Venezuela sharply devalues its currency

Venezuela's government announced that it is devaluing its currency, changing fixed exchange rate from $4.30 bolivars to the dollar to $6.30 bolivars to the dollar. The change is expected to help solve the budget problem for the government, which has turned increasingly to borrowing to meet its spending. Analysts, however, think that the move would not be sufficient to end the government's budget deficit or balance the exchange rate with an overvalued currency. 25% of inflation and a continuation of shortages of some staple foods are predicted. Inflation in Venezuela has increased from 20.1% at the end of 2012 to 22.2% in January, resulting in shortages of some foods. To confront the shortages, the government planned to have the state oil company give more of its profit to the Central Bank while reducing government spending on public work projects. The strong demand for foreign currency didn't receive any additional support from government, which will likely push up the "parallel" dollar market higher. Opposition leader Henrique Capriles criticized government's heavy spending on campaigning, corruption and gift abroad for the situation and that officials were trying to slip the change past the public at the start of a long holiday weekend.