Merida, October 24th 2012 (Venezuelanalysis.com) – Yesterday the national executive presented its budget for 2013 to the national assembly. The budget is for Bs 396.4 billion (US$ 92.2 billion) in both spending and income, and is primarily directed towards social and productive investment.
The overall budget is a 33.09% increase compared to the one approved for 2012.
The minister for planning and finances, Jorge Giordani, presented the budget to the assembly, saying that it aims to develop the five “historical objectives” contained in President Hugo Chavez’s proposed national plan for 2013-2019. After grassroots debate, the plan will be presented to the national assembly on 10 January.
Economic factors and income
The budget’s income estimation is based on an average price of $55 per oil barrel, a cautionary estimate well below the current price of $105.94, though up $5 from last year’s budgeted oil price.
In 2008 the price of oil dropped from $140 per barrel to less than $40 per barrel as a result of the world financial crisis. Oil is Venezuela’s main export and a major source of income, and the government always assigns any extra income received throughout the year to social projects, infrastructure, governors, and mayors, according to need.
Giordani explained that petroleum income in next year’s budget only accounts for Bs 83 billion, or 21%, with the rest coming from taxes (Bs 205 billion) and other funds, such as joint funds with China. In 2012 oil income accounted for 55.4% of the budget.
Seniat is the government body which collects various taxes, and this year the budget estimates that it will collect Bs 121.2 billion in IVA taxes (the tax applied to non essential goods), and Bs 54 billion in income tax, applied to profits or very high incomes.
The budget also estimates that Venezuela’s GDP will grow by 6%, and inflation will be located between 14% and 16%. Yearly inflation in September this year was 18% and GDP growth for the first half of the year was 5.6%.There will be no devaluation of the bolivar; its exchange rate will remain fixed at 4.3 Bs to the US dollar.
Social investment for next year, which includes health, education, housing, public services, community, and social security, will be 37.7% of the budget. As a percentage, this is slightly less than last year (40%), but it is equivalent to Bs 147 billion, which is more than last year’s Bs 115 billion.
Further, the social spending figure doesn’t include social investment by Petroleos de Venezuela (PDVSA), and the National Development Fund (Fonden). Since its formation in 2005, Fonden has assigned US$ 92 billion to 442 social-productive projects around the country.
Of the money assigned to social investment, the education sector will receive the highest amount, equivalent to 11.7% of the budget, or Bs 46.2 billion. 9.9% of the budget, or Bs 39.3 billion, has been assigned to social security, and 8% of the budget, or Bs 31.6 billion has been assigned to the health sector. The national executive assigned 4.9%, of the budget, or Bs 19.5 billion to social development and participation.
Giordani also reported that transfer of resources to the grassroots has increased by 49.1% this year compared to last year. So far this year Bs 4.47 billion have been transferred to grassroots organisations such as communal councils, he said. The figure doesn’t include extra-budget allocations, such extra oil income allocated to grassroots projects, and indirect funding of community councils through other government institutions and through state governments.
Bs 5.9 billion, or 1.5% of the budget has been assigned to housing and urban development, which doesn’t include other resources from the Simon Bolivar Fund. Bs 3 billion (0.8% of the budget) have been assigned to culture and communication. The executive also assigned Bs 2.01 billion to science and technology (0.5% of the budget).
On top of these assignations, there is also other funding designated especially to Venezuela’s social missions, such as the food mission, the mission for single mothers, and the health mission Barrio Adentro. The amount is Bs 5.9 billion. According to Giordani, the focus of this spending is to increase “protagonistic participation” in the missions.
In contrast, the US has assigned 26% of its 2013 budget to national security. The Venezuelan ministry for defence has been assigned Bs 32.15 billion, or 8% of the budget.
National assembly legislator Fernando Soto Rojas said the 2013 budget is “essentially humanist, because it attacks poverty, critical poverty, and because it guarantees continuity to the policy of social investment”.
Readers can see a detailed breakdown of the budget here (in Spanish).