Rise in Venezuelan gov't expenditure lashes public finances
Venezuela faces enormous difficulties despite high oil prices
Official data reveal that the Venezuelan oil basket averages USD 105 per barrel. However, the country's international reserves and deposits in US dollars are falling, public debt is increasing sharply, state-run oil company Pdvsa is demanding additional financial aid from the Central Bank of Venezuela (BCV), and the Foreign Exchange Administration Commission (Cadivi) finds itself unable to provide enough US dollars to citizens and companies.
This situation comes as a result of the government decision to increase public spending during the first eight months. Only central government spending rose 23% in said period compared to 2011. This represents a dramatic leap that demands more resources in addition to those obtained from oil revenues and taxes.
Determined to spend more, the Government ordered the BCV to transfer USD 3.5 billion from the country's international reserves to the National Development Fund (Fonden).
Additionally, in keeping with governmental decisions, state-run oil firm Pdvsa reduced the amount of petrodollars it transferred to the BCV to feed international reserves. Consequently, reserves have recorded a steady decline of 17% so far this year.
Such decline has dried liquid reserves, which are the US dollars in cash that the BCV sells, through the Foreign Exchange Administration Commission (Cadivi), to companies to pay imports at the official exchange rate.
Entrepreneurs have warned that the country may be hit further by shortages if imports are not increased.
In addition to hitting international reserves, the Government has depleted Pdvsa's cash flow. Today the oil company relies on resources from the BCV, which has to print new bills to meet the oil holding's needs.
BCV data shows that the financial institution has provided Pdvsa with USD 4.3 billion so far this year. Thus, Pdvsa's debt to the BCV amounts to USD 26.5 overall.
Furthermore, Venezuelan deposits abroad fell 22% in the first half; and according to data from the Ministry of Finance, public debt escalated (18%) during the same period and stood at USD 93.5 billion.
Pedro Palma, former president of the Venezuelan Academy of Economic Sciences, has warned about the vulnerability of Venezuela amid volatile oil prices, and expressed disappointment at the reported sales of gold reserves.
The International Monetary Fund (IMF) recently reported that some 3.7 tons of gold from Venezuela's international reserves were sold in August, bringing reserves down to 362.05 tons.
Translated by Jhean Cabrera
José Vicente Rangel clearly said: "We are not conducting negotiations threatened with a gun in the head." He warned behind closed doors in the midst of the social upheaval occurred during the oil strike in 2002 and 2003. Dissenting Timoteo Zambrano answered back that no other option was available: "The thing is that otherwise, you do not negotiate."