In Venezuela, Spending Cuts Are Not Enough

With increased foreign exchange restrictions now legally in effect, the Venezuelan government is rationing its limited pool of dollars to continue funding imports and foreign debt payments this year. On April 12, anecdotal evidence emerged in the Venezuelan press of increased lines at public banks as citizens sought access to their allotted amounts of foreign currency. On April 10, the National Foreign Trade Center (Cencoex) cut disbursements of foreign currency to travelers by nearly 70 percent in some cases. The move limits outflows of dollars from the Venezuelan government, thereby saving more for crucial payments and imports to avoid default and stave off social unrest. However, the move will make it harder for Venezuela's citizens and the already struggling private sector to repatriate profits or fund operations.