The inflation rate reached 30.9% in 2008, an 11-year high, according to the latest release from the Venezuelan Central bank. The bank also said prices rose 31.9% in the capital, Caracas, the highest level since 1997, outstripping the 2007 figure, 22.5%.
Venezuela's 30.9% inflation is the highest in Latin America. The Finance Ministry expects 15% inflation in 2009, but economists say prices will more likely climb by 28 to 35%. The Central Bank raised interest rates once last year to try to slow the surge. The Venezuela economy expanded 4.8% in 2008 â€" down nearly half from 8.4% in 2007 â€" as its economy began to cool after expanding rapidly for years and as prices plummeted for the country's main export fiscal revenue, oil. Finance Minister Ali Rodriguez is forecasting 6% growth for 2009, but the UN Economic Commission for Latin America and the Caribbean, Cepal predicts a 3% expansion. Oil accounts for 94% of Venezuelan exports and nearly half its federal budget, and falling crude prices are pinching the public spending that fuelled the country's recent boom. President Hugo Chavez vows to continue oil-funded social programs, including subsidized food and cash benefits for single mothers. But the country's Assembly based this year's budget on the assumption of a 60 US dollars the barrel of oil. Yet even as growth slows, inflation persists in Venezuela's heavily regulated and import-reliant economy, where price gains are slashing buying power. Falling oil prices, which have slowed inflation in countries across Latin America, may in fact accelerate price gains in Venezuela, former Central Bank director Domingo Maza Zavala said. The government is preparing an economic package to battle the downturn, but has no plans for new taxes or currency devaluation, Minister Rodriguez said last week. However some analysts expect President Hugo Chavez to eventually make painful cutbacks, but doubt he will announce such measures until after a referendum on abolishing presidential term limits, expected in February. If he wins, Chavez would be able to run again in 2012 and beyond, Meanwhile opposition leader Julio Borges accused the administrations of President Hugo Chavez of squandering 53 billion US dollars overseas in the last ten years. During a press conference in Caracas Borges claimed that President Chavez made out "political handouts" to the tune of 19 billion to Cuba; 8.5 billion to Argentina; 5.6 billion to Ecuador; Brazil, 5.25 billion; Nicaragua, 5 billion US dollars. "This is evidence of President Chavez cynicism when he recently declared he must look after Venezuelan peoples' dollars and we are shocked to see that his political patronizing has exceeded the central bank's international reserves", he added. Mr. Borges was particularly critical of a recent decision from monetary authorities which cut by half the US dollars (from 5.000 to 2.500) overseas travellers can purchase once a year.