Economy
Now, under the draft law to reform the Organic Law of the Public Sector Financial Administration, the national government will be able to meet the tax urgent needs through indebtedness.

The proposal makes reference to article 81 of said organic law. It provides for indebtedness to cover "any overheads which cannot be expended due to a reduction of the budgeted income for the fiscal year, and cannot be offset by the Macro-economic Stabilization Fund (FEM)."

The law also considers increasing borrowing to pay the operations "related to food sovereignty, preservation of social investment, security and integral defense, as set forth in the Constitution."

Initially, additional borrowing was authorized only to pay "extraordinary expenses as a result of disasters or to refinance or restructure the public debt."

The preamble of the draft law discussed by the National Assembly (AN) states that oil prices "have not recovered enough as to keep the investments in the oil industry or secure budgets. The 2009 budget is premised on USD 69 per barrel (sic). Such an average will hardly be attained in 2009."

The Executive Office substantiated the change approved by the AN in a first session. "The restrictions contained in article 81 of the Organic Law of the Public Sector Financial Administration would imply for the 2009 budget a dramatic reduction of social investment and a setback in the fields of education, health and infrastructure. They would also force a strong reduction of investment in production, with a negative impact on jobs (…) and adversely affecting the demand. The purpose is to keep the gross domestic product in the black and avoid recession."

"The crisis has touched not a single hair in Venezuela; this does not mean though that it cannot touch one, or even two hairs," said President Hugo Chávez when announcing the "anti-crisis measures."

Debt a la carte
The draft special law on supplemental indebtedness was also discussed. It is intended to cope with the expenditure budget and the debt service by adding USD 10.2 billion to an allocation of USD 5.7 billion set forth in the Umbrella Law as borrowing capacity.

Based on the data provided by the National Budget Office to the AN, the reduction from USD 60 to USD 40 in oil prices under the 2009 budget meant a 51-percent drop in oil income.

The contribution was curtailed from 11.05 percent of the GDP in a scenario of USD 60 per barrel to 5.26 percent of the GDP. To sum up, the Treasury will stop receiving USD 18.7 billion on account of oil revenues.

Like a balm, the Executive Office told the AN that the 3-percent increase in the VAT, from 9 to 12 percent, will yield additional USD 3.2 billion, that is, USD 19.4 billion in the aggregate for 2009.

Nevertheless, Minister of Planning and Development Jorge Giordani reported last weekend that the additional share as a result of the VAT increase would total USD 4.2 billion.

The expenditure for debt service, in the face of the foreseen public borrowing, heightened by 24 percent, from USD 7.3 billion to USD 9.0 billion, as reported to the AN National Budget Office.

Current receipts would drop from USD 72.3 billion to USD 52.9 billion, or 21.3 percent. Discretionary earnings (borrowing) would account for 21.9 percent out of total revenues.

Translated by Conchita Delgado

Ernesto J. Tovar
EL UNIVERSAL