CARACAS, Monday April 01, 2013 | Update

Venezuela's fiscal deficit leads to second devaluation in five weeks

If the foreign currency rate averaged VEB 14 per US dollar in the Ancillary Foreign Currency Administration System, the fiscal gap would be brought down to 10.2% of the gross domestic product

On February 8, the Venezuelan bolivar was devalued by 46.5% (File photo)
Monday April 01, 2013  01:48 PM
Amid an accelerated rise in expenditure, increasing losses in state-run oil companies, and costly subsidies, Venezuela's income is not enough for the Government, which currently faces a serious fiscal imbalance although the oil basket averages a record high of USD 103 per barrel.

As a result, two devaluations have been implemented in the last five weeks so as to obtain more bolivars per petrodollars. However, it all seems that despite the significant adjustment in the foreign exchange rate, which will spur the cost of imports and therefore will hit the people, the fiscal crisis will continue.

On February 8, the forex rate in the Foreign Exchange Administration Commission (Cadivi) was cut (46.5%) from VEB 4.30 to VEB 6.30 per US dollar. Likewise, on March 27, the newly created Ancillary Foreign Currency Administration System (Sicad) sold US dollars at a higher rate than its predecessor, the Transaction System for Foreign Currency Denominated Securities (Sitme), whose forex rate was VEB 5.30 per US dollar.

Although Sicad did not reveal the price of the US dollars sold in the bid launched on March 26, financial sources have said that companies paid VEB 11-14 per US dollar, that is, twice the rate in Sitme.

Investment bank Barclays Capital underscored that if Sicad sold some USD 10 billion at an average rate of VEB 14 per US dollar and the rest of US dollars at the rate of VEB 6.30 per dollar, the fiscal deficit would plummet from 19.6% to 10.2% of the gross domestic product.

Translated by Jhean Cabrera
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