Thursday, October 23, 2008

Venezuela’s budget based on petroleum at 60 USD a barrel

Venezuela's budget is forecasting 15% inflation and is based assuming oil prices of 60 US dollars per barrel next year, Finance Minister Ali Rodriguez told the National Assembly this week.

Total outlays are estimated in the equivalent of 78.6 billion US dollars, up 22% from the previous 63.9 billion. Mr. Rodriguez said Venezuela planned to bring in nearly half of its income, about 35.9 billion USD from oil.

With oil prices half the value of July’s record, Mr. Rodriguez admitted Venezuela had been affected by the drop, but predicted prices would recover: "nobody doubts the world will continue consuming energy. The tendency in the medium and long term is an increase in the price of crude".

President Hugo Chavez's administration has long downplayed oil prices in its budget calculations to allow a margin for fluctuations and off-budget spending. But officials have said they plan to watch spending closely as the world financial crisis takes its toll.

Next year's budget was based on the assumption Venezuela would be producing an average of 3.7 million barrels of oil a day. While Venezuela says it is producing 3.2 million barrels a day, international monitors such as the Paris-based International Energy Agency estimate output at about 2.4 million barrels.

Venezuela is the world’s eighth crude exporter and finances half its budget with the sale of oil which also represents 94% of the country’s exports.

The budget predicts next year's economic growth will be 6% and inflation 15%, despite the fact annual inflation was estimated at 36% in Caracas in September. Inflation last year was the highest in the region, 22.5%.

Mr. Rodriguez dismissed concerns that Venezuela would be forced to devalue its currency. "There are no plans to change the exchange rate," he said. Venezuela’s exchange rate of 2.15 Bolivares to the US dollar has not been modified in the last three years but the country has had a controlled multiple money exchange system since 2003.

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