Falling oil prices are forcing Venezuela to boost sales taxes and nearly triple domestic debt sales to make up for an expected 6.7 percent decrease in public income this year, Venezuelan President Hugo Chavez said on Saturday.
The socialist leader said he would ask lawmakers to increase sales taxes on goods and services to 12 percent from 9 percent to help make up for plunging oil revenue in the oil-rich nation.
The government now expects US$72.7 billion in fiscal income.
PHOTO: AP
This year’s revised budget anticipates crude prices of US$40 a barrel — not US$60-a-barrel as forecast by lawmakers last year — Chavez said in a televised speech.
Venezuelan crude reached about US$43 a barrel last week.
Venezuela will also sell an additional 22 billion bolivars (US$10.2 billion) in local-currency bonds to raise cash this year, bringing internal public debt to 64.5 billion bolivars by year’s end, Chavez said without giving details on the issue date, term or interest rate the debt would carry.
The government may be forced to reign in years of steep increases in public outlays, he said, promising that salaries and spending by high-level public officials would be reduced.
“The privileges are over,” he said, vowing to send a revised budget to the legislature, which is controlled by his allies, in the coming days.
Soaring crude prices have fueled years of record public spending in oil-rich Venezuela, winning Chavez support among millions of the country’s poor. The government has not run a budget deficit since 2003.
But Venezuela depends on oil for 93 percent of exports and nearly half its federal budget, and crude prices have slipped 65 percent since their peak in July, cutting off a key source of income.
Chavez has insisted the country can avoid steep spending cuts by tapping some of the nearly US$100 billion in currency reserves and development funds that his government says it has collected in recent years.
Yet public spending has fueled 29.5 percent annual inflation in Caracas — Latin America’s highest.
Chavez on Saturday vowed to increase the minimum wage by 10 percent in May and another 10 percent in September to help salaries keep pace with price gains.
That move, along with the sales tax hike and bond sales, will only fuel further inflation, said Pavel Gomez, an economist at the IESA business school in Caracas.
The new measures “aren’t attacking the source of the problem,” which is an over-reliance on oil income, said Gomez, who advocates steep public spending cuts instead.
Analysts warn that falling oil income and shrinking reserves may also push Venezuela to devalue its currency, which has been fixed by the government since 2003 but now trades at nearly three times the official rate on the black market.
A devaluation would likely fuel inflation, and Chavez insisted again on Saturday that no such move was being planned.
Meanwhile, his government seized seaports and airstrips in at least four states on Saturday, a move critics said was meant to limit the powers of anti-Chavez mayors and governors.
The takeover, backed by legislators this month, prohibits states and municipalities from collecting tariffs or tolls, cutting off a key source of funding for local projects that could otherwise compete with federal handouts, Caracas-based economist Abelardo Daza said.
Chavez last week said that any governors who challenged the takeover could end up in prison.
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