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UPDATE 2-Venezuela 2016 budget sees 6.3/dlr forex rate maintained
October 20, 2015 / 6:48 PM / 2 years ago

UPDATE 2-Venezuela 2016 budget sees 6.3/dlr forex rate maintained

(Adds inflation and currency items)

By Corina Pons

CARACAS, Oct 20 (Reuters) - Venezuela’s proposed 2016 government budget foresees the maintenance of the OPEC nation’s strongest official exchange rate of 6.3 bolivars per dollar despite speculation of a devaluation after December parliamentary elections.

The budget document, seen by Reuters, also forecast annual inflation of 60 percent. That would likely be less than this year’s inflation which President Nicolas Maduro has predicted at 80 percent but most economists expect to surpass three digits.

Earlier, presenting the proposed budget to parliament, Finance Minister Rodolfo Marco said it was based on an estimate of $40 per barrel of oil for Venezuela’s exports.

The budget calls for spending of 1.55 trillion bolivars, Marco said, equivalent to $247 billion at the strongest official exchange rate and more than double the amount budgeted for 2015.

Low oil prices and an increasingly dysfunctional socialist economic model have left Venezuela struggling with chronic product shortages, soaring prices and a contracting economy.

Analysts believe Maduro is waiting to get through December’s vote for a new National Assembly, with polls showing the economic crisis weighing heavily on his ruling Socialist Party’s prospects, before enacting possible reforms.

Critics have said Venezuela’s currency controls, with three rates ranging from 6.3 to 200 bolivars per dollar, and restricted access to greenbacks for importers are major factors behind the current recession, along with the fall in global oil prices.

The dollar goes for more than 750 bolivars on the black market.

“This budget will allow us to return to the path of economic growth,” said Marco. He did not say what estimates of inflation or GDP growth were used as the underpinnings of the budget.

The government said in a securities filing this month that GDP contracted 4.0 percent in 2014, though the data may have referred only to the first three quarters of last year.

The central bank this year has not published any official inflation or economic growth figures, which has further spurred investor concerns of a potential default on foreign debt.

Marco dismissed such concerns as rumormongering by political adversaries.

He sought to assure lawmakers that the government has the resources to pay down state oil company PDVSA’s $1.41 billion 2015 Bond, which matures on Oct. 28, and to pay a $2.05 billion amortization on the PDVSA 2017 bond .

Maduro says the country’s economic problems are the result of an “economic war” carried out by business leaders with the support of opposition politicians.

His critics point to price controls, currency controls and inefficient state-run companies as the principal culprits. (Reporting by Caracas newsroom, writing by Brian Ellsworth and Andrew Cawthorne; Editing by Matthew Lewis, Toni Reinhold)

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