Venezuela’s 2009 Budget Plans Increased Social Spending and Stable Growth

Mérida, October 23, 2008 (venezuelanalysis.com)– On Tuesday, Venezuela’s Finance Minister Alí Rodríguez presented a national budget proposal for 2009 that will increase social spending and is based on predictions of 6% economic growth, a stable national currency, and oil exports at a price of $60 per barrel.

“Venezuela is one of the most stable economies in the world in spite of the [world economic] crisis,” Rodríguez remarked as he submitted the budget to the National Assembly for approval.

The total budget for 2009 is 167.5 billion bolivars ($77.9 billion), which represents a 22% nominal increase over 2008 and is 23.7% of the current GDP.

Rodríguez estimated that oil revenues will make up 46.5% of total government revenues, or 77.9 billion bolivars ($36.2 billion), and non-oil revenues will amount to 77.2 billion bolivars ($35.9 billion) in 2009. He added that the government does not plan to enact any new taxes.

Daily oil production would increase slightly to 3.7 million per day (bpd) barrels in 2009, and daily exports will decrease to less than 3 million bpd, said Rodríguez. The minister predicted that the average price of a barrel of oil will be $60 in 2009.

“The price [of oil] seeks its appropriate level, the relationship between supply and demand, after the speculators withdraw,” Rodríguez asserted. “The tendency in the medium and long term is an increase in the price of crude.”  

In 2008, the government predicted oil prices would be $35 per barrel, and that oil revenues would make up 37.5% of the total budget. Then, oil prices peaked above $140 per barrel in July, and have dropped to half that since the financial crisis hit.

In the midst of this, the government has spent 45 billion bolivars ($21 billion) more than its original budget proposal in 2008, according to the Venezuelan daily El Universal.

Rodriguez emphasized “more discipline” for next year’s budget, specifying that the government should not spend more than what is planned in the budget.  

Critics say the government intentionally underestimated oil prices in 2008, and that the proposed 2009 budget relies too heavily on increased oil revenues at a time when the world economic crisis threatens to decrease the demand for oil.

Rodríguez said the Chávez administration’s recuperation of “petroleum sovereignty” through majority state control over the oil sector, along with nearly $40 billion in international reserves, provides a “solid economic base” that will allow Venezuela to weather the crisis.

The minister predicted that the Venezuelan economy will grow by 6% in 2009, completing six consecutive years of economic growth. Also, Rodríguez said the value of the bolivar will remain at 2.15 to the dollar, as it has been since 2005.

Inflation is estimated to be 15% next year, and this “implies a vigorous effort in the application of anti-inflationary measures,” particularly in the agricultural sector, Rodrígez explained.

In 2008, the target inflation rate was 11%, but by September it had accumulated to more than double that figure, spurred by rising food prices partly due to an emerging world food crisis.

Rodríguez said Tuesday that the 2009 budget will also incur 12.2 billion bolivars ($5.7 billion) of foreign debt to pay for the renovation of Venezuela’s Armed Forces and tax and customs department, and a new hydroelectric facility.

Total external debt was $30 billion as of June 2008, according to Finance Ministry statistics.

The 2009 budget emphasizes poverty reduction, said Rodríguez, by increasing social spending to encompass nearly half the national budget. This represents a 25% nominal increase over 2008, when 45% of the budget went toward social spending.

The social programs known as the “missions” will receive 21 billion bolivars ($9.8 billion) in 2009. The percentage of the budget allocated to education will be 18.2%, which is more than double the percentage allocated to education in 1998, the year before President Hugo Chávez took office.

Regional and local governments, including the community council system that has been funded through the national government since 2006, will receive 41.1 billion bolivars ($19 billion) in 2009, a 32% nominal increase over 2008, the minister announced.

Minister Rodríguez emphasized the current “cyclical crisis” of world capitalism is causing anxiety for billions of people, and will be a defining issue in the world economy in 2009. He lamented that the crisis could lead to further “hyper-concentration and centralization of capital” on a worldwide level.

“The integration of our peoples [in the South] will save us from catastrophe,” he asserted.