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Tuesday November 29th, 2022

Venezeula Central Bank’s worthless notes made into handbags

AFP – Venezuela’s currency has lost so much value that people simply throw away their small bills — they are virtually worthless anyway.

Enter Wilmer Rojas, 25, who scoops them up off the street, uses an origami-like folding technique, a needle and thread to make handbags with an eye to selling them — maybe even abroad, where people have real money.

Rojas can use as many as 800 bills to make such a purse. And if you add up the face value of all that money, it’s enough to buy… half a kilo (one pound) of rice. Rojas and his wife have three kids to feed, and another is on the way.

"People throw them away because they are no good to buy anything. No one even accepts them anymore," Rojas told AFP outside a subway station, where he also sells coffee and cigarettes in addition to his unusual bag-weaving work.

Meanwhile, inflation in this oil-rich, cash-poor economy churns on and on: since August, the bolivar has lost 87 percent of its value against the euro.

Inflation this year is forecast by the International Monetary Fund to come in at a staggering 13,000 percent.

With two-, five- and 10-bolivar notes, "you can’t even buy a piece of candy," Rojas says, explaining how he used 400 such bills to make a smaller handbag. 

Rojas then points to a queen’s crown he made out of bolivar notes.

"Here there are about 50,000 bolivars, which is maybe enough for a pack of cigarettes," he explains.

– Play money –

Rojas says he learned his craft from another makeshift artist.

"You can use magazine paper or newspaper pulp, but currency notes are better because they are not worth anything, they are all the same size and you don’t have to waste time cutting them," Rojas said.

He hopes to start selling his creations soon. But he fears Venezuela’s economic crisis may foil his plans.

"Here, people barely have enough to put food on the table and are not going to shell out money for something that required a lot of work," he says.

In downtown Caracas, other hungry artisans are selling woven bags like these. They get as much as 300,000 bolivars for one of them. That will buy you a kilo of meat.

Economist Tamara Herrera said the fact that Venezuela’s currency is now used as play money is the maximum expression of how much value it has lost.

– ‘Venezuela devalued’ –

With 1,000 two-bolivar notes that nobody wants, Jose Leon, a 26-year-old designer, began a protest on Instagram in 2016 that featured doctored notes and the hashtag #venezueladevaluada, or devalued Venezuela.

Deadpool, the anti-hero in the Marvel comics, was the inspiration for his first work on currency notes, using his face to replace that of independence hero Simon Bolivar.

Leon has also drawn the faces of "Star Wars" characters over that of Bolivar and other famous Venezuelans pictured on the notes.

Leon’s customers live abroad and pay him up to $20 per piece of "money art."

"With a bit of Wite-Out and some pens, I can raise the value of the currency by nearly 5,000 percent," Leon said at his workshop in San Cristobal, a city on Venezuela’s border with Colombia.

Leon is doing well with his art. But Rojas is still struggling to make money — in the meantime, he is using notes to make a carnival costume for his daughter.

"These things are no good for buying anything. At least I am putting them to good use rather than throwing them away," said Rojas.

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A new Sri Lanka monetary law may have prevented 2019 tax cuts?

ECONOMYNEXT – A new monetary law planned in 2019, if it had been enacted may have prevented the steep tax cuts made in that year which was followed by unprecedented money printing, ex-Central Bank Governor Indrajit Coomaraswamy said.

The bill for the central bank law was ready in 2019 but the then administration ran out of parliamentary time to enact it, he said.

Economists backing the new administration slashed taxes in December 2019 and placed price controls on Treasuries auctions bought new and maturing securities, claiming that there was a ‘persistent output gap’.

Coomaraswamy said he keeps wondering whether “someone sitting in the Treasury would have implemented those tax cuts” if the law had been enacted.

“We would never know,” he told an investor forum organized by CT CLSA Securities, a Colombo-based brokerage.

The new law however will sill allow open market operations under a highly discretionary ‘flexible’ inflation targeting regime.

A reserve collecting central bank which injects money to push down interest rates as domestic credit recovers triggers forex shortages.

The currency is then depreciated to cover the policy error through what is known as a ‘flexible exchange rate’ which is neither a clean float nor a hard peg.

From 2015 to 2019 two currency crises were triggered mainly through open market operations amid public opposition to direct purchases of Treasury bills, analysts have shown.

Sri Lanka’s central bank generally triggers currency crises in the second or third year of the credit cycle by purchasing maturing bills from existing holders (monetizing the gross financing requirement) as private loan demand pick up and not necessarily to monetize current year deficits, critics have pointed out.

Past deficits can be monetized as long as open market operations are permitted through outright purchases of bill in the hands of banks and other holders.

In Latin America central banks trigger currency crises mainly by their failure to roll-over sterilization securities. (Colombo/Nov29/2022)

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Sri Lanka cabinet clears CEB re-structure proposal: Minister

ECONOMYNEXT – Sri Lanka’s cabinet has cleared proposals by a committee to re-structure state-run Ceylon Electricity Board, Power and Energy Minister Kanchana Wijeskera said.

“Cabinet approval was granted today to the recommendations proposed by the committee on Restructuring CEB,” he said in a message.

“The Electricity Reforms Bill will be drafted within a month to begin the unbundling process of CEB & work on a rapid timeline to get the approval of the Parliament needed.”

Sri Lanka’s Ceylon Electricity Board finances had been hit by failure to operate cost reflective tariffs and there are capacity shortfalls due to failure to implement planned generators in time. (Colombo/Nov28/2022)

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Sri Lanka new CB law to cabinet soon as IMF prior action

ECONOMYNEXT – Sri Lanka’s new central bank law will be submitted to the cabinet as a prior action of International Monetary Fund with clauses to improve governance and legalize ‘flexible’ inflation targeting, Central Bank Governor Nandalal Weerasinghe said.

Under the new law members of the monetary board will be appointed by the country’s Constitutional Council replacing the current system of the Finance Minister making appointments.

“It will be a bipartisan approach,” Governor Weerasinghe told an investor forum organized by CT CLSA Securities, Colombo-based brokerage.

“The central bank’s ability to finance the budget deficit will be taken out. Thirdly the flexible inflation targeting regime will be recognized in the law as the framework.”

The law will also make macro-prudential surveillance formally under the bank.

There will be two governing boards, one for the management of the agency and one to conduct monetary policy.

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