The International Monetary Fund (IMF) does an annual review of the fiscal and macroeconomic accounts of all member countries. However, in Venezuela, the Fund hasn't conducted this review since 2017 because Caracas cut ties with the organization.
Economist José Manuel Puente, PhD in Political Economy, referred to the shift in Venezuela now that contact with the IMF has been resumed. He asserts that this makes it necessary to review the nation's accounts, clarifying that the Fund hasn't reviewed any Venezuelan data for several years. Therefore, they have to start from scratch and gather all that information, which could take up to 14 months to compile.
“It's now up to the IMF to see what the country's problems are and what economic policy options they can offer and the resources that are very important, as well as providing the technical advice and financial resources they can offer Venezuela for its rescue and gradual recovery,” Puente said.
External debt
Puente considers the amounts of Venezuela's external debt to be truly overwhelming, as the country had an external debt of about 35 billion dollars in 1998, and by the end of 2025, the situation is so dire that there are no exact official figures.
“We could be talking about 160 or 180 billion dollars, when you take those 180 billion dollars as a percentage of the Gross Domestic Product (GDP), which is how it's traditionally measured in economics, debt over GDP, the GDP reflects the capacity to pay and signals how complicated debt repayment is,” the economist indicated.
Analyzing the situation, Puente noted that Venezuela has one of the highest coefficients in the world, which means this rescue, this aid, this technical assistance, is going to be one of the most complex ever undertaken globally in many years.
“We're on the right track”
He believes that “we're on the right track,” but there's a lot of work to be done and the International Monetary Fund is essential for this, because “the IMF has the technical expertise, has the resources, and can help us gather a pool of countries, like the United States, like the European Union, and big Latin American economies, that can help rescue Venezuela, given the high amounts of debt.”
But he clarified that it's overdue debt and unpaid, making it an unmanageable amount for the republic, “that's why we need help and good national and international advisory.”
Resume relations with the IMF
For Puente, this has a lot to do with politics, “in the end, it's a socialist revolution that's now meeting with the 'empire' and the IMF to renegotiate a debt that is impossible to restructure without the help of the IMF and international governments. There is a contradiction in the economic policy of the last 27 years, but it's because there is no other alternative and of course, there is pressure from the US government to make this happen.”
Unfortunately, it's unavoidable, given the magnitude of the debt: This is one of the largest debt operations the International Monetary Fund has had to face in terms of GDP in recent years, because “we're talking about how the Venezuelan GDP has shrunk, meaning it has gotten smaller and the debt multiplied five or six times. So that debt-to-GDP ratio shows how difficult it is for Venezuela to pay off that debt on its own,” he said.
The specialist added that there are other issues to resolve. One of them is that, in the interim government's meeting with the IMF, the government team didn't have an economist. “I think it's necessary for the team to have an economist who handles macroeconomics, public finances, and debt restructuring so that they can competently, independently, and scientifically rigorously confront the IMF,” he asserted.
On the flip side, it's crucial that the advisors hired by the government undergo thorough vetting to ensure they're competent individuals and not tied to any power groups, banks, or American firms.
There are several steps to follow that are very important for the process to be as correct as possible in terms of national interest, respecting all public procedures and generating all documents that can be verified, because at this moment Venezuela doesn't even know the exact amount of its debt, he mentioned.
Quasi-fiscal debt
A portion of Venezuela's debt is quasi-fiscal debt owed to China, and this debt isn't quantified or published, so we don't know what the agreements are. Thus, this negotiation Venezuela is having with the IMF could be covering 60% of the total debt, because there's a 40% quasi-fiscal debt that's not part of the negotiation, which could impact the final outcome of the talks,” he emphasized.
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