Venezuela's foreign debt breaks USD 102 billion ceiling
Skyrocketing government expenditure is weakening public finance
Public spending is vital to fund housing programs and boost consumption. Over the last 12 months, the central government's spending, after inflation, has climbed by 26%. High oil prices and tax collection have failed to meet growing spending. Therefore, the government has been forced to issue new debt bonds.
Central bank's data indicates that, for the first time ever, by the end of the third quarter Venezuela's foreign debt broke the USD 100 billion ceiling. It currently stands at USD 102.3 billion, jumping 103% in four years and USD 5.5 billion in July-September only.
Likewise, debts to the Venezuelan banking system skyrocketed amidst constant bond sales. According to Barclays Capital, considering the size of the economy, Venezuela's debt both in US dollars and local currency (bolivars) will account for 51.6% of the GDP, therefore, doubling the figure recorded in 2008.
Although the debt-to-GDP ratio is still manageable, debt is growing at an unsustainable speed. Apparently, Hugo Chávez' Government will have to cut expenditure and adjust the fixed foreign exchange rate in order to bridge the gap between expenditure and income, which according to some estimates, fluctuates between 15-19% of GDP.
Adopting such steps will bring down economic growth in 2013.
Translated by Jhean Cabrera
A shipment of over 30,000 tons of phosphate arrived at Puerto Cabello port in late July on board the Shi Long Ling, a Chinese-flagged vessel that began its long journey in northern Africa. The cargo boat docked on July 26 after traveling more than 3,200 nautical miles. Undoubtedly, this would just be considered one in many cargo ships crisscrossing the oceans if it were not for the fact that Venezuela has denounced Western Sahara occupation by Morocco and yet purchases the territory's natural resource products from the occupying power.