IMF Refuses Aid to Venezuela in the Midst of the Coronavirus Crisis

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A Socialist Project e-bulletin ... No. 2037 ... March 30, 2020
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IMF Refuses Aid to Venezuela in the Midst of the Coronavirus Crisis

Vijay Prashad, Paola Estrada, Ana Maldonado and Zoe PC

On March 16, 2020, the chief of the International Monetary Fund (IMF) Kristalina Georgieva wrote a blog post on the Fund’s website; it represents the kind of generosity necessary in the midst of a global pandemic. "The IMF stands ready to mobilize its $1-trillion lending capacity to help our membership," she wrote. Countries with "urgent balance-of-payments needs" could be helped by the IMF’s "flexible and rapid-disbursing emergency response toolkit." Through these mechanisms, the IMF said that it could provide $50-billion to developing countries and $10-billion to low-income countries at a zero-interest rate.

The day before Georgieva made this public statement, the foreign ministry of the government of Venezuela sent a letter to the IMF asking for funds to finance the government’s "detection and response systems" for its efforts against the coronavirus. In the letter, President Nicolas Maduro wrote that his government is "taking different preventive measures and following through strict and exhaustive controls... to protect the Venezuelan people." These measures require funding, which is why the government is "turning to your honorable organization to request its evaluation about the possibility of authorizing Venezuela a financing line of $5-billion from the Rapid Financing Instrument emergency fund."

Georgieva’s policy to provide special assistance to countries should have been sufficient for the IMF to provide the assistance that the Venezuelan government had requested. But, very quickly, the Fund declined the request from Venezuela.

It is important to underline the fact that the IMF made this denial at a time when the coronavirus had begun to spread in Venezuela. On March 15, when Venezuelan President Nicolas Maduro’s government sent the letter to the IMF, Maduro met with senior government officials in Caracas. The Venezuelan pharmaceutical body (CIFAR) and the Venezuelan medical equipment companies said that they would be able to increase production of machines and medicines to stem the crisis; but, they said, they would need key raw materials that have to be imported. It is to pay for these imports that the Venezuelan government went to the IMF. The denial of the loan will directly punish the Venezuelan health apparatus and prevent Venezuela from properly tackling the coronavirus pandemic.

"This is the most serious situation we have ever faced," said President Maduro as he put in place new measures. The Venezuelan government imposed an indefinite national quarantine and has put in place -- building on the local self-government (communes) -- a process to distribute food and key supplies. All the institutions of the state are now involved in doing their part in helping "flatten the curve" and "break the chain" of contagion. But, because of the IMF loan denial, the country will have a harder time producing testing kits, respirators, and key medicines for those infected with the virus.

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