Venezuelan Government Unveils 2015 Budget, Anticipates Drop in Oil Prices

Santa Elena de Uairen, October 22nd, 2014. (venezuelanalysis.com)- On Tuesday, Venezuelan finance minister Rodolfo Marco Torres presented the outline of the 2015 government budget, which features heightened investment in pension programs, healthcare, and university expansion.

The plan, totaling 741.7 billion bolivars (about $117.7 billion at the official exchange rate of 6.3), represents a 35 percent overall increase from the 2014 budget. Proportionally, 34 percent more funds will be invested in social programs in 2015 than this year.

The programs which will see the most growth will be the Amor Mayor mission, which provides elderly pensions, the Barrio Adentro mission, which provides free healthcare and clinics in poor areas, and the Sucre Mission, which funnels money into the country’s Bolivarian community colleges.

The past year has not been easy on the Venezuelan economy, with over 63 percent accumulated inflation, and some sources indicate that 2014 government spending swelled some 70 percent over budget. 

As of now, Venezuela’s budget deficit registers at 16.9 percent of gross domestic product, higher even than that of countries like Greece and Spain during the 2012 eurozone crisis. However, when former president Hugo Chavez entered office in 1999, the deficit represented 24.7 percent of GDP. 

As the owner of the world’s largest known oil reserves, the Caribbean nation has always had a trick or two up its sleeve. But that same asset – the heavy crude which accounts for 96 percent of the country’s export revenue – has dropped US$15 in value since late September to US$77.65 a barrel, marking the lowest its been since 2010.

The vice president of the National Assembly’s financial commission, Jesus Faria, explained that to be “cautious,” the government calculated its budget assuming oil prices will be at US$60 a barrel, recognizing that “our economy is very vulnerable to changes on the international market.”

Faria insisted that the budget, by the will of the Bolivarian government, will continue to expand the “buffer” that protects popular sectors from being negatively affected in the areas of food, education, health, and housing.

The slide in the petrol market comes just as Venezuela’s state oil company, PDVSA, is due to fulfill a US$3 billion bond payment due next week. Marco Torres assured the National Assembly on Tuesday “Venezuela maintains and will maintain an impeccable record in paying its sovereign debt.”

The finance minister also asserted that the country was “fully prepared” to cope with price volatility on the global oil market. He said he expected the economy to grow 3 percent in 2015, with an inflation rate between 25 and 30 percent, and that the foreign exchange rate will stay the same.

Marco Torres noted that unemployment continues to decrease, after having reached 6.8 percent in the first quarter of 2014. He stressed the emphasis being put on national production, and asked Venezuelans to “continue confronting the productivity challenges that national economical development requires, now more than ever… with diversified production and just distribution….in defiance of the economic war we’ve been subjected to.”

Government projects are currently underway in Falcon, Guarico and Sucre states to install irrigation systems that may maximize the country’s agricultural potential, while recent inspections of vehicle manufacturers may indicate expansion in national production.