Where are the IMF and the World Bank as Trump gives Maduro the boot ?

I have no idea who will run Venezuela after its recent change of management.

I do know that whoever is in charge will need cash.

Why does Venezuela need cash when it has oil ?

Venezuela needs cash to invest in oil production and to restructure its external debt. Just how much cash is required for oil production is unknown to external observers but the producers know, have surely told Bessent and Wright what to expect, and have begged the US administration to lift sanctions on Venezuela so that oil may again flow unimpeded. Commercial banks and other investors were unenthusiastic, until very recently^[1], about lending to restore existing fields or to develop new ones but the prospect of cash from debt restructuring and fresh guarantees will revive their ardor. New money could fund investments in oil facilities and technology; and could fund public investments in infrastructure (roads, power, water, housing for the soldiers who will protect the oil fields from their real owners).

Venezuela’s next cash need is to deal with its external debt. That debt is estimated to be some US$ 130-170 billion of which official bilateral debt is perhaps half, mainly to China and Russia.^[2] The country is badly in arrears and cannot pay what it owes without significant concessions by the lenders. The discount on Venezuela’s commercial loans is probably so great that a comprehensive solution cannot be expected soon given the stiff resistance of the bond holders and their loyal servants in the US legal system. One may expect that Venezuela will prioritize smaller commercial obligations over larger ones and (over official bilateral arrears) and this is where the Fund will enter, though the World Bank should avoid debt restructuring in Venezuela for reasons given below.^[3]

The longer-term commercial debt problem

One can only assume that Venezuela will achieve some measure of stability and that short-term money will then be available. Oil output and prices, as well as secondary market quotes on public debt, may even go up, allowing some vapid Bushoid bragging about “Mission Accomplished”.

Despite some (hypothetical) revival of exports and growth the overhang of commercial and official bilateral debt will prevent restoration of the non-oil economy. Short-term remedies—lifting sanctions, forbearance from commercial and bilateral lenders, cash from the IMF and the World Bank--will help revive the economy but there are constraints that impede a longer-term resolution of Venezuela’s external debt. Those constraints cannot be resolved without some tricks of the sort that are currently being played in Argentina.

The knottiest problem is that the country’s commercial debts are large.^[4] Most lenders have probably long written off the commercial debts but there is the often the problem of holdouts who have bought low on Venezuelan bonds. (It would be interesting to know how what share of those bonds is covered by modern collective action clauses). It is possible that the Fund could do more above quota for Venezuela as (indirect) support to a commercial debt restructuring but the non-US chairs in the Fund (China, Russia, the Euros) will disapprove of this because of their stakes in Venezuela; they would insist on a “tough” Fund program that respects the interests of bilateral as well as commercial lenders. Of course, the US will not give a fig about what other Fund chairs say given that it will own the one valuable asset in Venezuela and one may therefore expect some difficult negotiations in the Fund’s Board about how to deal with Venezuela.

A second problem is we do not know how much of Venezuela’s oil has been mortgaged[5]. By “mortgaged” I mean a contract in which the oil company (the lender) extends cash to the government (the borrower) in return for the rights to sell future oil at a steep discount to the actual or expected market price. Oil is one of those dirty markets where everyone has an incentive to lie. The government as borrower does not want to tell producers and lenders that it has already sold its reserves. The existing commercial lenders have incentives to lie to their shareholders and bondholders about the value of their loan collateral, which has been grossly manipulated. Venezuela has incentive to lie to its own people, notably the underpaid military, about what it will pay to foreign creditors. The dishonesty in Venezuela’s oil-debt-public finance markets will make it costly, not to say impossible, again because of asymmetric information problems, to deploy performance-linked bonds in service of an eventual workout, not that such considerations will mean anything to the distinguished public servants in the boards of the Fund and the Bank.

The immediate roles of the Fund and the Bank

Venezuela owes nothing to the IMF and has not even had an Article IV consultation since 2004. Venezuela has an IMF quota (roughly, a borrowing limit) of some SDR 3.72 billion (US$5.4 billion at end-December 2025). The US can order the Fund to lend above quota to certain preferred allies, so let us estimate that Venezuela could tap at least $10B from the IMF^[6] and could do so quickly.

Venezuela pre-paid its loans to the World Bank years ago and has limited commitments to that institution. Venezuela could therefore take new money from the Bank without running into the lending limits and could do so quickly, especially if there were the usual pressure from the US Treasury and the bilateral creditors on the Bank’s Board. Let us call that immediate amount US$ 2B before July 1 (i.e., in the Bank’s fiscal year 2026) and more in the next fiscal year.

In the next few months Venezuela could borrow US$10-15 billion from the multilateral institutions on slightly better than commercial terms. It is possible that some bilaterals could be induced to deliver more. China and Russia would not be enthusiastic here because they would hate the banks getting in line before them but perhaps the former could enter into a currency swap with the Banco Central de Venezuela, in the usual spirit of collaboration among socialist peoples.

Risks to the credibility of the Fund and the Bank

The risks of poorly-prepared and oversized Bank and Fund interventions in Venezuela are great—and, by the way, bienvenido y bienvenida to the new First Deputy Managing Director of the Fund and the new Regional Vice-President for Latin America and the Caribbean at the World Bank—given that their Boards typically look the other way at disaster scenes and given that their senior managers have generally become dullard political appointees, as we see with several recent senior managers at the Fund and the Bank. We can expect those institutions to join happily in rotten programs that release more carbon, divert more cash from poor Latinos to rich gringos, and keep what should be a rich country in a vicious cycle of dependency on foreign invaders and their commercial agents. Nonetheless, I offer a few guidelines here for what the Fund and the Bank can do in Venezuela in the next 2-3 years.

I start from the unavoidable fact that poorly designed and overfed IMF and WB programs in Venezuela will do more harm than good without safeguards.

The Fund should only:

• Approve a lending program after a completely updated Article IV review, publication of a full and independent reconciliation of Venezuela’s debt, and rebasing of its national accounts;
• refinance commercial debt subject to collective action clauses or within the Paris Club framework;
• refinance debt up to some maximum—low—secondary market price; and
• disburse in the second and third years of an eventual stand-by program based on annual reconciliations of external debt, enactment of fiscal transparency laws (none of the usual fuzzy action plans), and imposition of an environmental clean-up tax on oil production, to be spent in the producing areas and to be monitored by community organizations.

The Bank should not contribute to budget support because untied money will be diverted to the hedge funds and the oil companies, despite the noble pronouncements Bank management will make about poverty alleviation, climate change, and knowledge management or some other blarney. The Bank must start with a program of grants (grants, not IBRD loans or IDA credits, at least in the first 2-3 years, given the disastrous fiscal situation of local governments in Venezuela) to support local initiatives (health, education, water, rural roads, sanitation, flood control and soil conservation, renewable energy) through community development operations under control of local governments.

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[1]. There are reports of a delegation of US investors going to Caracas, but readers should recall that this sort of US-imposed approach has failed in Argentina.

[2]. Reuters (December 19, 2025) https://www.reuters.com/world/americas/venezuelas-billions-distressed-debt-who-is-line-collect-2025-12-19/. See also Christian Baehr of Princeton’s Sovereign Finance Lab, April 2025, https://psfl.princeton.edu/sites/g/files/toruqf5686/files/documents/Baehr%20Venezuela%20Brief%20Final.pdf

[3]. Christian Baehr of the Princeton Sovereign Finance Lab reported in April 2025 that the Maduro government had hired external debt advisors.

[4]. Note the unusual symmetry. Most embarrassed EMs are not heavily indebted to both commercial and official bilaterals, as Venezuela is.

[5] The crypto markets will surely complicate things.

[6]. Argentina’s outstanding credit from the Fund is about 1,300 % of quota (41.8 billion SDR divided by that country’s quota of 3.2 billion SDR).