Venezuela is currently facing political and economic crisis.
What is the current status of Venezuela’s economy?
Venezuela is a country with more oil than Saudi Arabia.
Earlier presidential regime of Venezuela was marked by an increasing authoritarianism and a gross mismanagement of the country’s oil.
It currently faces rapidly declining foreign exchange reserves, poverty and hyperinflation.
The inflation is projected to be 720% this year and 2069% in the next year, according to the IMF.
It has also been experiencing an acute shortage of food, medicine and other vital supplies.
What are the reasons of the economic crisis?
Due to major fall in crude oil prices since 2014, the country has just $10.2 billion in reserves.
As money was in short supply, the government started printing cash, which is also a factor contributing to spiralling inflation.
The revenues generated from oil industry was not invested or diversified to other sectors.
So the economy was over-concentrated in oil while other sectors became uncompetitive and unproductive.
The economy became dependent on imports.
Due to excessive price controls measures there was a misallocation of resources and a fixed exchange rate.
This further created opportunities for corruption among the regime’s elite.
What is the reason for political crisis?
After the socialist leader, then President Hugo Chavez died in 2013, Nicolas Maduro, also of the United Socialist Party (PSUV), was elected president on a promise to continue Mr Chavez's policies.
Chavistas, the name given to the followers of the socialist policies of the late President.
They praise the two men for using Venezuela's oil riches to markedly reduce inequality and for lifting many Venezuelans out of poverty.
But the opposition says that since the PSUV came to power in 1999, the socialist party has eroded Venezuela's democratic institutions and mismanaged its economy.
Chavistas in turn accuse the opposition of being elitist and of exploiting poor Venezuelans to increase their own riches.
