IMF would not grant Venezuela US $ 5.1 billion in special drawing rights because it does not recognize the Maduro regime

The International Monetary Fund is reportedly not providing US $ 5.1 billion in Special Drawing Rights to Venezuela to bolster its reserves as part of a massive injection of resources into member countries because it does not currently recognize the regime of Nicolás Maduro as the legitimate government of the Caribbean country.

In theory, Venezuela would be among the biggest beneficiaries in terms of percentage of the country’s gross domestic product. a $ 650 billion Special Drawing Rights (SDR) proposal that, if approved, the IMF would hand over to countries to increase global liquidity. It’s part of an effort to help emerging and low-income countries cope with rising debt and COVID-19.

Some Republicans in the U.S. Congress, including Senators Pat Toomey and John Kennedy, have urged Treasury Secretary Janet Yellen to oppose the creation of the reserves, saying they will reward Maduro, among other U.S. adversaries.

But Venezuela will not be able to access the assets, which most countries will receive via a transfer to their central bank if they are approved as planned by the IMF’s board of governors in the coming months, according to the IMF. Indeed, the United States and more than 50 countries consider Juan Guaidó, as the legitimate president of the nation, after the presidential elections of 2018, regarded as fraudulent by a large part of the international community.

“The current political crisis in Venezuela has led to a lack of clarity within the international community, as evidenced by membership in the IMF, regarding the official recognition of the government.”IMF spokesperson Gerry Rice said in response to questions Bloomberg News.

Venezuela cannot access its existing holdings of SDRs and will not be able to use others “until a government is recognized”.Rice said.

The move is the latest setback for the Maduro regime, which has been largely isolated from a global financial network due to US sanctions. After seven years of economic contraction following a collapse in oil prices, IMF financial assistance of $ 5.1 billion would have represented 81% of the country’s current international reserves.

Maduro regime officials plan to invite IMF officials to inspect the government’s economic data, a step known as the Article IV assessment, in the interests of fix the relationship after not releasing economic data for 14 years. This has led most economists to guess at the extent of the country’s economic collapse, according to three people familiar with the matter.

However, since Maduro’s regime is prohibited from having contacts, discussions, or access to IMF financing until it is recognized as an official government, the Article IV assessment cannot currently be carried out.

While the IMF suspended Venezuela’s access to SDRs in 2019 due to political chaos, relations between the two sides have long been strained. In 2007, the late President Hugo Chávez pledged to cut ties with the Washington organization, arguing that the Fund served American interests.

“This is the kind of initiative that a country like Venezuela could use to deal with the crisis,” said Temir Porras, former chief economic adviser to Chávez and Maduro. “This is an opportunity to see things from a more pragmatic angle, not only to meet immediate health needs, but to help stabilize our economy.”

Venezuela’s holdings of SDRs fell more than 99% from their assigned level last month, to just $ 12.5 million from $ 3.6 billion in 2009, when it received reserves during the global financial crisis, according to IMF data. More than two-thirds of Venezuela’s international reserves are gold, which has been difficult to sell due to sanctions imposed by the United States.

With information from Bloomberg

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