Analysts warn Chavez economic plans insufficient

March 24, 2009 04:03

A set of economic measures introduced by President Hugo Chavez will boost state coffers as oil income falls, but do little to address Venezuela's most serious economic problems, including soaring inflation and slowing growth, analysts said Monday. Faced with plunging oil income, Chavez has asked lawmakers to hike sales taxes and nearly triple domestic debt sales this year. Yet analysts say the measures won't draw enough cash to keep Venezuela from running its first budget deficit since 2003, and will only further fuel Latin America's highest inflation. "The package is concentrated on closing this fiscal gap, but it won't close," said Leonardo Vera, an economist at Venezuela's Central University, who expects the deficit to reach $2 billion this year as oil income slips more than 60 percent to about $31 billion. Venezuela relies on oil for 93 percent of exports and nearly half its federal budget. But world crude prices have slipped 63 percent since their July peak, slashing a key source of income. To compensate, Chavez has asked the legislature to revise its 2009 budget, cutting spending by 6.7 percent in anticipation of $40-a-barrel crude, not $60-a-barrel, as it forecast last year.

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