Jan. 13 (Bloomberg) -- Venezuelan President Hugo Chavez today vowed to trim his nation's debt and funnel $8.7 billion of its international reserves from the central bank to a social spending fund as part of his plan to implement socialism in the oil-rich country.

``We could pay our entire foreign debt with the reserves we have if we wanted to -- that's one of our strengths,'' Chavez said in an annual address to the legislature today.

The use of central bank reserves to fund social spending projects echoes a pledge Chavez made this week to strip the central bank of its autonomy, calling bank independence a ``neoliberal'' concept counter to his vision for Venezuela. Lawmakers have also said the government plans to use international reserves to finance the nationalization of the country's largest and publicly held telephone, power and oil companies.

Venezuela's soaring oil income has allowed it to accumulate about $56 billion in international reserves in the Central Bank in two separate spending funds, Fonden and Fondespa. They were created by Chavez to finance social and infrastructure projects as part of his so-called Bolivarian revolution.

Lower Its Debt

In his speech to the National Assembly, Chavez asked to be granted temporary executive powers to govern by decree so he can speed his reforms.

Chavez said that Venezuela will use some of its oil income to keep lowering its debt burden in coming years.

The country's foreign debt fell 14 percent to $26.9 billion on Sept. 30 from $31.2 billion at the end of 2005, Finance Ministry figures show. Domestic debt fell 3.6 percent to 32.5 trillion bolivars ($15.1 billion) from 33.7 trillion bolivars in the same period.

A reduction in Venezuelan debt, while making the country less vulnerable to economic crises, may boost pressure on the central bank to slow inflation, which at 17 percent, is the highest in Latin America.

The central bank and the Finance Ministry accelerated sales of local-currency denominated bonds by 1,300 percent in the past four years, in part to arrest a surge in the money supply as Chavez more than tripled government spending in the time.

International reserves will also be used to compensate shareholders in Electricidad de Caracas and CA Nacional Telefonos de Venezuela, the country's largest publicly-traded power and telephone companies, Congressional Finance Committee president Ricardo Sanguino said on Jan. 11.

The government will also take ownership of ``all, absolutely all,'' of the country's electricity industry, Chavez added in his four-hour speech to the legislature today.

The congress, which is entirely composed of Chavez supporters following an opposition boycott of legislative elections in 2005, will grant Chavez on Tuesday executive authority to rule by decree for one year, congressional spokesman Alcides Castillo said.

To contact the reporters on this story: Theresa Bradley in Caracas at tbradley7@bloomberg.net.

Last Updated: January 13, 2007 20:01 EST