Q24N (Confidencial) The Central Bank of Nicaragua’s (BCN) decision to freeze the rate of depreciation of the córdoba against the dollar created two distinct groups of economic actors: those who gained and those who lost when it took effect.
Importers and those with dollar-denominated debts are at the top of the first group, as they no longer have to spend large amounts of córdobas to buy foreign currency. Remittance recipients, pensioners, and salaried workers are in the second group, because they lost the little protection they still had against the effects of inflation.
The measure, which will remain in effect until 2026, was one of the factors that allowed the BCN to lower the Monetary Reference Rate to 5.75%, which had been set at 6.25% on January 9, 2025, and at 6.00% eight months later. With this 25-basis-point reduction, the central bank hopes to keep inflation expectations anchored and continue strengthening the córdoba.
On August 9, 2023, the BCN announced that its Board of Directors had decided to set the rate of depreciation of the córdoba against the US dollar at 0% annually, effective January 1, 2024. Supporting this measure were cited the growth of economic activity and international reserves; consolidated public finances; and a financed balance of payments. Also cited were a stable financial system, as well as monetary and exchange rate stability.
The Chairman of the BCN’s Board of Directors, Ovidio Reyes, stated at the time that “with this policy, everyone wins… because exchange rate stability is universal.” He was referring to his hope that businesses, the government, and the general population would benefit because “the uncertainty generated by a highly volatile exchange rate disappears,” thus giving the national currency greater importance. A desirable outcome of this is that depositors will have confidence in the córdoba, the official stated.
In evaluating the results of this policy, during the Article IV consultation visit by a technical mission from the International Monetary Fund, the multilateral institution deemed the decisions to ease monetary policy and maintain the depreciation rate at 0% through 2026 “appropriate.” “Given the cyclical conditions, prudent fiscal policy, and credit adjustments as banks adjust their portfolios to meet increasing capital requirements,” they indicated.
The organization added that “the Central Bank of Nicaragua (BCN) has encouraged greater use of the local currency. Further efforts are needed to continue this policy and deepen capital markets to improve the effectiveness of monetary policy. In an adverse scenario, the authorities should be prepared to raise the benchmark interest rate and recalibrate the depreciation rate,” if necessary. Inflation is low, but not only in Nicaragua
The goal of freezing the exchange rate was to strengthen the córdoba and offset the effects of high international inflation on the national economy, thereby improving the population’s purchasing power. Two years later, the córdoba remains the dominant currency in the streets, while the dollar continues to hold sway in banks.
Inflation, meanwhile—which closed 2023 at 5.6%—has been under control since then: it accumulated 2.84% in 2024 and 2.17% through November 2025. But not everyone is celebrating these figures.
Economist Enrique Sáenz is one of them, questioning whether this decrease is due to the exchange rate policy, because Nicaragua’s 2.17% inflation rate through November 2025 was higher than that observed in Costa Rica, Guatemala, and El Salvador. Only Honduras had higher inflation than Nicaragua. “If we consider the decrease in the inflation rate a positive result, that becomes relative when compared to the rest of Central America,” he noted.
He cautioned that statistical data helps us understand reality, but in economics, that only makes sense when it’s related to people’s living conditions.
In this regard, a finance expert who asked to remain anonymous explained how the perception that inflation is low has been promoted in the country, but the public doesn’t agree. The Central Bank of Nicaragua (BCN) sets an inflation rate,” but people continue to pay much more to buy their food.
Álvaro, an economist who asked to be identified by a pseudonym, maintained that the Central Bank expected to stabilize the inflation rate because “up to 40% was caused by the exchange rate.”
He emphasized that there were losers in the process, but defended the decision, stating that “someone had to make a sacrifice.” Especially since it wasn’t a painful effort, because it didn’t involve business closures or job losses.
In contrast, he observed that in the medium term, this “translated into an overall benefit for everyone,” because controlled inflation helps contain production costs. From there, he concluded that “the measure was successful. Very late, even.”
The dollar remains king
The other major goal is to strengthen the córdoba. Strengthening it means encouraging people to prefer saving in córdobas, rather than dollars, while simultaneously reducing the preference for dollar-denominated loans. Sáenz noted that, despite the time that has passed, almost 90% of bank loans are still in dollars. This means that the public has not shown much enthusiasm for the córdoba and continues to prefer the dollar. Nearly 70% of deposits remain in dollars.
The conclusion is that the dollarization of the economy persists, “which is understandable because the main support of the economy comes from family remittances, and these arrive in dollars or euros,” he explained.
Álvaro added another detail: 38% of exports go to the country that produces the dollar, the United States, and the other 23% to Central America, transactions that are also carried out in dollars.
Sáenz indicated that, despite the Central Bank’s efforts, economic growth is around 4%, which is not much different from what was observed in 2024. He also warned that this growth does not translate into more jobs. The National Institute of Statistics and Censuses (INIDE) reported that in November 2025, the open employment rate was the same as in November 2024. It also reported that the average real wage paid by the formal economy in January 2025, even with the minimum wage increase, had decreased by November 2025. The situation regarding underemployment also remained unchanged.
His conclusion is that, while the conditions for some did not improve in terms of employment or wages, they worsened for others. First, pensioners, whose pensions haven’t been adjusted in two years. Also, recipients of remittances.