UPDATE 1-Venezuela to start $3 billion debt from Monday

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CARACAS Aug 8 (Reuters) - Venezuela will begin a widely-expected $3 billion new debt issue from Monday, Economy Minister Jorge Giordani said.

The minister added that Venezuela's payment last week of $1.5 billion in maturing bonds demonstrated the OPEC member's capacity to pay its debt.

The new issue would begin "from Monday" and more details would be given during the day, Giordani said on a TV programme alongside President Hugo Chavez.

The issue is intended to soak up liquidity in the local bolivar currency and feed unmet dollar demand.

Central Bank director Armando Leon told state newspaper Correo del Orinoco on Saturday that the bonds would be issued via the institution's new currency exchange system, Sitme, which has replaced a former unregulated forex market.

Sitme uses a complicated formula, based on dollar-denominated bond prices, to fix what is essentially a third band in Venezuela's state-controlled forex market.

The government often issues debt denominated in dollars but buyable in bolivars as an exchange rate tool.

Venezuela's sovereign and PDVSA bonds, such as the benchmark Global 2027 VENGLB27=RR, are widely traded because they offer high yields for investors willing to bear what is considered a significant risk of default.

PDVSA is the state oil company.

(Reporting by Andrew Cawthorne; Editing by Diane Craft)