Is the IMF politicising aid by denying Venezuela an emergency loan?

The International Monetary Fund (IMF) made another controversial decision on Tuesday by rejecting Venezuela’s emergency loan request to fight the growing deadly coronavirus pandemic, suggesting that only US-friendly states could be entitled to receive aid. 

There are only 33 confirmed coronavirus cases in Venezuela, but like other countries, it could quickly jump into bigger numbers and the Latin American country does not want to rely on pure luck. 

The IMF rejection has led many observers to question the institution's ability to take decisions on neutral grounds as it's clearly in line with US foreign policy, which has been trying to punish Venezuela’s left-wing leader Nicolas Maduro and topple his government for several years. The IMF's largest donor state is the US.

The US also has a veto right over the international lender’s major loan decisions, making it likely that the IMF has denied the essential humanitarian aid to Caracas for political reasons. 

"As we have mentioned before, IMF engagement with member countries is predicated on official government recognition by the international community, as reflected in the IMF's membership. There is no clarity on recognition at this time," said a statement from the IMF, excusing the decision to reject the aid to Venezuela. 

But the IMF rationale barely makes any sense. The IMF has 189 member states and the majority of them recognise the Maduro government as Venezuela's legitimate administration. The US-led anti-Maduro states represent a minority, amounting to about 50 countries. 

Since the latest presidential elections in 2018, Maduro’s government and his presidency have been challenged by Juan Guaido, the president of the Congress and the opposition leader, claiming that elections were fraudulent. But the military and a crucial part of Venezuelan society stands for Maduro, preventing Guaido from ousting Maduro. 

While the IMF tried to use the legitimacy issue to reject the emergency loan to Caracas, the real reasons appear to be rooted in US President Donald Trump’s pressure tactics over the Maduro government. Trump has imposed heavy sanctions over Caracas to force the country to bow down to Washington. 

Another contradictory aspect of the IMF decision against the Maduro government is the fact that the international lender has still not recognised Guaido as the legitimate head of Venezuela, leaving Maduro as the president. 

Despite the US-led Western political bloc's support to Guaido, Maduro was able to ward off several attempts to overthrow him coming from the Guaido camp. 

Maduro’s troubles

Maduro, the successor of the late Hugo Chavez, a self-described Latin American socialist, has recently been dealing with growing problems on several fronts, ranging from worsening conditions in the world’s oil markets to US sanctions, which have almost stopped the country’s oil production, leading to a large humanitarian crisis across Venezuela. 

Maduro, who called the IMF by different names in the past, from a tool of US imperialism to the blood-sucking “assassin”, appeared to have no other option than knocking the door of “the lender of the last resort” assome experts have called it. 

“The Bolivarian government is taking different preventive measures and following thorough, strict and exhaustive controls to protect the Venezuelan people,” Maduro said in his letter to IMF Managing Director Kristalina Georgieva, referring to expanding pandemic. 

“For this reason, we are turning to your honourable organisation to request its evaluation about the possibility of authorising Venezuela a financing line of $5 billion from the emergency fund of the Rapid Financing Instrument,” Maduro wrote. 

In 2011, the IMF formed the Rapid Financing Instrument (RFI) as a financial aid tool, which is a one-time and “low-access” loan, to assist member countries, “facing an urgent balance of payments need, without the need to have a full-fledged program in place,” according to its own description. 

The RFI can be demanded by member states like Venezuela to address urgent needs, emerging from occasions like “natural disasters” and “emergencies resulting from fragility”, which are fitting descriptions for the current situation in Venezuela.