IMF Releases $346 Million to Venezuela for Earthquake Reconstruction

On June 24, two earthquakes measuring 7.2 and 7.5 struck the South American country within a matter of seconds. According to official figures, the number of confirmed fatalities now exceeds 5,000. Some 16,740 people were reported injured. Nearly 18,000 people are said to have lost their homes in the disaster. United Nations estimates suggest the number of missing persons could reach as high as 50,000.

Re-engagement with the IMF

The hardest-hit area was the northern coastal state of La Guaira, north of Caracas. Hundreds of buildings were damaged or completely destroyed. According to information in the fact sheet, the displaced are living in overcrowded emergency shelters, which frequently lack water and adequate sanitation. Venezuelan authorities have still not provided any figures on the number of missing persons.

The background to the IMF release is the re-engagement between Venezuela and the International Monetary Fund, based in Washington. In April, both sides officially resumed their relations after a seven-year pause. The Venezuelan state, which has been insolvent since 2017, has foreign debts of approximately 170 billion US dollars, currently equivalent to some 145 billion euros.

Political Background

It was only in mid-May – still before the earthquakes – that Venezuela announced a comprehensive process for restructuring its foreign debt. According to an IMF estimate, the country's annual economic output most recently stood at around 110 billion US dollars. By comparison: Germany's annual economic output amounts to 5.5 trillion dollars, roughly fifty times higher.

Despite the rapprochement with the IMF, the Venezuelan government had initially announced that it did not intend to draw on IMF loans for the time being. The 346 million dollars now released are explicitly funds from the country's existing IMF holdings, and not new loans.

From Conflict to Cooperation

The political context has fundamentally changed in recent months. After nearly 13 years in power, Nicolás Maduro was overthrown in January by a US military commando operation and taken to the United States. Subsequently, the United States and other states recognized the interim government under Rodríguez, and a re-engagement with the IMF followed. In the US, he is reportedly to face trial for his policies regarding drug trafficking, through which Washington considers itself to have been harmed.

Relations with the IMF had previously been frozen after the IMF – in 2019, following the lead of the United States, the EU, and other countries – recognized the opposition government under Juan Guaidó as Venezuela's legitimate government following an election that was neither free nor fair, rather than the left-wing authoritarian government under ruler Nicolás Maduro.