If anyone still doubts that Venezuela’s economy has taken a disastrous plunge under the government of Nicolás Maduro, they should read the forecast from the International Monetary Fund (IMF) released on Monday. Needless to say, it’s not a rosy picture.
The IMF projects annual inflation in Venezuela to reach 1 million percent by the end of 2018. That’s hard to comprehend, but very likely.
According to the agency, the fiscal deficit in Venezuela will continue to be “financed entirely by the expansion of the monetary base,” that is, through the issuance of bolivars. In other words, President Maduro will print more banknotes and possibly artificially raise minimum wages, without the backing of a healthy economic performance.
That’s because, under Maduro’s delusional reality, he insists on ignoring that the Venezuelan economy is a ruin. Never mind, that the IMF has already warned that for this year there is fear of an 18 percent drop of the Gross Domestic Product (GDP). That decline is largely due to the reduction of oil production.
Thanks to the crazy policies of Hugo Chavez’s successor, the country with the largest hydrocarbon reserves in the world today is impoverished and dependent on precarious commercial deals to keep afloat what is left of its economy.
The economic collapse has created a dire shortage of food, medicine and basic products. This has forced Venezuelans into poverty – in a country that was once one of the most prosperous in the hemisphere. In the last two years alone, this crisis has also caused the exodus of 1.6 million Venezuelans – many of them to South Florida. Not to mention that the collapse of Venezuela’s economy also has a considerable effect on it neighboring countries.
According to the Colombian authorities, more than one million Venezuelans have fled to their country. And in the last two years, Peru has received more than 350,000 refugees from the disastrous policy that Maduro carries out. The situation in Venezuela is unsustainable, and its repercussions reach a large part of the continent. The nearby countries, especially Colombia, are making great efforts to welcome immigrants, but if the exodus continues they will need international help.
To get out of this crisis, several economists have pointed out that the Venezuelan government should encourage oil production and respect private business activity to help ease the scarcity of basic necessities. It also needs to soften monetary controls to achieve an exchange rate that does not distort the economy. With these measures, the economic crisis could be eased gradually. However, Maduro is not inclined to take the path of reason. The government tries to stop the uncontrolled rise in prices with more controls and audits. But the result of these restrictive measures has been an increase in the scarcity and cost of consumer products.
The inflationary spiral will cause a greater degree of desperation among the population, an increase in emigration to neighboring countries and possibly an increase in criminal activity, now among the highest in the region. Maduro has failed as a leader. He doesn’t listen to reason, he doesn’t listen to advice, he doesn’t want dialogue, he represses the opposition and he does not accept the reality that the formulas he has applied are failing. The solution to the crisis will only come when Maduro leaves the Miraflores Palace.
Meanwhile, the IMF’s forecast of an annual hyperinflation of one million percent hangs over Venezuela as an ominous cloud on the horizon