WRAPUP 1-Venezuela raises fuel price, devalues bolivar amid crisis

miércoles 17 de febrero de 2016 19:39 GYT
 

(Adds details on devaluation, context on fuel prices)

By Brian Ellsworth and Girish Gupta

CARACAS Feb 17 (Reuters) - Venezuelan President Nicolas Maduro on Wednesday devalued the currency and raised heavily subsidized fuel prices in an effort to stem a widening economic crisis, though critics of the socialist leader quickly dismissed the moves as insufficient.

The measures are meant to help shore up the OPEC nation's finances as plummeting oil prices and a collapsing state-led economic model have left the country with a severe recession, triple-digit inflation and chronic product shortages.

"This is a necessary measure, a necessary action to balance things, I take responsibility for it," Maduro said, in reference to the fuel hike during a combative four-hour speech in which he insulted opposition leaders and occasionally used foul language.

The reforms risk fueling triple-digit inflation at a time when millions are struggling to make ends meet, and comes two months after the ruling Socialist Party suffered a blistering defeat in parliamentary elections due to anger over the crisis.

The package will likely be seen by Wall St. investors, who are increasingly concerned about a potential default, as mildly positive but still vastly insufficient to help Venezuela make some $10 billion in debt payments amid a major cash crunch.

"Bottom line is no change to cashflow for this year and hefty year end debt payments," wrote Siobhan Morden of Nomura in an email.

The measures devalue the strongest official exchange rate by 37 percent to 10 bolivars per dollar from 6.3, and streamline the previous three-tiered system into a dual exchange rate mechanism. The weaker of the two rates will be a free float based on an existing system that currently sells dollars at around 200 bolivars, Maduro said.   Continuación...