Venezuela's expenditure exceeds income despite high oil prices

Mar 01, 2013 12:00 AM

Historically, high oil prices imply high revenues in US dollars, which are used to pay comfortably the liabilities arising from imports, trips and transport of goods, among other things. However, imbalances in the Venezuelan economy are so serious that the country slipped into deficit in the fourth quarter of 2012.

Although the Venezuelan oil basket recorded a high average of some USD 98 per barrel and the country received as much as USD 24.62 billion in exports, spending, mainly for imports, was so high that the current account of the balance of payments ended in the fourth quarter last year with a deficit of USD 598 million.

The Central Bank of Venezuela (BCV) has attributed the deficit to the 33.9% rise in imports reported in the last quarter of 2012 as compared with the figure recorded a year earlier.

In an attempt to curb the deficit, the country took on further debts, thus reducing its international reserves. Although the amount is not alarming, this is the first time the country is hit by such an imbalance amid a cycle of high oil prices.

The rampant increase in expenditure and the aforementioned deficit led to a new devaluation of the Venezuelan currency in February 2013.

It all seems that the economy of Venezuela, which grew 5.5% in 2012, will slow down.

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