Caracas, October 17, 2016 (venezuelanalysis.com) – Venezuelan president Nicolas Maduro has approved the country’s budget for 2017, vowing to uphold his government’s commitment to social development and poverty reduction despite an acute financial crisis.
Meanwhile the president’s decision to bypass the country’s opposition-controlled National Assembly for budgetary approval has prompted a slew of criticism from opposition politicians.
Record Breaking Social Spending
On Friday, Maduro announced that Venezuela’s federal expenses for 2017 will total nearly 8.5 trillion bolivars (approximately USD $8.5 billion at the parallel market rate), up more than 500% from 2016.
The new budget will also include “record breaking” investment in the public sector and significant changes to how government revenue is collected, the president revealed.
According to Maduro, over 73 percent of 2017’s annual budget will go towards the state’s social programs, and specifically to areas such as housing, health, education, and public works, as well as to the citizen’s neighbourhood organisations known as communal councils.
The figure dwarfs 2016’s budgetary allocation to social spending, which was just over 42%.
“This is a mandate from Chavez, this is his way of thinking, this is his legacy,” Maduro told supporters gathered in central Caracas for the announcement.
The new budget was unveiled after being discussed in a series of citizens’ assemblies throughout Venezuela at the beginning of October, as well as in the midst of a drawn out economic crisis marked by triple digit inflation, stagnating wages and depleted international reserves.
2017: Less Oil, More Tax
The president emphasised that the 2017 budget will also see the expansion of the “tax revolution” begun by his government in 2014, which included the implementation of a luxury goods tax, new rules on income tax and a government clamp down on tax evasion.
For the first time, domestic tax is projected to provide the bulk of government revenue and will finance 83 percent of the total 2017 budget, said the head of state.
Until recently, around 80 percent of Venezuela’s budget has come from its oil industry; however a collapse in global crude prices in recent years has led the government to look elsewhere for ways to diversify the national income.
In a historic sea change, just 17% of the 2017 national budget will come from oil export earnings, which the government has calculated according to the conservative estimate of USD $30 per barrel. Another 11.9% of 2017’s outgoings will be financed through contributions from state-owned companies.
Unconstitutional or Unfit to Legislate?
Despite being well received amongst government supporters, not all of Venezuela was unanimous in celebrating the new budget. The country’s political opposition coalition has accused the president of acting unconstitutionally in order to push through his government’s fiscal plan.
Last Tuesday, the Supreme Court (TSJ) declared that the budget would be reviewed by one of its auditing committees as opposed to by the National Assembly, after the president argued that the opposition-held legislative branch was unfit to fulfil its constitutional obligations to vet the budget proposal.
Maduro cited the body’s ongoing violation of a TSJ order to suspend a group of legislators pending investigations into electoral fraud as the principle reason for his appeal. Government spokespeople have also drawn attention to the legislative body’s failure to convene on 25 occasions due to lack of quorum amongst opposition representatives.
Venezuela’s opposition coalition took majority control over the national assembly in December 2015 leading to a standoff between the executive and legislative branches of government. The new opposition majority would have likely vetoed the government’s proposed budget.