Venezuela is in the middle of an economic crisis and it has just $10.5 billion in foreign reserves left. For the rest of the year, the South American country owes $7.2 billion in outstanding debt payments. In 2011, Venezuela had $30 billion in reserves. Venezuela has a mix of falling reserves, high inflation and recession.
If the price of oil stagnates and foreign reserves reach zero, then, a default will be unavoidable. According to the country's 2016 financial report, about $7.7 billion of its foreign reserves are in gold. To make debt payments in 2016, Venezuela shipped gold to Switzerland.
The falling reserves paint a scary financial picture as Venezuela faces a humanitarian crisis sparked by an economic crisis. CNN reports that Venezuelans are suffering massive food and medical shortages, as well as skyrocketing prices.
Inflation keeps growing, exports and imports fall
Exaggerated government spending, a falling currency, mismanagement of the country's infrastructure and corruption are the key factors that have sparked high inflation in Venezuela. This indicator will increase to 1,660% this year and even 2,880% in 2018, according to the International Monetary Fund (IMF).
Another important problem is the low price of oil, which stands at just half of its price in 2014. Venezuela has the biggest oil reserves in the world, and its economy depends a lot on this. Oil shipments make up over 90% of the whole exports, thus, oil is an important factor to grow and pay for imported goods.
This situation makes almost impossible for Venezuela to pay its debts and buy medicine, food and other key products for its population. Scarcity, violence and poverty have become widespread.
Venezuela had a solid economy many years ago but it has deteriorated year after year. We have to add that the imports are shrinking drastically, they fell 50% compared with the last year.