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(Bloomberg) — Since declaring himself the winner of July’s presidential vote, Venezuela’s Nicolás Maduro has been condemned by governments across the world, targeted by massive street protests and spurned by some of his closest allies.

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Now, a new problem is emerging for the authoritarian leader: The bolivar has tumbled in unofficial markets to trade as much as 20% weaker than the official rate, the biggest gap since 2022, as the supply of dollars that the government pumps into the financial system dries up. Maduro, it seems, blew through a big chunk of the money the country stockpiled in the run-up to the election, spending on campaign rallies in a futile attempt to court voters and win legitimately.

The growing crisis threatens to revive a cycle of rapid inflation and currency debasement that sent Venezuela into a tailspin when economic output collapsed an estimated 80% over the past decade. Maduro had managed to stabilize the bolivar and slow price increases in the past two years by imposing austerity and keeping a lid on money printing, providing a dose of relief for Venezuelans that’s now at risk.

The bolivar is overvalued at the official rate and the government needs to allow it to weaken, according to José Manuel Puente, an economist at the Institute of Higher Education in Administration, a private business school in Caracas.

“The government decided to keep the exchange rate anchored for political and electoral reasons,” he said in an interview. “The imbalance will end as it always does in Venezuela: with a large exchange rate adjustment, probably with an inflationary shock, and with an economic slowdown or recession.”

Now, as Maduro dismisses demands from foreign governments, protesters and the political opposition for an audit of the election results, his administration has seemed to recognize the precariousness of the economic situation. At the end of last month, officials announced plans to reduce reserve requirements for banks in a bid to spur lending in the moribund local credit market.

The biggest pain point, however, is in the currency market, where demand for greenbacks has overwhelmed the limited supply offered by the central bank, reviving a parallel market used to skirt supply shortages and controls. In unofficial markets it takes 43.5 bolivars to buy a dollar. That compares with 36.5 per dollar at the government rate.

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But it’s very difficult to access that official rate: The local supply of hard currency was constrained as the central bank limited sales to just $300 million last month, a third of what it offered in July when the government increased spending around the presidential election, according to estimates by Caracas-based financial analysis firm Ecoanalítica.

In the run-up to the vote, Maduro covered the capital in ads, billboards and murals, and staged almost daily campaign events across the country that often included musical acts and elaborate production. All that spending compelled the central bank to step up dollar sales to mop up the excess supply of bolivars unleashed by government spending.

“That is not waste,” Maduro said on state television Tuesday, reacting to the article. “It’s the necessary investment for the country to continue its course, step by step, toward a full and complete recovery.”

The central bank is in a jam partly because the bolivar is overvalued given the rate of inflation. Maduro’s government allowed it to weaken just 0.1% last month, creating an imbalance in a country where monthly inflation is running at 1.4%.

“With no supply at the official market, that demand moves to the parallel market,” said Asdrúbal Oliveros, the head of Ecoanalítica. “This creates a lot of pressure for the private sector, which must compensate by increasing dollar prices to offset smaller margins.”

The high cost of living is already a burden on Venezuelans, 82% of whom live in poverty, and could set off a new wave of migration, adding to the almost 8 million people who have fled the country since 2015. At the peak of the crisis, prices were soaring 130,000% a year.

For now, Maduro continues to follow the playbook of autocratic leaders before him. Over the weekend, the opposition presidential candidate who ran against him, Edmundo González, fled the country under threat of arrest. While Maduro claims to have won with 52% support, the opposition says it has evidence showing a win for González.

Amid the upheaval, Venezuelan businesses need a weaker bolivar to better compete with imports, according to Adán Celis, president of the country’s largest business association, Fedecámaras.

Business representatives have asked the government to let the bolivar slide so that the industry can “take a breath,” he said.

(Updates with comments from Maduro in the 10th paragraph.)

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