Hyperinflation Catastrophe

In Venezuela, worthless bolivares litter the streets,  tangible evidence of the hyperinflation that has plagued the nation since 2016. This year, with increased U.S. sanctions and military threats, the inflation crisis has reached new heights. According to the Venezuela Finance Observatory, annual inflation in April alone reached 229 percent, more than double the 94 percent average in 2024. 

The International Monetary Fund (IMF) provides a conservative estimate of a 270-percent inflation rate by the end of the year; however, local economists predict it could exceed 400 percent and even reach 530 percent. On average, the bolivar loses 13 percent of its value each month. Venezuelan economist José Guerra warns that the country is “on the brink of a second wave of hyperinflation.”

Origins of the Crisis

The economic catastrophe began in 2016, when plummeting global oil prices combined with misguided government policies. With oil production as the backbone of Venezuela’s economy, the lack of foreign currency inflow drained the Venezuelan Central Bank’s reserves. As a result, the government printed more money. By May 2016, monetary liquidity exceeded 250 percent. 

Effects of Hyperinflation  

Though the population has turned to the U.S. dollar as a de facto currency, physical dollars are in increasingly short supply. Additionally, the cost of buying U.S. dollars has doubled since January. Digital dollar transactions are common, but the lack of cash has stalled physical markets. 

Even with government-issued bonuses and subsidies, the situation continues to deteriorate. Real wages for public-sector workers have dropped by over 70 percent since January, resulting in strikes across the country. Additionally, many shopkeepers and vendors trade at higher-than-official rates, so citizens have turned to the black market, where one U.S. dollar is worth 310 bolivars, as opposed to 217 on the official market. However, the price of meat on the black market has doubled in recent months and risen to $7-$8 per kilogram. 

The Future of Venezuela’s Economy

With economists predicting increasing inflation rates, the future of Venezuela’s economy is uncertain and the gap between official government reports and economic reality is growing. Though the government claims 7 percent GDP growth, both the IMF and independent analysts estimate it to actually be at 1-2 percent. The Central Bank stopped publishing official inflation data in October 2024, and authorities have started targeting individuals who independently track the crisis. In May 2025, at least 20 contributors to the Monitor Dollar platform, which reports real-time exchange rates, were arrested.