VENEZUELA: Government Lacks Consensus on IMF Proposal

By Humberto Márquez Reprint | | Print |

Humberto Marquez

CARACAS, Feb 1 1996 (IPS) - The Venezuelan government lacked the internal support needed to meet the economic and fiscal conditions of a loan from the International Monetary Fund (IMF) this week.

Caracas hoped to raise three billion dollars with this agreement but is holding back because the government and the IMF cannot agree on the adjustments needed to guarantee the loan, and neither the business nor political sectors are backing them.

The thin support or closed opposition of unions and parties also provoked a spate of demonstrations last week, objecting to sudden increases in the cost of living, which the government fears may continue if the IMF loan is approved.

Finance Minister Luis Matos told Parliament Tuesday that he has so far not signed the IMF agreement because the government “is not down on its knees yet.”

Meanwhile, Parliament is calling for “a coherent economic policy.”

The IMF resources will shore up the Central Bank reserves, to help it resist the sudden rush on blocked resources when the exchange controls imposed by President Rafael Caldera in June 1994 are lifted.

Matos told parliament that this control will be eliminated in May, changing the expected date for the loan agreement.

Discussions of the issue began in October, and the offer was expected to be sealed by December or January.

The government went to the IMF when it was struck by an external payments crisis in the third quarter of 1995, taking with it objections to the Fund’s package of measures which Caldera had argued against since before he became president, in 1993.

Initially, the government proposed “gradual adjustments without shocks” in the economy, but later it threw these demands overboard, along with the eight economic programmes drawn up since February 1992.

The measures to reduce the fiscal deficit are at the centre of the row, both within the country and with the fund. Matos estimated overspending at 7.5 points of the Gross Domestic Product (GDP) in 1996 or a third of the 15 billion dollar budget.

The Executive proposed reducing the deficit to 2.5 percent of the GDP by increasing some taxes and bringing in a provisional tariff on banking debits, while refusing to increase national petrol prices.

The IMF considers the uctive aparatus,” which, ignoring the petrol sector, has suffered three consecutive years of recession.

Carmona and the advertising magnates Fernan Frias and Roberto Coimbra proposed increasing petrol prices to 8.6 US cents, as opposed to the present three, claiming that the agreement with the IMF will serve as an “inspiration and guide” for economic reanimation.

The government wants petrol to remain outside the Congress package and the negotiations with the IMF, remaining “an issue reserved for the president of the Republic.”

In the meantime, the population will face tough changes without the benefits of an agreement with the Fund, dealing with food prices which increased by a third in the last month and 40 percent increases in the cost of basic services.