Venezuela Fiscal


Government presents 2014 budget plan, projects increased expenditures

On 22 October, Finance and Planning Minister Nelson Merentes presented the draft budget for 2014 to the unicameral National Assembly. The budget projects that expenditures will reach VEF 550.6 billion (USD 92 billion), which represents a nominal increase of 39.4% over this year's budget.

According to the draft budget, which is based on the assumption of an average price of USD 60 per barrel for the Venezuelan mix of crude oils, 20.8% of total income will come from oil revenues (2013 budget: 21.0%). The assumed oil price is up USD 5 over 2013's budget, but well below the price of USD 100.1 per barrel LatinFocus Consensus Forecast panelists expect in 2014. Venezuelan authorities tend to underestimate the price of oil, as the surplus revenues obtained when oil prices exceed the assumed price gives the Bolivarian administration more discretionary spending power. The government lowered the debt ceiling to VEF 112.7 billion, down from the VEF 116.7 billion established in the 2013 budget.

Nelson Merentes stated that the budget plan was based on an assumption that the official exchange rate would remain at the current VEF 6.30 per USD. This view is not shared by most market participants, who see the VEF trading at 8.74 per USD by the end of 2014, according to the latest LatinFocus Consensus Forecast.

The current draft budget assumes that the economy will grow between 4.0% and 6.0% in 2014 and that inflation will range between 26.0% and 28.0% in the same period (2013: between 14.0% and 16.0%).

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