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Venezuela begins payment of debt by over 1,700 billion

Venezuela begins payment of debt by over 1,700 billion

Posted by Dubraswka Aguilar on October 07, 2014

Venezuela has withdrawn money from its central bank reserves to start paying roughly $1.786 billion in debt, a high-ranking government source told Reuters on Monday, allaying fears the Socialist-run country might opt to default.

Venezuela has to service roughly $1.498 billion due from its Global 2014 bond on Wednesday and about $250 million in coupons as of next week. The country has to pay a total of around $5 billion in sovereign bonds and bonds issued by state oil company PDVSA this month.

"Yes, it was for the payment," the source said when asked if international reserves had dropped ahead of the debt service. With the $1.786 billion drop on Friday, international reserves stand at $20.012 billion, the lowest level in over a decade.

Investors have become increasingly concerned about the country's economy, which is widely believed to have slipped into recession this year, and worry that President Nicolas Maduro is delaying reforms needed to shore up government finances.

Fears of a possible default had heightened, with bond yields spiking, after the publication of an article by two pro-opposition economists in the last month that suggested an orderly default could ultimately help the OPEC country's slumping economy.

Slamming what he deemed an international campaign to sully Venezuela, Maduro vowed to pay debts "down to the last dollar," leading bonds to recover somewhat.

Like his predecessor, the late Hugo Chavez, Maduro often accuses the United States or financial speculators of plotting to torpedo the self-styled socialist experiment.

While many analysts say default fears are overblown, there is worry about Venezuela's growing debt obligations amid a fiscal deficit, over 60 percent annual inflation and strict currency controls that have led to a shortage of dollars.

Venezuela has to pay over $6 billion in debt in 2015; around $7 billion in 2016; and over $14 billion in 2017, according to Thomson Reuters data.

"I'm not worried about 2014," said Asdrubal Oliveros, an economist with Ecoanalitica in Caracas. "I'm worried about the future," he said, adding the government's maneuvering room is dwindling.

 

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