The Board of Directors of the Central Bank of Nicaragua (Banco Central de Nicaragua or BCN) has announced that the sliding exchange rate (aka; slip rate or crawling peg) of the Nicaraguan Córdoba to US Dollar will be reduced to 1% as of February 1, 2023 (from its current 2%).
Unlike a floating exchange rate such as the US Dollar against other world currencies, the Nicaraguan Córdoba is on a slip rate which provides for a slow devaluation of the Córdoba against the US Dollar.
The slip rate or crawling peg concept was designed to protect countries such as Nicaragua against economic instability caused by sudden fluctuations in the Córdoba to US Dollar exchange rate.
The Central Bank
The BCN is confident that this decision to lower the rate can be taken at the current time (as they did in 2019 and 2020) due to their macroeconomic policies and “growing macroeconomic indicators”. https://www.bcn.gob.ni/
They described the “economic and financial evolution” (in Nicaragua) as having provided a climate of; “stable public finances, financed balance of payments, stability of the main variables of the financial system, improvement in the levels and coverage of international reserves and the stability of monetary and exchange rates” stability. The BCN sees it as a measure that will strengthen the stability of the national currency (the Córdoba).
History
The modern Córdoba Oro (NIO) became official currency in 1990.
The crawling peg rate was introduced in 1993 after a stabilization program had controlled hyperinflation leftover from the latter part of the revolutionary years. The peg was originally set at 12% per annum but was later reduced to 6% and then 5% where it stayed since 2004.
This rate devalued the Nicaraguan Córdoba against the US Dollar at a rate of 5% per year.
The 5% rate remained in place until November 1st 2019 when it was reduced to 3% per year and then a year later (December 1st 2020) it was reduced to 2%. This latest reduction brings it down to 1% as of February 1, 2023.
Read more on the crawling peg concept.
Monthly “Official Exchange Rate” (Tasa de Cambio);
