Consumer price inflation in Venezuela is expected to reach 480% in 2016 and to surpass 1640% in 2017, according to figures of the International Monetary Fund (IMF). The hyperinflation is detrimental to the population of the South American country, as the shortage of medical supplies has led to a situation in which infants and other patients die from curable diseases. The situation is so bad that the military took control of food supplies, which the government gave more power in the hands of the armed forces. Soldiers guarded the empty shelves in grocery stores.
While the economic danger to Caracas increases, there is no wonder that many economists believe that the nation will soon have to ask for a bailout from the IMF. However, Venezuela canceled its relations with IMF a decade ago and not trying to improve them even during such crisis.
China is trying to take advantage of poor political relations which many African and Latin American countries have with the United States and the IMF. The Asian country provided Venezuela loans at worth of 10 billion USD last year, which kept the country afloat. These loans are used only for patching the state budget and do not require deep political reforms, which are vital to any deteriorating economy.
In its most rough estimate given in April, the IMF stated that political uncertainty and a renewed decline in oil prices deepen existing macroeconomic imbalances in Venezuela. The South American country is not the first with hyperinflation and will probably suffer the same symptoms as previous victims. The dollarization grossed many countries from hyperinflation and this may work with Venezuela, while people exchange assets in more stable currency – with or without the consent of the government.
Meanwhile, IMF warned many other countries to prevent their economies from hyperinflation. It is expected that South Sudan and Ukraine to bring down inflation to single-digit rates until 2020, but Yemen (10%) to be the only country except Venezuela with double-digit inflation.