Some 850 Venezuelans join government payroll each day

Imbalance in Venezuela's public accounts is tremendous. The gap between the public income and spending stands at 15% of gross domestic product (GDP). Therefore, it is above the level reported by some symbolic countries facing the European crisis, such as Greece (10%) and Ireland (13.4%).

High oil prices and tax collection have failed to meet skyrocketing public spending, including the growing number of pensioners and civil servants, the allocation of US dollars at a low foreign exchange rate, and subsidized food, gasoline, and public utilities.

Based on data compiled by the National Statistics Institute (INE) and the Venezuelan Institute of Social Security (IVSS), at the end of 2002 the number of civil servants and pensioners was 1.9 million. By the end of September 2012, the number jumped to 4.89 million.

Consequently, the number of public servants and pensioners soared 156% over the last 10 years. On average, 850 people joined the government payroll each day.

To make ends meet, the Venezuelan Government has pondered some moves, including devaluation as a means to obtain more bolivars per petrodollar, an increase in public utilities rates, and a tax reform.

However, such measures may undermine people's purchasing power.

In the meantime, since President Hugo Chávez is facing cancer again, there is the possibility of holding a new presidential election in the medium term. Additionally, the economic cabinet is considering taking on further debts, issuing more bolivars via the Central Bank of Venezuela (BCV), and using some funds deposited abroad.

Should the Government take such actions, inflation will escalate, the GDP-debt ratio (currently at 50%) will increase, and the structural imbalance will remain the same. 

vsalmeron@eluniversal.com

Translated by Jhean Cabrera