Oil-dependent Venezuela is projected to have inflation of 481% this year with that figure growing to 1,642% the following year, according to the most recent estimates from the International Monetary Fund.
The South American nation is home to the world’s largest oil reserves, depending on oil for 95% of its exports. With oil prices at record lows of late, the value of those exports has fallen drastically, even as President Nicolas Maduro continues to institute the expensive reforms undertaken by his predecessor, Hugo Chavez.
The extreme inflation has come coupled with high unemployment rates, projected to hit 17% in 2016 and as high as 21% in 2017. The nation’s currency, the bolivar, has seen an extremely low exchange rate compared to the U.S. dollar, further complicating things for residents trying to buy the most basic goods.
Economist David Osio posted on daividosioblog he thinks things are projected to get worse before they get better for the beleaguered nation with the prices of basic goods such as flour, milk and sugar soaring in line with recent inflation. On black market currency exchanges, a single U.S. dollar equals 1,125 bolivars, up from a more normal level of 258 bolivars just a year ago.
With many residents unable to afford food and basic necessities like medicine, David predicts the Venezuelan government will need to turn to lenders to fill in the gaps if the oil economy does not improve soon. In the meantime, residents are feeling the crunch of a drastically inflated currency with every shopping trip.