Central Bank of Bolivia Sells Dollars Directly to Citizens as Devaluation Fears Rise – Economics
The central bank of Bolivia is now selling dollars directly to citizens in a bid to stem what it calls a speculative onslaught that has increased popular demand for foreign exchange. This surge in demand was caused by several factors that led the public to believe that a devaluation move might be imminent.
The Central Bank of Bolivia sells dollars to calm the local market
The Central Bank of Bolivia is taking extraordinary measures to provide foreign exchange to its domestic market. On March 6, the monetary institution announced that it would begin selling dollars directly to citizens, making its action complementary to the established traditional foreign exchange market.
The measure would counter what the central bank is describing as a “speculative attack” on the national monetary system, prompting Bolivians to buy more dollars to protect against an alleged exchange rate surge. Edwin Rojas, Governor of the Central Bank of Bolivia stated:
We emphasize that the Central Bank of Bolivia opens its doors through the Banco Unión, as it is the body that will work with us in this process, so that the people who want dollars and cannot get them (from the outside) come to us come can meet their demand.
fears of devaluation
The increased demand for dollars that the central bank is facing has to do with concerns about the current level of national reserves and how this may trigger a change in the US dollar’s exchange rate.
Bolivia has had a fixed exchange rate since 2011, which stipulates that each dollar is valued at 6.86 Bolivians, the country’s fiat currency. Countries like Venezuela and Argentina that had implemented exchange controls on foreign currencies have experienced increased levels of devaluation and inflation experience.
On March 9, Rojas provided a summary of how the market reacted to this move, noting that more than $91 million has been allocated over the past two weeks to meet unprecedented demand. He explained that the country has no plans to change its monetary policy.
However, analysts are unsure whether these moves are sustainable. The last report on foreign exchange reserves was on February 8, when the central bank said it had $372 million. That’s less than the $400 million that Antonio Saravia, a local economist, needs every month for the national market. He doubts the government can maintain this level of intervention for too long.
What are your thoughts on the situation where the Central Bank of Bolivia is facing unprecedented demand for US Dollars? Tell us in the comment section below
photo credit: Shutterstock, Pixabay, WikiCommons
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Source: Crypto News Deutsch
