Venezuela to Cut Spending: Moody’s

Moody’s says that Venezuela’s strong external asset position will provide a cushion if the current drop in oil prices deepens, but it will have to significantly reduce spending if the downturn in oil prices becomes a long-term trend. Until now, says Moody’s, Venezuela has been spared of the global financial crisis since it has little dependence on external capital inflows given its large oil exports. However, the drop in oil prices, which have gone from $140 in June to under $55 this month, pose a challenge for the country’s fiscal and external accounts, which calls for a cut in public spending. Moody’s says that has announced a more austere budget for 2009 and will likely benefit from financial assets close to one-third of GDP, with provides short-term flexibility. Venezuela’s B2/B1 government bond ratings are supported by its sizable energy exports, Moody’s says, adding that it has had the country’s ratings on review for possible upgrade since September 19.