©Getty

Nicolas Maduro, President of Venezuela

Azerbaijan has called for help from the International Monetary Fund. Nigeria is turning to the World Bank. Russia and Saudi Arabia are slashing public spending and considering sales of state assets. In Venezuela, where the collapse in oil prices has been even more devastating for the economy, the authorities appear paralysed. With President Nicolás Maduro locked in a power struggle with the opposition-led legislature, the best hope for Venezuelans may be for the country’s external creditors to step in and force a resolution — sooner rather than later.

It is difficult to pin down numbers in a country with three official exchange rates and controlled prices that bear little relation to realities on the black market. But inflation is running in triple digits, even by the official measure; the IMF estimates that output shrank by a tenth last year; and it is clear that people are suffering acute hardship.

Oil exports are the only source of the hard currency Venezuela needs to buy almost all daily essentials. Imports have collapsed from about $50bn in 2007, when Brent crude averaged $72 a barrel, to $30bn last year, a remarkable 40 per cent contraction that has led to shortages of medicines, nappies and basic foods such as milk and rice.

Queues, hoarding and profiteering have become part of everyday life. With the price of Venezuelan crude barely above the cost of production, imports are set to extend their decline this year. It would not take much to turn hardship into a humanitarian crisis and a wave of refugees.

Yet there is no sign of any effective action to avert disaster. Mr Maduro has left in place repressive price controls and fuel subsidies that serve simply to enrich regime insiders. He has sought to tighten his grip on the central bank, damaging its already threadbare credibility. And he has asked the national assembly for powers to run the economy by emergency decree, a request that was passed, possibly unconstitutionally, by a Supreme Court packed with regime placemen and then blocked by the legislature.

The result is policy stasis. There are no heroes in Venezuelan politics at the moment, only greater or lesser villains. Nobody is in control or legislating and nobody is being constructive, at a time when assertive action is essential to avert an economic crash that would affect the vast majority of Venezuelans.

Yet despite the complete failure of his policies, Mr Maduro has made it a priority to meet payments on sovereign debt, even at the cost of squeezing imports further. This is because a default would threaten the regime’s existence: it could allow creditors to seize oil cargoes and assets abroad, choking off the revenues on which the system of political patronage depends.

The government has scraped together enough to service the debt, with the help of Chinese loans and exigencies such as gold swaps and high yield issuance. It may be able to stagger on for a few more months. However, payments of some $10.5bn fall due this year and China’s patience is wearing thin. Unless oil prices recover, even cutting imports further will not be enough to plug the financing gap. With the risk of social unrest rising, most analysts believe a default is inevitable.

This would create huge strains if asset seizures cut Venezuela off from its only sure source of revenues, worsening the existing shortages. Any restructuring would be difficult, given Venezuela’s hostility to the IMF. However, a default would at least force the country’s delinquent politicians to confront its problems, however messy and delayed their resolution might be. In the current impasse, this may be the best outcome.