Maduro Forced to Cut Public Spending on Lower Oil Prices

Venezuela’s President Nicolas Maduro has been forced to cut public spending due to the fall in international oil prices, a situation that his country highly dependent on energy, last resided five years ago.

“I have ordered to make a series of cuts in the budget of the nation, and for that I am naming (…) a special presidential commission for the rationalization and reduction of public spending. What? In luxury spending,” said Maduro Friday night.

He recalled that the budget for 2015 has been calculated using the expected sale at $ 60 a barrel, but which nevertheless do “cuts”, which must also meet public expenditure in the remainder of 2014.

“I have ordered a review of the salaries and wages of all staff of ministries, state enterprises, starting with the President of the Republic is made and make me a proposal for substantial (…) reduction, to set an example” added Maduro.

“This hit by falling oil prices do not take it the wrong way. Always in our vision and revolutionary formation took it as an opportunity to end wasteful, extravagant expenditure, with unnecessary expenditures and to reorient our country towards optimization of its resources, “he said.

Oil is the mainstay of the economy of a country whose foreign exchange availability depends 96 percent of exports of crude oil and derivatives, although the state budget is financed mainly from the collection of domestic taxes.
Maduro said that “in the coming days” give details about which sectors will suffer cuts are announced.

Exactly one month ago, the parliamentary majority related to its management approved the first of two votes fiscal 2015 budget that forecasts revenues and expenses 741 708 000 bolivars, an amount equivalent to 117,731,000 dollars at the rate of 6.30 per dollar, the lowest of the three officers.

The other two existing official rates are not fixed and fluctuate in 12 and 50 bolivars per dollar, which equivalencies 741 708 000 bolivars budget are 61,809,000 and $ 14,834,000 dollars respectively.

On March 21, 2009, the then ruler and mentor Maduro, Hugo Chavez, who died four years later reduced by another drop in oil prices the budget for that year of 77,900 to 72,738,000 dollars, when one ruled in Venezuela only official exchange rate of 2.15 bolivars per dollar.

The average sales price of Venezuelan oil arrived in early 2009 to $ 36 a barrel, almost a third of the average annual current $ 91.74. The Venezuelan oil averaged selling price of $ 98.08 per barrel over the past year, exactly 30 dollars above the $ 68.08 that ended this week.

The alarm has been turned on again because this selling price increasingly further from the barrier of $ 100 “is the current fair price” and that is not obtained since last June. Venezuela produces about three million barrels per day, of which exports about 2.5 million, mainly to the United States and China.The budget cuts will not affect has guaranteed Maduro, government social programs that are crucial for the poor of population Chavista electoral base that relies on maintaining a parliamentary majority in elections in 2015 renewed the seats in the National Assembly government.

In addition to budget cuts, Maduro said his government is “moving” in search of hard currency “to cover the shortfall by falling oil revenues” .Adelantó in this sense that the authorities of the Ministry of Finance and Economy travel to China next week in search of “deepening economic and financing agreements”.

China has already provided to Venezuela so far this year 40,000 million, is insufficient to “oxygenate the fiscal accounts” deficient in at least 16%, according to some analysts agree that the government needs emergency loans at least 16,000 million.