May 29, 2018 / 8:38 PM / a year ago

UPDATE 1-Inflation-stricken Venezuela postpones currency overhaul

(Adds Maduro quote, background on currency plan)

CARACAS, May 29 (Reuters) - Venezuelan President Nicolas Maduro said on Tuesday he would postpone an overhaul of the national currency to remove three zeroes from the bolivar after banking industry leaders requested more time to ensure cash transactions may proceed.

Maduro had said the government on June 4 would remove three zeros from prices and print new bank notes in response to inflation that has made it nearly impossible to obtain cash and left millions of Venezuelans struggling to find basic foodstuffs.

“I agree with a period of 60 days,” Maduro said in a televised meeting with banking industry leaders in the presidential palace, adding that the period could be extended to 90 days. “This monetary ‘reconversion’ is very much needed by Venezuela.”

He also said new bolivar notes would coexist with old notes during the monetary overhaul.

Critics had accused Maduro of rushing the plan through, noting that the new bank notes were not ready yet. Some feared a repeat of the protests and looting of December 2016 when Maduro abruptly eliminated the largest bolivar note in circulation.

Consumer protection agency Sundde on Monday warned businesses not to halt or slow operations as the monetary overhaul went into effect.

Venezuela’s annual inflation is now close to 14,000 percent, according to the opposition-controlled legislature, as the country’s socialist economic system spirals downward.

Cash is in short supply because new banknotes have not been printed fast enough to keep up with price increases, spurring a growing use of cellular phone apps for financial transactions.

Late socialist leader Hugo Chavez in 2008 carried out a similar so-called monetary conversion that removed three zeroes from the currency.

But the has bolivar depreciated by 99 percent since Maduro took office in 2013, while unchecked expansion of the money supply has give the country’s the world’s fastest rate of inflation.

Economists say shedding three zeroes from the currency is a palliative measure that would need to be repeated unless Maduro makes deep reforms to the country’s dysfunctional currency controls and excessive money creation.

“It’s hyperinflation that’s the problem, not the bills,” tweeted opposition lawmaker Carlos Valero.

Maduro, who portrays the country as the victim of an “economic war,” has in the past accused adversaries of stealing the country’s bills and smuggling them to neighboring Colombia. (Reporting by Brian Ellsworth and Corina Pons; writing by Angus Berwick, editing by G Crosse Editing by Alexandra Ulmer)

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