Hanke Urges Venezuela to Adopt U.S. Dollar to Fight 400% Inflation
Updated
Updated · Fortune · Aug 22
Hanke Urges Venezuela to Adopt U.S. Dollar to Fight 400% Inflation
2 articles · Updated · Fortune · Aug 22
Summary
Steve Hanke, newly named a special adviser to Venezuela’s National Assembly, said the country should scrap the bolivar and central bank and fully adopt the U.S. dollar.
The proposal aims to stop monetary financing of government deficits, which Hanke says is driving roughly 400% inflation and blocking broader economic stabilization.
A 78% plunge in the bolivar over the past year has already pushed most private transactions into dollars, which Hanke says improves the odds of formal dollarization to 50%-80%.
Key obstacles remain: Venezuela would lose its lender of last resort and hand monetary control to the Federal Reserve, a step even Argentina’s Javier Milei has avoided after taking office.
Hanke argues official dollarization could unlock oil investment, help service Venezuela’s $250 billion debt load—about 150% of GDP—and shift the economy from contraction this year to growth next year.
Could adopting the U.S. dollar save Venezuela's economy, or will losing its central bank push the nation into a deeper financial trap?
With the bolivar constitutionally protected, how can lawmakers legally enforce a dollarization plan that strips the nation of its monetary sovereignty?