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Venezuela: Six billions for social programs

Caracas / AFP
07/22/2005

A new law passed in Venezuela will give President Hugo Chavez an extra six billion dollars to spend on controversial social programs, lawmakers said Wednesday.

The reform of the central bank was passed on Tuesday and gives 20.23 percent of the country's currency reserves, about 29.6 billion dollars, to Chavez' National Development Fund (Fonden), said Rodrigo Cabezas, chairman of the Congress finance commission.

Currency surpluses from oil exports by the state-controlled Petroleos de Venezuela SA (PDVSA) would also go to the national fund which is used for housing, health and hospital construction.

With Chavez facing legislative elections in December and a presidential vote in late 2006, opposition leaders have said he is using the money for political ends. Economists have said the move could stoke inflation, undermine the value of the bolivar currency and is putting the independence of the central bank at risk.
A central bank official, Armando Leon, warned recently that the measure would mean there would be no control over public spending.

Influential economist, Pedro Palma, told AFP: "This law a big step toward the suppression of the autonomy of the central bank and when there are difficulties on the oil markets the government will just force the central bank to finance its spending."