IDB and CAF: Venezuela seeks loans while its oil money sits at the U.S. Treasury

On October 16, in Bangkok, the World Bank's regional vice president said the bank has a pipeline of projects ready for Venezuela and that, to move forward, it is waiting for the country to clear its arrears with other multilaterals. Those arrears, with the IDB and CAF, add up to a little over $3 billion. In July, asked about the $13 billion the United States had reportedly taken in from Venezuelan oil, the U.S. president said he thought it was even more, and the proceeds of those sales settle first in accounts controlled by Washington.

The money that would open the door to credit is Venezuelan, and Washington holds the key to the account.

No one has publicly proposed using it for that. As of October 18, neither the State Department nor the Treasury had raised it in testimony before Congress, nor had the IDB in what it has published, nor the Venezuelan government at the IMF annual meetings. The route reportedly mentioned by one of the sources close to the IDB talks is a bridge loan from a third party: borrowing in order to be able to borrow.

The door

Arrears are the hardest rule of multilateral credit, and at two of the three banks they are in writing. The IDB does not lend in Venezuela until they are cleared and does not renegotiate or reschedule; as of June 30, the country owed it $2.321 billion in overdue principal and interest, $134 million more than six months earlier. CAF suspends disbursements from the day an installment falls due, and has not approved a loan to Venezuela since 2018; as of June 30 it recorded $769 million in overdue principal, almost three times the level at the end of 2024, plus $296 million in uncollected interest and fees.

The arrears with CAF are recent, and their origin says a lot. Between 2020 and July 2024, Venezuela paid CAF with its own capital: the bank bought back 168,573 shares for $2.394 billion and applied the money to overdue installments, through a mechanism created during the pandemic for all shareholders that only Venezuela ended up using. When the program ended, the arrears began. The 105 Series B shares it has left would add up, at the average price of that buyback, to about one and a half million dollars.

With the World Bank the country has no debt: the last loan was in 2005, and the bank's statements as of June 30 do not list it among countries in arrears. Its regional vice president stated the condition on arrears with the other banks orally, in an interview, and as of October 18 it did not appear in any document the bank had published.

Between the two regional banks, the arrears grow by about $60 million a month, because installments keep falling due even if no one pays them.

The account

On the other side is the account an executive order shielded in January. The Department of Energy had announced it two days earlier, without nuance: the proceeds of all sales of Venezuelan crude would settle first in accounts controlled by the United States. OFAC later specified which payments have to go there: royalties, per-barrel levies and federal taxes owed to the government or to PDVSA. Paying into that account is one of the conditions OFAC sets for a foreign buyer to be safe from sanctions; the others range from the date the company was organized to the exclusion of Russian, Iranian, North Korean or Cuban counterparties and of Chinese-controlled entities. Local taxes and fees are paid in Venezuela.

The order is clear about whose money it is. It is sovereign property of the Government of Venezuela, held in custody by the United States and not the property of the United States, and it is beyond the reach of the country's judgment creditors. It is just as clear about who decides: the destination is determined by the Secretary of State, "on behalf of the Government of Venezuela", the Treasury follows his instructions and nothing leaves the account without an authorization issued under that order.

How much is inside, no one in office has said. In April, the State Department official who testified before the House said about $3 billion had moved through the account and that he would get back to lawmakers on how much remained. In July, the president called a press estimate of $13 billion collected too low. In September, the Treasury Secretary twice refused before Congress to give the amount of disbursements and acknowledged that no audit has been published. Three senators asked in writing for the balance and monthly statements, with a deadline of October 5; as of October 18 there was no public answer.

On the Venezuelan side, the official transparency portal still shows a single inflow and a single expense, of $300 million each, dated March 13.

The account as key

Using that account to pay the multilaterals would not be a legal oddity. Among the sovereign purposes the order itself invokes for holding the money is "compliance with international obligations." The phrase serves to support the account's immunity from creditors, and the category is in the text; any specific payment would also require an authorization issued under the order.

And the mechanics have a precedent with the same actor. In March 2021, the U.S. Treasury gave Sudan same-day bridge financing of about $1.15 billion to clear its arrears with the World Bank; the bridge was repaid with a grant from the bank itself. Somalia had done the same a year earlier with a $365.9 million bridge loan from the government of Norway. In those cases, Washington and Oslo put up their own money.

In Venezuela's case, the Treasury already holds Venezuelan money in custody.

The government, meanwhile, is seeking financing. On October 2, at a meeting with IDB Invest, an IDB affiliate, the acting president said the country is well advanced on financing for the public sector; the official note does not say with whom or for how much. A State Department official had described before Congress severe budgetary stress and the search for additional resources for reconstruction after the earthquakes.

Both figures in circulation were put forward by the banks. The $2 billion in the first year is the World Bank's offer, and the $2.5 billion is reportedly the result of efforts by the IDB's president.

Why the answer is not that simple

The account is not sitting still. The Treasury explained to a congressman in April that funds leave only if Caracas commits to the State Department to use them for approved purposes, such as public-sector salaries, medical supplies or energy infrastructure. The official who testified that month added supplies and diluents for the oil industry, and named the vetoed uses: payments to China, Cuba or Iran. Money comes in and goes out every month against a budget, and what is unknown is how much remains.

Paying the arrears from the account would not replace credit: it would unlock it. The World Bank speaks of up to $2 billion in the first year if they are cleared, and the IDB's president is reportedly working, without confirmation from the bank, on a $2.5 billion loan. The real choice is what opens the door: the country's own money held in custody in Washington, or a bridge loan from a third party that would have to be repaid with interest.

Even with the arrears paid, the sequence remains. According to the same reports, the IDB loan would go through the special development lending window, which requires an IMF program, which Venezuela has not requested, and is capped at $500 million or 2% of GDP; reaching $2.5 billion would take two waivers from the board. Without a country strategy with the IDB Group, the board cannot approve financing operations. The IMF, in turn, does not lend to a country with arrears to other financial institutions except with a credible plan to clear them. The IDB needs the Fund, and the Fund needs to know how the IDB will be paid.

In Bangkok, Venezuela's governor to the IMF and the IDB said the debt sustainability analysis and its publication have proved more challenging than expected. It is the document on which talks with bondholders will rest, and it will have to leave the debt to the IDB and CAF out of any haircut: the first does not renegotiate and the second operates as a preferred creditor.

What moves the calendar

The figures that dominated the debate were an offer from the World Bank and a loan attributed to the IDB since September. The calendar is moved by a document that has not been published, a payment instruction to the multilateral banks, whether it comes from the Treasury account or from a bridge loan bearing the name of whoever provides it. Until it appears, overdue installments with CAF and the IDB keep piling up.

On October 14, the executive delivered to the National Assembly the draft 2027 Annual Borrowing Law, together with the budget bill. The Constitution requires a special law for a public credit operation to be valid, save for exceptions set by the organic law, and the annual borrowing law is the one that accompanies each budget. The note with which the Assembly received the bill gives no amounts or lenders: it is not known whether it includes credit from the multilateral banks.

Venezuela already paid CAF once with its own capital. This time the money from its oil goes through Washington, and so does the signature.