By FABIOLA SANCHEZCARACAS, Venezuela (AP) ¿ A set of economic measures introduced by President Hugo Chavez will boost state coffers as oil income falls, but do little to address Venezuela's most serious economic problems, including soaring inflation and slowing growth, analysts said Monday. Faced with plunging oil income, Chavez has asked lawmakers to hike sales taxes and nearly triple domestic debt sales this year. Yet analysts say the measures won't draw enough cash to keep Venezuela from running its first budget deficit since 2003, and will only further fuel Latin America's highest inflation. "The package is concentrated on closing this fiscal gap, but it won't close," said Leonardo Vera, an economist at Venezuela's Central University, who expects the deficit to reach $2 billion this year as oil income slips more than 60 percent to about $31 billion. Venezuela relies on oil for 93 percent of exports and nearly half its federal budget. But world crude prices have slipped 63 percent since their July peak, slashing a key source of income. To compensate, Chavez has asked the legislature to revise its 2009 budget, cutting spending by 6.7 percent in anticipation of $40-a-barrel crude, not $60-a-barrel, as it forecast last year.
But analysts said the socialist leader should've cut spending more, and warn that his plan to hike sales taxes to 12 percent from 9 percent and to triple local debt sales to the equivalent of $15.8 billion this year will only fuel continued spending. Banks will be pushed to use excess cash to buy the newly issued debt, tightening credit available for consumer and other lending that might otherwise boost sagging growth, said Leonardo Buniak, an economist at Leonardo Buniak & Asociados, a consulting firm in Caracas. Growth slowed to 4.8 percent last year from 8.4 percent in 2007, and the economy could contract by 1.5 percent in 2009, according to the Caracas-based consulting firm Ecoanalitica. Higher sales taxes will meanwhile boost consumer prices, fueling Caracas's 29.5 percent annual inflation, said Jose Manuel Gonzalez, head of Venezuela's largest business chamber, which represents hundreds of local businesses. Currency exchange caps also force importers to buy dollars on the black market for as much as three times the official, fixed rate, further inflating consumer prices. Chavez has promised to raise the country's minimum wage by 10 percent in May and 10 percent in September to boost Venezuelan's buying power. But that move will likely only further drive inflation, which could approach 40 percent this year, some analysts said.