22 January 2016•Update: 22 January 2016
NEW YORK
Inflation in Venezuela could reach 720 percent in 2016 due to falling oil prices and scarcity of goods, the IMF warned Friday.
"In Venezuela, longstanding policy distortions and fiscal imbalances were already having a deleterious effect on the economy before the collapse in oil prices," IMF Western Hemisphere Director Alejandro Werner said in a statement.
"A lack of hard currency has led to scarcity of intermediate goods and to widespread shortages of essential goods --including food -- exacting a tragic toll. Prices continue to spiral out of control, and we expect inflation to rise to 720 percent this year, from a world-high inflation of about 275 percent in 2015," he added.
Venezuela's central bank announced last week that inflation had reached 141.5 percent last September and that the economy shrunk 7.1 percent during the third quarter.
Werner noted that Venezuela's economic issues worsened due to falling oil prices.
The country is a major oil producer that depends on sales and exports of the commodity to generate revenue for a significant portion of its economy.
It produced approximately 2.3 million barrels per day of crude in December, according to an OPEC report.
The production level has remained steady since 2014 despite a 77 percent decline in prices since June 2014.
As a member of OPEC, Venezuela has strongly advocated for the cartel to trim its oil output, in order to combat plummeting prices.
But despite support from Iran and African members, OPEC has resisted cutting output.
While oil prices hover around $30 per barrel from low demand and oversupply, one of the country’s former finance ministers said last October that Venezuela’s 2016 budget is itemized at a base price of $40 per barrel for oil.
Its total budget for 2016 stands at $247 billion.
