Venezuela devalues bolivar currency

People withdrawing from ATMs in VenezuelaVenezuela's currency is being devalued in a move expected to push up prices in the heavily import-reliant economy.

Government officials in Caracas said the fixed exchange rate is changing from 4.30 bolivars to the dollar to 6.30 bolivars to the dollar.

The devaluation had been widely expected by analysts in recent months, though experts had been unsure whether the government would act while President Hugo Chavez remained out of sight in Cuba recovering from cancer surgery.

It was the first devaluation to be announced by his government since 2010, and it brought down the official value of the bolivar by 46.5% against the dollar.

By boosting the bolivar value of Venezuela's dollar-denominated oil sales, the change is expected to help alleviate a difficult budget outlook for the government, which has turned increasingly to borrowing to meet its spending obligations.

Planning and finance minister Jorge Giordani said the new rate will take effect on Wednesday, after the two-day holiday of Carnival. He said the old rate would still be allowed for some transactions that were already approved by the state currency agency.

Venezuela's government has had strict currency exchange controls since 2003 and maintains a fixed, government-set exchange rate. Under the controls, people and businesses must apply to a government currency agency to receive dollars at the official rate to import goods, pay for travel or cover other obligations.

While those controls have restricted the amounts of dollars available at the official rate, an illegal black market has flourished and the value of the bolivar has recently been eroding.

In black market street trading, dollars have recently been selling for more than four times the official exchange rate of 4.30 bolivars to the dollar. The announcement came after the country's Central Bank said annual inflation rose to 22.2% in January, up from 20.1% at the end of 2012.

The announcement was strongly criticised by opposition leader Henrique Capriles, who said the government's heavy spending was to blame for the situation and that officials were trying to slip the change past the public at the start of a long holiday weekend. He said on Twitter: "They spent the money on campaigning, corruption, gifts abroad!"