• Venezuela's external debt rose to $156 billion in 2018, a new report estimates.
  • That means the amount it owes is about 738% of the value of exports.
  • As oil exports continue to decline, debt will pile up at an increasing rate.

As Venezuela's crisis deepens, it's spiraling further into the red.

External debt in the collapsing country has more than doubled over the past decade, economists at the Institute of International Finance estimated in a new report, rising to about $156 billion in 2018.

That means the total amount owed by Venezuela is about 738% of the value of its exports, more than four times what is typical in emerging markets. (Debt-to-gross domestic product estimates weren't included due to Venezuela's lack of government data, multiple exchange rates, and high levels of inflation.)

"The creativity of policymakers in tapping alternative sources of financing as policies deteriorated and bond markets closed resulted in atypical debt composition for the standards of emerging markets," wrote Sergi Lanau, deputy chief economist at the IIF.

While it's been cut off from many credit markets, Venezuela's debt has continued to increase from a build-up of arrears, bilateral loans, and legal fees from arbitration cases. The debt-to-export ratio looks poised climb even though new borrowing is not possible, the report said, because of the rate at which oil shipments are falling.

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IIF
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US sanctions imposed last month in attempt to cripple the government of President Nicolas Maduro have further squeezed Venezuelas once-booming energy industry, where output was already collapsing. Oil accounts for about 98% of export earnings, according to OPEC .

Reuters reports state-run energy company PDVSA declared a maritime emergency Tuesday as suppliers blocked access to tankers due to unpaid debts, further restraining its ability to export oil. Shipments have dropped by more than a third over the past month.

Debt defaults are common in countries facing hyperinflation, according to Steve Hanke, a professor of applied economics at Johns Hopkins University.

"This is very standard," he said. "Whenever you have a hyperinflation, you tend to observe a lot of unpaid bills. All the sources of traditional finance dry up on you."

Venezuela stopped meeting bond obligations in late 2017. It has missed about $8 billion in principal and coupon payments since then, according to the IIF, and arrears on non-bonded debt instruments were estimated at $2 billion.

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IIF
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