Fitch: Opaque off-budget spending weighs on Venezuela

Fitch Ratings said the growth in off-budget spending has decreased the transparency of Venezuela's public and external accounts and increased their discretionary character. Information on these funds' balances, quality of investments and cash flows is limited, thus increasing the challenges to assess the sovereign's actual financial strengths and vulnerabilities, the agency said.

In addition, "the policy choice of transferring an increasing share of the oil windfall to opaque and highly discretionary mechanisms has resulted in a visible deterioration in Venezuela's external and fiscal credit metrics in spite of exceptional oil prices," Erich Arispe, director in Fitch's Latin America sovereigns group, said in an agency news release.

On April 4, Fitch revised Venezuela's outlook to negative from stable and attributed the change to Venezuela's weakening policy framework, which has resulted in increased vulnerability to commodity price shocks and deterioration in credit metrics, as well as rising political uncertainty related to the 2012 electoral cycle.

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