Collateral damage when crude oil prices decline
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While oil importers are reaping the benefits of falling prices, countries dependent on exports are facing significant hardship because of declining economic activity and falling currencies.
Venezuela is possibly the worst hit as oil is pretty much its only export.
An indication of its prevailing economic condition is that the United Nations last week barred it from voting in the General Assembly because of non-payment of financial contributions.
Now markets are wary that Venezuela will not be able to fulfil its foreign debt obligations and is headed for a default.
Conditions are worsening internally because of a contracting economy and hyperinflation. The International Monetary Fund expects inflation in the country to rise from 275% in 2015 to a high of 720% in the current year.
Given Venezuela’s prior years of disastrous policies, it is a cautionary tale of what can happen when economic mismanagement meets unfavourable global conditions.