Venezuela Begins $150 Billion Sovereign Debt Restructuring

The Venezuelan government announced Wednesday that it has begun a comprehensive and orderly process for restructuring its sovereign debt and obligations of state oil company PDVSA. In a statement, the economics and finance ministry said the intention was to put the economy at the service of the Venezuelan people and free the country from the burden of accumulated debt.

The government added that Venezuela demonstrated solvency for years by fully complying with international obligations until 2017, when financial sanctions impeded that capacity. "For too long, the country has been deprived of normal access to financing, and its economy lost the capacity to invest in health, electricity, water, education, infrastructure, productive recovery, and the well-being of its population," the statement said.

Officials said the restructuring process aims to guarantee substantial debt relief that will be used to benefit the country and its population.

Foreign sanctions severely affected Venezuela's economy over the past decade. The country stopped making payments on its public debts in 2017 as it entered hyperinflation, according to the report. Independent financial think tank OMFIF estimates Venezuela's defaulted debts total at least $150 billion, or over 200 percent of its gross domestic product.

Under the interim government of Delcy Rodriguez, relations with the United States have improved. In April the Trump administration lifted sanctions on Rodriguez's government. The country, a founding member of OPEC, holds the largest proven oil reserves in the world at 303 billion barrels.

Last month the IMF and World Bank resumed dealings with Venezuela, paving the way for a full IMF assessment of the economy for the first time in about 20 years. Such a step could eventually unlock billions of dollars in funding via frozen special drawing rights.

The organizations had paused their dealings with Venezuela in 2019 over government recognition issues. Investor appetite for Venezuelan government bonds has increased since January. The country's benchmark 10-year sovereign bond has almost doubled in price since then and rallied further after the debt restructuring announcement on Wednesday.

Bonds issued by PDVSA have also surged in value this year and rose again during Wednesday's trading session. Venezuela said Wednesday that it expects to present its macroeconomic framework and public debt sustainability analysis to the international financial community next month.