CARACAS: President Hugo Chavez said Friday that Venezuela will base its 2010 budget on expectations of 0.5 percent economic growth and inflation no higher than 22 percent, despite depressed world prices for oil, the nation's biggest export.

Venezuela's economy contracted 1 percent in the first half of the year — down from 6 percent growth a year earlier. Venezuela is also battling the highest inflation rate of any Latin American nation, reaching 26.7 percent in August.

Chavez said the nation expects to lower inflation to between 20 and 22 percent next year, but he did not say what measures the government would adopt to reach that goal. He also reiterated plans to boost growth and generate employment by increasing spending in areas including construction.

Next year's budget will be based on prices of $40 a barrel for Venezuela's heavy crude, which sells for roughly $5 a barrel less than benchmark light, sweet crude. Chavez added that the estimate is conservative, as the government expects Venezuelan oil to average $60 to $70 next year.

"We are obliged to be prudent," Chavez said.

He added that Venezuela could increase this week's debt sale of $3 billion in dollar-denominated debt bonds by as much as $1 billion after investors solicited some 6.5 times more than the amount offered. Venezuela announced the domestic bond sale Monday as part of a plan to help finance public spending.

The sale will bring Venezuela's total debt sales this year up to $15.8 billion, the amount approved by the National Assembly earlier this year, Chavez said.

The socialist leader said last week that Venezuela will also pay off more than $4.6 billion in oil industry debts by the end of the year and provide loans to businesses in sectors including manufacturing and construction to stimulate economic growth.