- IMF figures show country’s holdings fell in February, March
- President Maduro battling inflation, recession, shortages
Venezuela has ratcheted up efforts to sell off its gold holdings and raise the cash needed to fund imports and pay back debts after the collapse in oil throttled the economy.
The country cut its gold reserves by 16 percent in the first quarter, following a 24 percent reduction in 2015, according to data from the International Monetary Fund. The 1.38-million ounce reduction was the largest by any central bank since Switzerland sold 3.2 million ounces in the third quarter of 2007, and coincided with continued increases in gold reserves in mainland China.
Venezuela has been thrown into turmoil by the collapse in oil prices, and President Nicolas Maduro faces rising political tensions amid runaway inflation, a contracting economy and shortages of some basic goods. Vice President for Economic Policy Miguel Perez Abad said this month that Venezuela will continue to use international reserves to help meet its commitments, while cutting back on imports.
As Venezuela’s gold holdings fell in the first quarter, prices surged 16 percent, the most in three decades. The country’s hoard, which stood at 8.77 million ounces at the end of 2015, was unchanged in January, dropped to 7.67 million ounces in February and contracted to 7.4 million ounces in March, IMF data show. The World Gold Council this month said Venezuela’s gold holdings made up 66 percent of its total reserves. Spot bullion traded at $1,218.95 an ounce at 10:45 a.m. in New York on Wednesday.
Officials have repeatedly said the country will honor its financial obligations in full and without delay. In February, Trade Minister Jesus Faria said every debt payment this year was guaranteed, including those near term, as well as in October and November. The same month, central bank President Nelson Merentes said the country will continue to make debt payments.
The possibility that the country may be tempted to sell some bullion to raise funds was flagged in August by Citigroup Inc., which listed Venezuela as a potential seller amid concern that it may default. The nation is one country that may be at risk of selling part of its holdings after oil fell, analysts including David Wilson wrote in a report.
Venezuela’s gross domestic product will shrink 8 percent this year after contracting 5.7 percent in 2015, according to the IMF, which forecasts that inflation may climb to almost 500 percent. The reduction in imports this year means the country will have enough cash to honor its bond payments in 2016, according to Eurasia Group and EMSO Asset Management.
The country shipped almost 60 metric tons of gold to Switzerland, a major refining hub, in the first quarter, Swiss Federal Customs Administration data show. Swiss imports from the South American country totaled about 12 tons last month, the data show.