IMF refuses to help Venezuela with US$5B loan to fight Coronavirus

Mar 19, 2020 News

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– Says it cannot engage countries with govts. not recognized by int’l community

The refusal of the International Monetary Fund (IMF) to help Venezuela with a US$5B loan is showing just how important it is for a country’s government to have the blessings of the international community.
Yesterday, the New York Times carried an article done by the Associated Press which said that Venezuela is in dire need of the loan to fight the coronavirus which threatens to push the Spanish speaking country’s already battered economy over the edge.

But even in such unfortunate circumstances, an IMF spokesperson told the Associated Press that the request could not be considered since there was no clarity among its 189 member states on who it recognizes as Venezuela’s rightful leader: Nicolás Maduro or Juan Guaidó, the U.S.-backed head of congress.
“Unfortunately, the Fund is not in a position to consider this request. As we have mentioned before, IMF engagement with member countries is predicated on official government recognition by the international community, as reflected in the IMF’s membership,” the spokesperson said in a statement while adding, ‘There is no clarity on recognition at this time.”
The Associated Press went on to note that Maduro’s appeal to an institution he has long vilified came as a shock to friends and foes alike since it is an about-face for Maduro, who for years, refused to share economic data with the Washington-based lender and just last month, condemned it as a tool of U.S. imperialism. In the past, he has called the IMF a blood-sucking “assassin” responsible for plunging millions of people into poverty across Latin America.

The news agency said it also lays bare, the precarious state of finances in socialist-run Venezuela as it struggles with collapsing oil production and the effect of U.S. sanctions.
While Venezuela’s exposure to the coronavirus has so far been limited — with just 33 cases confirmed — the Associated Press said that the potential economic damage from the disease has the entire country of around 30 million on edge.
But even before the virus’ outbreak, the Associated Press noted that Venezuela’s oil industry was on its knees. In this regard, it noted that severe sanctions applied last year by the Trump administration nearly halved oil production and worsened a humanitarian crisis that has pushed nearly five million people to flee the country.
Compounding that is the fact that the country will have to contend with oil prices at a multi-year low amid a meltdown in oil markets that followed Saudi Arabia’s decision to flood the market to retaliate against Russia’s refusal to go along with a proposed OPEC production cut. Making matters worse, most of the added supply from Saudi Arabia is of the same heavy crude variety that Venezuela produces, the Associated Press reported.

RAPID FINANCING INSTRUMENT
The IMF had set up the rapid financing instrument in 2011 as a one-time, short-term loan aimed at helping low-income countries absorb shocks like natural disasters. The amount a country can requested is restricted to 100% of the country’s quota at the IMF—about $5 billion in Venezuela’s case—and is supposed to be less comprehensive than traditional loans.
However, countries with debt levels the IMF deems unsustainable are barred from taking out loans. The Associated Press noted that such could be the case of Venezuela, which has defaulted on more than $65 billion in bonds and owes billions more to Russia, China and dozens of foreign energy companies whose assets it expropriated over the past two decades.
The Associated Press also noted that Venezuela is believed to be the first country to try to tap the $50 billion in financing the IMF has available to help developing nations deal with the virus.
It said that the U.S., which is the biggest shareholder and has a veto over major decisions at the Washington-based lender, has balked at assisting a Maduro government it no longer recognizes and accuses of stealing billions from its own people.

SITUATION IN GUYANA

The foregoing situation for Venezuela, where it was denied funding in a time of need due to non-recognition of its government by the international community, would spell as a warning for Guyana which is facing threats of sanctions.

On Tuesday, U.S. Secretary of State, Mike Pompeo issued some cautionary statements to Guyana as its leaders continue to struggle with concluding an electoral process that is transparent and credible.

Pompeo said that the individuals who seek to benefit from electoral fraud and form illegitimate governments/regimes will be subject to a variety of serious consequences from the United States of America.

Further to this, the senior official said that the United States joins the Organisation of American States, (OAS) the Commonwealth, European Union, CARICOM and other democratic partners in calling for an accurate count of the votes for Guyana’s March 2 General and Regional Elections.

It should be noted as well that the US has been issuing a number of statements since the March 2 elections regarding matters of transparency and credibility. Last Friday, US Assistant Secretary, Michael Kozak hinted that Guyana is likely to face sanctions for the conduct of the elections 2020.

“Under U.S. law and practice, those who participate and benefit from electoral fraud, undermine democratic institutions and impede a peaceful transition of power can be subject to a variety of consequences,” Kozak said in a Twitter post.

The official also made it clear that the US will not treat an illegal government as normal. His specific statement in this regard was, “De facto regimes do not receive the same treatment from us as democratically elected governments”.

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