Venezuela is likely to experience rising inflation and limited financing from abroad when President Hugo Chavez takes control of US$12 billion in international reserves, analysts said over the weekend.
Chavez said on Friday the Central Bank was in the process of handing over 28 percent of its nearly US$42 billion in reserves to the government in a bid to maintain broad social spending as oil prices fall.
Venezuela — which relies on oil for nearly half the government’s budget — has seen world oil prices fall more than 70 percent from July’s record highs.
Former Central Bank director Domingo Maza Zavala warned that Venezuela will have difficulty obtaining international financing as the credit market contracts and its diminishing international reserves warn off investors.
Even though Venezuela’s vast oil reserves work as collateral, international reserves reflect on the country’s ability to repay, he said.
“The guarantee that we can call instrumental is the [international] reserves,” Maza Zavala said. “The bigger these reserves are in relation to external debt, the more confidence international creditors will have.”
Under a reform enacted by Chavez four years ago, the Central Bank is obliged to fix an optimal level of international reserves and turn over the rest to a social development fund known as Fonden each year. Some economists and Bank directors contested the decision, saying it hurts the Central Bank’s autonomy.
Caracas-based economist Pavel Gomez said the remaining US$30 billion in optimal reserves established by the bank may not be sufficient to finance debt payments and dollar-denominated imports if the economic situation deteriorates.
An optimal level of reserves “would probably be much higher this year than previous years,” Gomez said.
Venezuela already has the highest official inflation rate in Latin America — closing last year at 30.9 percent. Many economists expect even greater inflation this year, as the Finance Ministry aims for 15 percent.
Separately, OPEC will consider further cuts to oil production if prices continue to fall, Algerian Energy and Mining Minister Chakib Khelil said on Saturday.
OPEC is set to meet in Vienna in March and Khelil said another reduction in output remained a possibility.
“If there is a downward trend at the time of our meeting on March 15, I am sure that everyone would agree on implementing another reduction in oil output to stabilize prices then increase it later,” Khelil was quoted as saying by the APS news agency.
He said he expected the prices to stabilize at around US$45 before “increasing during the third quarter of the year.”
Super Typhoon Kong-rey is the largest cyclone to impact Taiwan in 27 years, the Central Weather Administration (CWA) said today. Kong-rey’s radius of maximum wind (RMW) — the distance between the center of a cyclone and its band of strongest winds — has expanded to 320km, CWA forecaster Chang Chun-yao (張竣堯) said. The last time a typhoon of comparable strength with an RMW larger than 300km made landfall in Taiwan was Typhoon Herb in 1996, he said. Herb made landfall between Keelung and Suao (蘇澳) in Yilan County with an RMW of 350km, Chang said. The weather station in Alishan (阿里山) recorded 1.09m of
STORM’S PATH: Kong-Rey could be the first typhoon to make landfall in Taiwan in November since Gilda in 1967. Taitung-Green Island ferry services have been halted Tropical Storm Kong-rey is forecast to strengthen into a typhoon early today and could make landfall in Taitung County between late Thursday and early Friday, the Central Weather Administration (CWA) said yesterday. As of 2pm yesterday, Kong-Rey was 1,030km east-southeast of Oluanpi (鵝鑾鼻), the nation’s southernmost point, and was moving west at 7kph. The tropical storm was packing maximum sustained winds of 101kph, with gusts of up to 126 kph, CWA data showed. After landing in Taitung, the eye of the storm is forecast to move into the Taiwan Strait through central Taiwan on Friday morning, the agency said. With the storm moving
NO WORK, CLASS: President William Lai urged people in the eastern, southern and northern parts of the country to be on alert, with Typhoon Kong-rey approaching Typhoon Kong-rey is expected to make landfall on Taiwan’s east coast today, with work and classes canceled nationwide. Packing gusts of nearly 300kph, the storm yesterday intensified into a typhoon and was expected to gain even more strength before hitting Taitung County, the US Navy’s Joint Typhoon Warning Center said. The storm is forecast to cross Taiwan’s south, enter the Taiwan Strait and head toward China, the Central Weather Administration (CWA) said. The CWA labeled the storm a “strong typhoon,” the most powerful on its scale. Up to 1.2m of rainfall was expected in mountainous areas of eastern Taiwan and destructive winds are likely
The Central Weather Administration (CWA) yesterday at 5:30pm issued a sea warning for Typhoon Kong-rey as the storm drew closer to the east coast. As of 8pm yesterday, the storm was 670km southeast of Oluanpi (鵝鑾鼻) and traveling northwest at 12kph to 16kph. It was packing maximum sustained winds of 162kph and gusts of up to 198kph, the CWA said. A land warning might be issued this morning for the storm, which is expected to have the strongest impact on Taiwan from tonight to early Friday morning, the agency said. Orchid Island (Lanyu, 蘭嶼) and Green Island (綠島) canceled classes and work
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