Venezuela's state oil company says it has agreed to pay down a US$1 billion loan secured from its United States-based affiliate over a year ago.

Petroleos de Venezuela SA said in a statement it would start paying the loan from Houston-based Citgo Petroleum Corp this month.

Fitch Ratings had said the loan granted PDVSA to help pay for the 2007 nationalisation of heavy oil projects caused "considerable concern".

The agency downgraded Citgo's credit rating a notch to a junk-grade double-B-minus after the loan was announced in December 2007, and has not lifted it since.

Venezuela is banking partially on revived oil prices to push economic growth in the second half of the fiscal year.

Finance Minister Ali Rodriguez said growth will still be hurt by the world financial crisis but will likely improve over the first quarter - when gross domestic product expanded just 0.3 per cent, down from 5 per cent a year earlier - Venezuela's state-run Bolivarian News Agency reported.

Venezuela set an official growth target of six per cent in 2009, but officials have since said that could be lowered, without naming a new estimate.

President Hugo Chavez's government is heavily reliant on oil, which provides 93 per cent of export revenue. Plummeting world oil prices have prompted the government to tighten currency controls that limit importers' access to dollars, and state oil company Petroleos de Venezuela SA has racked up billions in dollars in debt owed to contractors.

But PDVSA has since begun to pay down those debts, which stood at $5.6 billion in June, and Rodriguez said the payments "should fuel the country's economic activity a little more."

World crude prices are still 54 per cent below last July's peak, but have risen 70 per cent from December levels.

Benchmark crude is trading at or around US$70 per barrel.

Rodriguez also said economic growth will be aided by government investments in agriculture, industry and other sectors.

Last Thursday Venezuela and China signed a US$7.5 billion deal to jointly build a new railway in Venezuela.

The government has also approved US$1.5 billion to construct universities, hospitals, buildings and an international airport in southwestern Barinas state.

- AP