CARACAS, Thursday November 22, 2012 | Update

Venezuela's foreign debt breaks USD 102 billion ceiling

Skyrocketing government expenditure is weakening public finance

Both climbing public expenses and growing debt are unsustainable. Imminent adjustments may curb growth in 2013 (File photo)
Thursday November 22, 2012  11:19 AM
Immersed in a decisive year when Hugo Chávez was to secure his stay in office and boost the election of his candidates for state governors, the Government has shot up expenditure to the highest level ever recorded in the history of Venezuela to spur economic growth. The consequences, however, are starting to emerge.

Public spending is vital to fund housing programs and boost consumption. Over the last 12 months, the central government's spending, after inflation, has climbed by 26%. High oil prices and tax collection have failed to meet growing spending. Therefore, the government has been forced to issue new debt bonds.

Central bank's data indicates that, for the first time ever, by the end of the third quarter Venezuela's foreign debt broke the USD 100 billion ceiling. It currently stands at USD 102.3 billion, jumping 103% in four years and USD 5.5 billion in July-September only.

Likewise, debts to the Venezuelan banking system skyrocketed amidst constant bond sales. According to Barclays Capital, considering the size of the economy, Venezuela's debt both in US dollars and local currency (bolivars) will account for 51.6% of the GDP, therefore, doubling the figure recorded in 2008. 

Although the debt-to-GDP ratio is still manageable, debt is growing at an unsustainable speed. Apparently, Hugo Chávez' Government will have to cut expenditure and adjust the fixed foreign exchange rate in order to bridge the gap between expenditure and income, which according to some estimates, fluctuates between 15-19% of GDP.

Adopting such steps will bring down economic growth in 2013.

Translated by Jhean Cabrera
Living with HIV/AIDS (II)

At first she agreed that I use her real name, that she had no problems with that at all. After all, living with HIV had driven her to help others – as a workshop facilitator giving talks and conducting seminars, or as a volunteer for local AIDS Service Organizations like Acción Solidaria (Solidary Action) and Mujeres Unidas por la Salud (Women United for Health, or Musa), a support group network for HIV-positive women. But when we were well into the interview, the realization that she might lose her private health insurance coverage made her change her mind.

fotter Estampas
fotter Estampas