IMF will not let Venezuela access its share of new SDRs | News on the coronavirus pandemic

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The International Monetary Fund will not hand over $ 5 billion in Special Drawing Rights to Venezuela to bolster its reserves as part of a massive infusion of resources into member countries, due to an ongoing dispute over whether if President Nicolas Maduro is the legitimate leader of the country. .
Venezuela would in theory be one of the biggest beneficiaries in terms of percentage of gross domestic product of the $ 650 billion in special drawing rights that the IMF plans to give 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 Congressional Republicans, including Senators Pat Toomey and John Kennedy, have urged U.S. 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. That’s because the United States and more than 50 other countries view opposition leader Juan Guaido as the country’s legitimate leader, following mock presidential elections in 2018.

“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,” said IMF spokesman Gerry Rice, in response to questions from Bloomberg News.

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

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

Officials in the Maduro administration are considering whether to invite IMF officials to inspect the government’s economic data – a step known as the Article IV assessment – with the aim of fixing the problem. relationship after a 14-year data crash that left most economists guessing at the depths of the nation. monumental collapse, according to three people familiar with the matter.

Yet, as the Maduro government does not have the right to have contacts, discussions, or access to IMF financing until it is recognized as an official government, this Article IV assessment cannot take place at this time.

Venezuelan presidency press officials did not respond to requests for comment.

While the IMF suspended Venezuela’s access to SDRs in 2019, citing political chaos, the relationship between the two has long been controversial. In 2007, the late President Hugo Chavez pledged to cut ties with the Washington organization, claiming that the Fund was simply serving American interests.

“This is the kind of initiative that a country like Venezuela could really benefit from in the face of the current crisis,” said Temir Porras, former chief economic assistant to Chavez and Maduro. “It’s time to take a more pragmatic approach, not only to immediately address urgent health needs, but to help stabilize our economy.”

Venezuela’s holdings of SDRs had fallen more than 99% from their allocated level last month, to just $ 12.5 million from $ 3.6 billion in 2009, when it was a reserve beneficiary for the global financial crisis, according to IMF data. More than two-thirds of Venezuela’s foreign exchange reserves are in the form of gold, which has been difficult to sell due to US sanctions.

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