Pdvsa's higher funding to central bank spurs inflation
Professor Pedro Palma of the Higher Business Studies Institute (IESA) warned that money in circulation has skyrocketed
Palma explained that Pdvsa issues bonds that are bought by the central bank by printing new bolivars. Once Pdvsa spends all this money, the funds go to the banking system, which relies on it to grant loans. This way, the amount of money in circulation skyrockets and spurs prices.
If this situation continues, "we will experience an increasingly remarkable expansion of the monetary base, which in turn the financial system will double or triple. This may lead to an explosive expansion of money supply that will result in significant inflation."
The IESA professor also indicated that ahead of the elections held in 2012, Hugo Chávez's Government boosted public expenditure to the extent that today it faces a fiscal gap that represents eight percent of the gross domestic product (GDP). Including the whole public sector, the gap stands at 14% percent of the GDP.
Translated by Jhean Cabrera
Ever since last March 9, when US President Barack Obama issued an Executive Order declaring Venezuela an "unusual and extraordinary threat" to the United States, the Venezuelan government has screamed denunciations of supposed plans of invasion or military incursion by the United States.