MercoPress. South Atlantic News Agency

Venezuela appeals to reserves to sustain public spending

Venezuela will spend 1.65 billion US dollars from its National Development Fund in the first quarter to sustain public spending after a drop in international crude prices and the global slowdown have affected the country, said President Hugo Chavez.

In a live broadcast to the nation President Chavez last week reiterated that his government has plans to invest 225 billion US dollars in oil and non-oil projects over the next four years. "Venezuela's socialist economic policies will help shield it from the effects of the global recession" underlined the populist leader. "We have enough resources to attend to the needs of the country" he added. Economists predict Venezuela's economy will enter a recession this year following the collapse of the oil price last July, which accounts for 93% of Venezuela's exports. Morgan Stanley predicts the economy will shrink 1 percent, while Barclays Plc forecasts a contraction of 4.1%. "This crash -- it's already being talked about as the perfect storm -- could be worse than the 1930s" Chavez said, referring to the global financial crisis. "Thanks to the people, 10 years ago this revolutionary government arrived, and we are prepared to face the challenge with our Bolivarian principles". Meanwhile it was announced that inflation has accelerated with consumer prices rising 2.4% in Caracas in January from December with an accumulated annual inflation of 30.7%, the highest in Latin America. However Chavez said the central bank's inflation index doesn't take into account services provided for free through government programs, such as healthcare, and said that the bank's inflation methodology should be changed. "The only way to beat inflation is with Socialism" the president insisted. Chavez then underlined that his administration will use money saved in the National Development Fund and in a separate development fund started with China to maintain spending this year even as oil revenue falls. Last month the government took 12 billion US dollars from central bank's reserves, which will be used for development projects. Service providers to the country's huge oil corporation Petroleos de Venezuela SA claim the company hasn't been paying bills and is accumulating debts.