Bolivia’s central bank is now selling dollars directly to citizens in order to curb what it calls a speculative attack that has increased the population’s demand for foreign currency. This rise in demand was caused by several factors that led the population to believe that there might be an upcoming devaluation move.
Bolivia’s central bank sells dollars to satisfy the local market
The Central Bank of Bolivia implements exceptional measures to supply its internal market with foreign currency. On March 6, the monetary establishment announce It will start selling dollars directly to citizens, adding its activity to the established traditional exchange market.
The measure will counter what the central bank calls a “speculative attack” on the national monetary system, prompting Bolivians to buy more dollars in order to protect against rumors of an exchange rate increase. Edwin Rojas, President of the Central Bank of Bolivia stated:
The Central Bank of Bolivia opens its doors, we repeat, through Banco Unión, because it is the body that will cooperate with us in this operation so that the populations that demand dollars and cannot obtain them (from abroad) can come to us with their demands.
Fears of devaluation
The increased demand for dollars that the central bank is facing has to do with concerns about the current state of national reserves, and how this could change the exchange rate of the US dollar.
In Bolivia, there is a file installed Exchange rates fell in 2011, which set the value of each dollar at 6.86 Bolivian, the country’s paper currency. states like Venezuela And Argentinawhich placed controls on foreign exchange, experienced high levels of currency depreciation and inflation because of these restrictions.
On March 9, Rojas gave a summary about the market’s reaction to this measure, noting that more than $91 million has been allocated over the past two weeks to meet the unprecedented demand. He explained that the state has no plans to change its monetary policy.
However, analysts are unsure of the sustainability of these movements. The latest report on the state of foreign currency reserves dates back to February 8, when the Central Bank reported that there were $372 million. That’s less than $400 million Antonio Saravia, a local economist, estimates that the national market needs monthly. He doubts the government can sustain this level of interference for long.
What do you think of the situation the Central Bank of Bolivia is facing with an unprecedented demand for US dollars? Tell us in the comments section below
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