Venezuela Requests 5 Billion Dollars of IMF Emergency Credit Line to Fight Coronavirus

Venezuelan Chancellor Jorge Arreaza published on Twitter a letter dated Sunday March 15th, in which President Nicolás Maduro asks the International Monetary Fund (IMF) for a loan of 5 billion dollars to combat the coronavirus.

“President Nicolás Maduro has formally requested financing from the International Monetary Fund for 5 billion dollars to strengthen the response capacities of our health system in containing #COVID ー 19,” the Venezuelan foreign minister said in the message, which accompanied the communication addressed to this multilateral financing organization.

Venezuela confirmed last Friday the first two cases of coronavirus (COVID-19) and today vice president Delcy Rodriguez updated the number to 36. Before these announcements Venezuelan authorities initiated a drastic protocol of social distancing suggested by the WHO and China and yesterday President Maduro ordered a nationwide social quarantine to avoid as much as possible the chances of collapse in the weakened health system.

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To worsen this economic picture, the coronavirus pandemic effect on global markets and oil prices have put an additional burden on Venezuelan economy with the price of the Venezuelan basket of oil being currently below the cost of production.

In 2007, then-president Hugo Chávez threatened to break with the body but did not take that step. This credit line request by Maduro of the IMF is the first that Venezuela has presented since 2001. The last visit of an IMF technical mission to Caracas was in 2004.

The mechanism requested by Venezuela from the IMF – called the Rapid Financing Instrument (RFI)- provides financial assistance to all countries that face an urgent need.

The RFI “was created to replace and broaden the scope of emergency assistance policies” and “provides rapid financial assistance with limited conditionality to all members,” the IMF explains on its website.

“Access is subject to an annual limit of 37.5% of the quota and a cumulative limit of 75% of the quota,” it adds. The quota is the annual contribution of each member country to the IMF, which in the case of Venezuela is equivalent to $ 5,089 million, according to the agency.

According to the Venezuelan news outlet “Mision Verdad” this financial tool allows access to financial resources without ex-post and ex-ante conditions, with zero interest rate and with a grace time of 5 years and a half.

The Venezuelan economy is today devastated by an economic crisis that in six years has reduced its GDP by two thirds. This crisis has been aggravated by US illegal sanctions starting in 2015 with President Obama’s executive order declaring Venezuela an “unusual and extraordinary threat”. These escalated since 2017 with Trump’s administration that has imposed more than 300 unilateral coercive measures mistakenly called “US Sanctions”.

Last Thursday, a political ally of Venezuela also subject to illegal US sanctions, Iran, asked for $ 5 billion from the IMF. It was the first time in almost 60 years that the Asian country requested financial assistance from the agency.

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Venezuelan Minister of Economy and Finance, Simon Zerpa, through his twitter account explained that President Nicolas Maduro’s decision answers to “criminal illegal and coercive sanctions that keep frozen more than USD 5 billion liquid from Venezuela.”

“Any financing that we obtain won’t affect the integrity of our economic sovereignty, [it can be obtained] without compromising the Program of Economic Recovery, Growth and Prosperity (economic plan),” he highlighted in another tweet.

Featured image: Venezuelans using face masks in public transport. Since last Monday it is mandatory nationwide. Courtesy AP

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