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Venezuelans are set to pay international prices for gasoline as the government removes a decades-old subsidy program to tackle smuggling.
President Nicolás Maduro said the sale of contraband Venezuelan fuel was costing state-run oil company PDVSA billions of dollars a year.
"Gasoline must be sold at an international price to stop smuggling to Colombia and the Caribbean," the president said in a televised address.
Despite sitting on the world's largest oil reserves, Venezuela is suffering the worst economic crisis in its history amid food shortages and hyperinflation.
According to the International Monetary Fund, inflation in the OPEC nation could hit 1mn percent this year, while GDP is expected to shrink 18%. Last month Maduro announced plans to cut five zeros from the currency in a bid to curb the effects of runaway prices.
Oil production, which accounts for 95% of the country's export revenue, has plummeted by more than 1Mb/d since 2015. Analysts blame the decline on corruption, government interference and international sanctions that have crippled PDVSA and forced foreign producers to flee.
Maduro raised the prospect of changes to the subsidy program last month, saying that only Venezuelans who held a government-issued identity card would be eligible for direct subsidies.
However, even those with the "Fatherland ID" will only have access to cheaper fuel for another two years, Maduro said in Monday night's address.
Gasoline prices in Venezuela are the cheapest in the world at around US$0.01 a liter, according to fuel analytics firm GlobalPetrolPrices.
Fuel subsidies have traditionally been a thorny topic in Venezuela. The last attempt to significantly increase prices prompted the Caracazo – the 1989 street riots that left hundreds dead and prefaced seismic upheaval in the country's political landscape.
Maduro's announcement drew widespread criticism, even from those who have previously opposed subsidies.
"This government is very irresponsible: they spent 20 years playing demagoguery with gasoline saying that it belonged to the the people," opposition lawmaker José Guerra said on Twitter.
"Now they put it at an international price of US$1.10/l – unpayable today for Venezuelans ruined by socialism."
Francisco Monaldi, a Venezuela expert at Rice University, said the adjustment would be "brutal" for non-card holders and those without vehicles.
"Remember that the rise in gasoline impacts everyone due to the higher transportation costs," Monaldi said.
He added that instead of a "gasolinazo" there needed to be a gradual price increase for all citizens without discrimination.
Maduro also said Monday that the oil-backed Petro cryptocurrency would officially become legal tender on August 20, declaring the day a national holiday.
"It will be the country's second accounting unit and will begin operations as the mandatory [currency] of PDVSA and the oil industry," he said.
Venezuela aims to eventually release 100mn Petro units totalling US$6bn as part of a plan to sidestep US sanctions and ease a severe cash shortage.
Maduro's hopes for a global Petro rollout suffered a setback in March when the US banned trading of the virtual currency by American citizens or by anybody within US territory.
Lawyers have warned that companies doing business with Venezuela face legal risks in the US if they are involved in deals using the Petro.
Guerra, an economist, said the initiative was doomed to fail.
"This dual-money system of the Petro and the Bolívar is very similar to the Cuban model of the peso [nacional] and the peso convertible. A little bit of imagination, please," he said in another Twitter post.