The Venezuelan government's model of securing support from potential voters will not be sustainable for much longer. Government revenue is already well below the level necessary to maintain its spending. According to several estimates, Venezuela needs the global price of oil to stay between $120 and $160 per barrel to meet its current spending needs. Although Venezuela ostensibly has a balanced budget (in which it calculates the price of oil at an artificially low $60 per barrel), during the presidencies of Chavez and Maduro, Venezuela has run a fiscal deficit in which additional appropriations are used to plug gaps in the budget. Such spending (which is mostly used to fund PDVSA and other state-owned enterprises) has increased steadily in recent years and jumped from 111 billion bolivars ($17.65 billion) in the first eight months of 2013 to 280 billion bolivars during the same period in 2014. Most likely, the main reasons for this increase are the need to keep pace with rampant inflation and the imperative to prop up faltering state businesses.
This increase in spending has led to a sharp rise in the amount of bolivars in circulation over the past several years, which in turn has exacerbated Venezuela's inflation. In August, the government acknowledged a year-on-year increase in inflation of more than 60 percent as the overall money supply increased by about 58 percent. During the past four years, the country's monetary supply increased from about 285 billion bolivars to more than 1.5 trillion bolivars. This expansion, along with shortages caused by food smuggling and bottlenecks in imports, will continue spurring Venezuela's inflation. And as the economic situation becomes more precarious, the Maduro administration will have a hard time managing its debt and social programs.
