IMF: No transactions with Venezuela while leadership in doubt

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AFP -The International Monetary Fund will not have any contact with Venezuela, nor allow the country to access its reserves held by the institution, until the international community recognizes a government in Caracas, an IMF spokesman said Wednesday.

The country’s leadership has been in question since late January when national assembly leader Juan Guaido challenged embattled President Nicolas Maduro as the country’s acute economic crisis worsened.

“Any IMF engagement with Venezuela, including responding to potential financial transaction requests, is predicated on the issue of government recognition being clarified,” an IMF spokesman told AFP.

“We are guided by our membership on that issue, and at this point, this determination has not been made.”

The United States is among some 50 countries that recognize Guaido, the opposition leader who declared himself interim president in late January in a bid to replace Maduro. Guaido has branded Maduro’s rule illegitimate because of what Guaido calls fraudulent elections last year in which Maduro won another term in office.

Maduro, who is backed by Russia and China, is under increasing pressure as the economy implodes and the exodus of Venezuelans continues amid a worsening humanitarian crisis.

Earlier Wednesday, US Vice President Mike Pence asked the United Nations to recognize Guaido as the legitimate leader of Venezuela, telling the Security Council, “Nicolas Maduro must go.”

The IMF has previously said it is awaiting a decision by its members on recognition of a government in Caracas, which would take a majority of the voting shares in the fund, although the issue would not necessarily be decided by a formal vote.

The United States holds the biggest share of IMF votes, at 16.5 percent, giving it veto power over most decisions.

– Draining reserves –

All of the 189 members of the global crisis lender are required to keep a minimum level of foreign currency reserves on deposit at the IMF but because of the limbo in Caracas neither Maduro nor Guaido could have access to those funds.

Nor would either leader be able to enter negotiations with the IMF for an aid program.

The United States has sanctioned a broad array of Maduro administration officials, military officers and institutions, blocking them from the financial system and freezing assets held in US banks, including those of Venezuela-owned oil company Citgo.

That made the reserves at the IMF the easiest source of quick cash for the Maduro regime.

Venezuela has dramatically drained its reserves at the IMF over the last four years, which are held in Special Drawing Rights — the currency used by the institution, which is based on a basket of five major currencies.

Since March 2015, the amount on deposit at the fund has declined nearly 89 percent to the equivalent of just under $400 million, as Caracas struggled to manage debt payments and import basic goods.

Britain also has recognized Guaido, and the Bank of England holds about 31 tons of Venezuelan gold reserves worth $1.3 billion, which Maduro has been trying for several months to repatriate.

 

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