Venezuela is set to float a digital currency, nicknamed Petro, to shore up the collapsing economy and to tackle inflation which is raging at 4,000%. Socialist President Nicolas Maduro announced the creation of the new Bitcoin-like virtual currency on Sunday, 3 December saying this will help the Latin American nation to crawl out of the hyperinflation.

The Petro will be backed by the country's oil, diamond, gold and gas reserves, said Maduro. But he did not reveal how and when the digital currency would be launched formally and offered few specifics about the scheme.

"Venezuela will create a cryptocurrency," said Maduro before hailing the move. "The 21st century has arrived," he added to loud cheers on his weekly live broadcast.

The introduction of the digital currency would allow the Venezuelan government "to advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade", said Maduro, referring to Washington-imposed sanctions. He said Venezuela is currently facing a financial "world war".

"This is going to allow us to move forward to new ways of international financing for the country's economic and social development," added Maduro.

The US and European nations have imposed severe economic sanctions on high-ranking Venezuelan government officials making it difficult for them to make international monetary transactions.

The oil-rich country's economy has been hit due to declining oil prices and the continuing political power struggle in Caracas. This has resulted in a chronic shortage of food supplies, medicines and other basic resources as the country's currency, the bolivar, is in a free fall.

Maduro's opponents said the proposed currency will do nothing to pull the country out of the economic morass. "It's Maduro being a clown. This has no credibility," opposition lawmaker and economist, Angel Alvarado told Reuters.

Venezuela coup
Venezuela's President Nicolas Maduro speaks during his weekly broadcast in Caracas Miraflores Palace/Reuters