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Oil report

Venezuela orders banks to sell dollars from fuel sales to forex market

CARACAS, June 18 (Reuters) - Venezuela’s central bank has ordered local banks to sell dollars received through gasoline sales to the government’s foreign-exchange system to boost supply of hard currency to the cash-strapped economy, three sources familiar with the requests said.

Following decades of subsidizing gasoline so heavily that it was nearly free, Venezuela this month launched a new system under which some service stations charge international prices for fuel and some drivers pay in greenbacks.

As service stations have started depositing these dollars in local banks, the central bank has asked the banks to sell the dollars on the government’s foreign-exchange market, the sources said.

It was not immediately evident how much hard currency the service stations were handling.

The central bank, oil ministry and state oil company PDVSA did not respond to requests for comment.

Central bank representatives have also urged the banks to direct dollars they earn from the use of foreign credit cards into the official forex market. The government of President Nicolas Maduro last year authorized the use of foreign credit cards as part of a broader easing on currency restrictions.

The move comes as Maduro’s government scrambles for workarounds to get hard currency into an economy hurting for cash due to low oil production and U.S. sanctions.

Boosting the supply of dollars could stabilize the exchange rate and control inflation, which the central bank registered at 295.9% in the first five months of the year. During that period, the amount of dollars and euros deposited into the banking system fell by 68.6%, according to local firm Ecoanalitica.

In 2019, Venezuela allowed local banks to open foreign currency trading platforms as part of a loosening of the OPEC nation’s exchange controls.

Fuel shortages have plagued Venezuela for years as its economy deteriorated due to a plunge in the price of crude, its main export. They grew more acute this year after a near-complete collapse of refineries.

Maduro launched the new gasoline system after receiving five shipments of fuel from Iran, another U.S. adversary whose oil sector is under sanctions by Washington. (Reporting by Mayela Armas and Corina Pons in Caracas Writing by Sarah Kinosian Editing by Matthew Lewis)

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