Russian authorities developed a plan to pull its strategic partner Venezuela out of the deep crisis. Venezuela’s economy is in collapse and inflation reached about 1,300,000% last year, Russian publication the Bell reported, citing sources in Russian government.
There are four main points in the proposed package of measures.
First, Russian economists offer to introduce a basic income for Venezuelan households. They claim a basic income is a more effective measure to combat poverty than fuel subsidies that the government intended to introduce beginning January 1, 2019. “Real money can be spent both on fuel and the household necessities,” said an interlocutor familiar with the proposals.
Second, Russian officials propose to stop funding the budget deficit with new currency. In August last year, Maduro removed five zeroes from the currency and reissued it as the “sovereign bolivar,” but without any actions to reduce the budget deficit, the currency soon lost 95% of its value against the dollar.
Third, Russian economists proposed that Venezuela implement tax reforms, following the example of Russia, moving to indirect taxation instead of direct taxes.
The fourth measure proposed by Russia involves an increase in oil production and maximum export diversification.
It is not known if the Venezuelan government is ready to implement the recommendations of Russian officials, the news outlet reports. However, they got the important things they needed from Russia after the meeting with Maduro in early December. As a result of the talks, Maduro stated, Russia is investing over $5 billion into Venezuela’s oil industry and over $1 billion into the mining industry. Russia will also supply 600,000 tons of grain to the country.
From 2006, the Russian government and Russian oil giant Rosneft provided at least $17 billion in loans to Caracas.