Chávez, on Thursday, announced the pending sale of $4.6 billion in debt.

The government will invest in houses, schools, hospitals, roads and other public-works projects, President Hugo Chávez told the Venezuelan state newspaper Correo del Orinoco in an interview published Friday.

Venezuela's economy contracted one per cent during the first half of the year, and Chávez says unemployment is on the rise because of the world financial crisis.

Unemployment reached 7.9 per cent in June, up from 7.6 per cent a year earlier, according to Venezuela's National Statistics Institute.

mixed views

Opposition-aligned economist Orlando Ochoa, said increased government spending would not be enough to revive consumption or to make up for restrictions on the currency for travellers and importers.

"It won't compensate," Ochoa told The Associated Press.

Under currency controls imposed in 2003, travellers and importers must apply to a government agency for dollars at the official rate of 2.15 bolivars. But as depressed world oil prices limit revenue, the government has been cutting back on those dollars, paralysing some businesses.

Many now to turn to Venezuela's thriving currency black market, where the dollar sells for nearly three times its official rate.

The increase in spending is part of a stimulus package Chávez's government plans to announce shortly. Chávez has said his government would also approve more dollars for spending abroad to encourage economic growth.