IDB President Pursues $2.5 Billion Loan for Venezuela Amidst Board Resistance, Sources Reveal

New York/Mexico City, Sept 22 (Reuters) - The President of the Inter-American Development Bank (IDB), Ilan Goldfajn, is striving to obtain approval for a $2.5 billion loan to Venezuela; however, he has encountered resistance from certain board members, according to two informed sources. Concerns have been raised regarding extending credit to Caracas without assurances from other multilateral lenders about Venezuela's repayment capacity. Despite these concerns, the board acknowledges the potential advantages of re-engaging with Venezuela. The IDB has not commented, and the Venezuelan government did not provide a response. Notably, the IDB suspended new loans to the nation in May 2018 due to payment defaults. Reviving lending would necessitate special approvals, which are not unusual when nations resume borrowing from multilateral banks. Nevertheless, some board members are wary of the expedited nature of this approval process. Venezuela has been grappling with a liquidity crisis and worsening economic conditions largely attributed to plummeting oil revenues and an expanding fiscal deficit. Analysts predict that restructuring the country’s debt, estimated to exceed $200 billion, will be a slow and complicated endeavor. Any loan proposal for Venezuela will ultimately require the approval of the IDB’s Executive Board, which consists of 14 members, with the US holding significant influence at 30% of the voting power, followed by Argentina and Brazil at 11.35% each. Although a $2.5 billion operation is minor compared to Venezuela's vast overall debt, it could represent a crucial step in the country’s recovery process. Currently, the IDB cannot extend loans under its public arrears policy due to Caracas's outstanding debt exceeding $2 billion in principal and interest. A third-party bridge loan could potentially resolve these arrears, which is a common procedure in reintegrating nations into the global financial system. The proposed loan would be categorized under a Special Development Lending arrangement but would require size and compliance waivers concerning existing agreements with the International Monetary Fund. Goldfajn recently indicated that the IDB is developing an engagement note with Venezuela, which is a preliminary plan that usually precedes new lending activities. The IDB, which counts 48 member countries and is the largest provider of multilateral funding in Latin America and the Caribbean, approved $17.4 billion in new loans and guarantees in 2025, building an outstanding loan portfolio of nearly $118 billion as per its recent annual report.