boosting supplies of hard currency in the local market in an effort to contain a sharp drop in the value of the bolivar.

Shoppers wearing protective masks walk through the Coche market in Caracas, Venezuela, on Tuesday, March 31, 2020.

The monetary authority has sent $11.3 million and 2 million euros in cash this month for local lenders to sell to clients, on track to exceed the $15 million transferred in April, according to people familiar with the matter who asked not to be identified because they weren’t authorised to discuss it.

The cash injection is helping to reverse the bolivar’s slide in the parallel market that most Venezuelans use to access foreign currency. While the central bank routinely offers dollars and euros to local banks, it has increased its offerings since last year to rein in swings in the black market. The bolivar had fallen to a record low of 200,000 per dollar before rebounding 11 per cent to about 180,000 per dollar as of Wednesday.

A box full of Bank Notes of 100 Bolivares displayed over a counter in desktop of a spare part business in the Great Caracas area on December 13, 2016.

Press officials for the central bank didn’t reply to requests for comment.

President Nicolas Maduro’s government is trying to bolster the local currency after pouring new bolivars into the economy this year as a nationwide quarantine brought Venezuela’s frail economy to a standstill. While printing bolivars can help alleviate immediate crises, the practice also fuels inflation and undermines the value of the local currency.

The Venezuelan regime has gone to great lengths to maintain access to dollar and euros — like flying in bills worth hundreds of millions from Russia — as US sanctions leave the regime isolated from conventional financial systems. It has also used secret gold sales to raise funds, most recently shipping $500 million worth of gold to Iran.