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Minister Giordani: Increases in the IVA and internal debt will cover decline in oil prices

According to Jorge Giordani, Minister of People’s Power for Planning and Development, increases in the value-added tax (IVA, a sales tax) and internal debt will cover the decline in income generated by the reduction in oil prices, from 60 to 40 dollars a barrel, on which the national budget is based.

The three percent increase in the IVA, an increase of approximately $10 billion in internal debt, and the reformulation of the 2009 national budget based on oil prices of $40/barrel, with a production of nearly 3.2 million barrels per day, are all part of the “anti-crisis” measures announced by President Chávez on Saturday.

In an interview with journalist Carlos Croes, from a private television channel, Giordani indicated that every percentage point increase in the IVA, which will move from 9% to 12%, is equivalent to an increase in government revenues of approximately $1.4 billion.

Regarding internal debt, the Planning and Development Minister said that it is a small increase that is due to the fact that loans are impossible to obtain in the international market.  “Therefore we have to go to the internal market, to paper, and that can be done.  We have done the calculations; our financial sector has the capacity to do it,” he explained.

He affirmed that these are strictly monetary measures that Venezuela has previously used.

Giordani further expressed that a 6.7% reduction in public spending in the national budget, from approximately $78 billion to $73 billion, was the first measure proposed by the government.

About a measure to reduce the salaries of high level government officials, which was also announced by the President, Giordani said that the salaries of officials in other government branches (judicial, electoral, legislative and citizens) would have to be regulated through a law to cap salaries.  In the case of executive branch officials, he noted, the President would only have to write “an instruction that would not be submitted for discussion and would go into effect.”

“For other branches of government, the President can make suggestions, and the National Assembly is there.  If it is a salary law, it would have to regulate it for all branches,” he explained.

Referring to the minimum wage, which will increase by 10% in May and another 10% in September, Minister Giordani indicated that Venezuela has one of the highest minimum wages in the region, currently at $372.  He noted that the wage has been rising and has been one of the President’s central policies.  The Minister explained that the wage increase will include pensioners.

He concluded by emphasizing the best aspects of education, health and social welfare policies.  “This government has made an effort to pay and clear the social debt,” Giordani said.

Agencia Bolivariana de Noticias, Embassy of the Bolivarian Republic of Venezuela Press Office / March 23, 2009

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