Central bank liquid reserves slump to USD 1.6 billion

While the gleam of the oil barrel triggers incoming petrodollars, liquid reserves of the Central Bank of Venezuela (BCV), that is, foreign currency in cash for prompt payment of imports and the foreign debt, are narrowing at fast pace.

After a 17% drop thus far this year, on Thursday, May 17, the country total reserves stood at USD 25.4 billion, the lowest level since August 2007.

However, most importantly, most of the amount is related to gold bars and the liquid portion. According to a report prepared by think-tank Síntesis Financiera, the liquid portion only accounts for USD 1.6 billion which "barely covers 10 days of imports."

This does not mean at all that no imports will be possible; foreign currency will keep on feeding the tank of liquid reserves. Anyhow, it mirrors the impact of the way of administering petrodollars.

State-run oil holding Petróleos de Venezuela (Pdvsa) delivers to the BCV only 40% of the petrodollars. Therefore, liquid reserves plummet and US dollars for the private sectors in areas such as food, drugs and spare parts for vehicles, are in short supply.

The BCV cannot sell all of a sudden a portion of the gold bars to thicken liquid reserves, because the transfer of the ingots to Caracas slowed down the operations.

"The BCV cannot resort promptly to gold reserves to supplement its liquid reserves, because they are not guarded by institutions operationally embedded in the global financial system," Síntesis Financiera explained.

Thus, the solution at hand for the government involves the delivery of US dollars to the central bank or raising the outlays through the Transaction System for Foreign Currency Denominated Securities (Sitme).

The mismatch

A comparison between the numbers released by the BCV and Cadivi ending the first quarter of 2012 found a significant inconsistence.

The Foreign Exchange Administration Committee (Cadivi), the organization responsible for the allocation of US dollars at the official exchange rate of VEB 4.30 per US dollar, approved USD 5.2 billion for the private sector s imports.

Add to this amount, about USD 1.92 billion gotten by businesses after selling abroad the bonds purchased in Sitme, for a total amount of USD 7.13 billion.

Nevertheless, the BCV recorded that the private sector s imports of goods and services amount to USD 9.49 billion, that is, there is a mismatch in the numbers of USD 2.36 billion.