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Abu Dhabi, UAEWednesday 20 June 2018

Venezuelan city launches own currency to combat inflation

The "Elorza" bills can be traded in Elorza city near Colombian border

<p>Venezuela&#39;s bolivar banknotes, here at a vegetable market in Caracas, have been devalued through rapid inflation. Bloomberg</p>
<p>Venezuela&#39;s bolivar banknotes, here at a vegetable market in Caracas, have been devalued through rapid inflation. Bloomberg</p>

A Venezuelan city has started to issue its own currency to alleviate the hyper-inflationary cash crisis in the country.

The "Elorza" currency, with bills featuring the face of local independence leader Jose Andres Elorza, will be valid in Elorza city in western Venezuela, near the border with Colombia.

The bills are being sold in the municipality's offices to ensure that thousands of tourists and residents can trade, said mayor Solfreddy Solorzano, a member of the ruling Socialist Party.

Venezuela's national currency, the bolivar, has plummeted in recent years amid a crippling economic crisis and prices double nearly every month. This makes basics such as food and medicine unaffordable and in short supply.

On top of that, there are shortages of cash itself, making basic transactions impossible.

"People do not have bolivars to spend, so we created two denominations of notes," Mr Solorzano said, adding that up to two billion bolivars' worth of "Elorza" have been purchased - the equivalent of about US$9,000 (Dh33,057) at the black market exchange rate.

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Many Venezuelans earn the equivalent of just a dollar or two a month.

In December, a socialist collective in one of Caracas’ hilltop slums also launched its own currency, the panal, to try to overcome cash shortages. One note features the face of late president Hugo Chavez, who died in 2013.

The currency could be exchanged for rice that members of the community grew and harvested.

In Elorza, the mayor's office receives bolivars by bank transfer or debit card payment and, after discounting an 8 per cent commission, gives "Elorza" in exchange.

People will be able to return their tickets to the mayor's office to claim a bolivar-denominated refund.

President Nicolas Maduro blames the country's crisis on an "economic war" being waged by the United States and the opposition, aimed at toppling his government. Critics blame strict currency and price controls, and rapid money-printing.

The Central Bank has increased the total amount of currency in circulation by more than 50 per cent in the past month alone, though cash-printing has not kept up.

Mr Maduro says smugglers are also taking Venezuelan bolivar notes over to Colombia.