- The Washington Times - Sunday, March 22, 2009

CARACAS, VENEZUELA (AP) - Venezuelan President Hugo Chavez, who has for years funneled state oil income into sweeping social programs, vowed Sunday to cut nonessential state spending and order a review of top officials’ salaries as oil income plunges.

The socialist leader said he plans to sign a decree as soon as Monday targeting “unnecessary spending” on parties, mobile phones, new cars, bonuses and salaries _ some of which he admitted have become “astronomical.”

The move will yield a “modest but very important” reduction in spending, and should cut budget outlays by more than 5 percent this year, Chavez told his weekly television program.

Chavez defended Venezuela’s massive outlays on health, education and social programs, promising not to cut financing or scale back $100 billion in planned spending on development and infrastructure projects over the next four years.

Some $20 billion of that will in fact be spent this year on infrastructure, public housing, agriculture and other projects, Chavez said, calling the plan an “anti-crisis vaccine.”

High crude prices have boosted public spending and economic growth for years in oil-rich Venezuela. But the country depends on oil for 93 percent of exports and nearly half its federal budget, and crude prices have slipped 65 percent since their July 2008 peak, slashing a key source of income. Economic growth slowed to 4.8 percent last year from 8.4 percent in 2007.

Chavez on Saturday said his government will revise its 2009 budget to reflect a 6.7 percent decrease in public income and crude prices of $40 a barrel, not the $60-a-barrel forecast last year. Prices for Venezuelan crude averaged about $43 a barrel last week.

To compensate, the government plans to boost sales taxes to 12 percent from 9 percent and sell the equivalent of $10.2 billion in local-currency bonds to raise cash. Planning Minister Jorge Giordani said the sales tax hike would mean a $4.2 billion increase in state revenue.

Analysts warned the measures would further fuel Venezuelan inflation, which at 29.5 percent in Caracas in February is the highest in Latin America.

Chavez’s political opponents, meanwhile, criticized the measures saying taxpayers would bear the economic brunt.

“How is it possible that after so much oil income, so many handouts to other countries and so much waste, it occurs to him to raise taxes on the people?,” opposition politician Julio Borges said.

“They’re taking money out of Venezuelans’ pockets,” said opposition leader Manuel Rosales, the mayor of Maracaibo. The new measures “don’t at all solve the serious economic crisis.”

Chavez hasn’t announced any plans to trim the government payroll, which has ballooned to about 2 million public employees in his decade in office.

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