Venezuela oil
Venezuela is going through a deep economic recession and has witnessed sharp price rise in essential commodities owing to fall in oil prices.[Representational Image]Reuters

Venezuela has banned the circulation of the country's largest banknote, 100 bolivars, in a bid to fight 'mafias' who have stashed billions of these currencies in Colombia. The oil-rich nation is currently facing recession and has seen a sharp price rise of essential commodities on the back of fall in oil prices.

According to Agence France-Presse (AFP), Venezuelan President Nicolas Maduro has signed an emergency decree ordering 100 bolivars banknote to be taken out of circulation.

"In accordance with my constitutional powers and through this emergency economic decree, I have decided to take the 100 bolivars bill out of circulation in the next 72 hours," the report quoted President Maduro as saying.

Plunge in crude oil prices have hit the South American nation's economy hard with the country facing a severe shortfall in dollars, pushing up prices of food, medicine and other essential items. Earlier, the International Monetary Fund (IMF) had forecast the inflation rate to hit 475 percent by the end of this year.

With rising inflation, the purchasing power of Venezuelan bolivar has fallen sharply in recent times. As per the report, a 100 bolivars bill is worth fewer than three cents of a dollar at current market rates. "One bill can barely cover the cost of a piece of candy, while a stack of 50 notes is needed to buy a hamburger," the report said.

To beat such hyperinflation, the country is now preparing to issue new banknotes and coins in values up to 200 times of the existing denominations.

Justifying his move, the Venezuelan President said this was necessary after an investigation found that international 'mafias' had hoarded billions of bolivars in Colombia and Brazil.

President Maduro also accused the national banks to be 'accomplices in the plot' to destabilise the economy. Calling the present crisis as an US-backed capitalist conspiracy, President Maduro ordered strict vigil over any possible return of these currencies from abroad.

Interestingly, Venezuela is now the second country after India to ban high value currencies this year. In a surprise move last month, India banned Rs 500 and Rs 1,000 notes to check the flow of black money in the financial system. Since then, the country is facing a severe cash crunch with people queuing up in front of banks and ATMs becoming a common sight.