Venezuela embarks on $150 billion restructuring of debt amid political turmoil

The Venezuelan government announced Wednesday that it has begun a "comprehensive and orderly process" for restructuring its enormous sovereign and state oil company debt.

In a statement, Venezuela's 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."

"Venezuela demonstrated solvency throughout the years, fully complying with all its international obligations. This capacity and willingness to meet our financial commitments was impeded from 2017 onward as a result of financial sanctions," the government said.

"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 restructuring process aims to guarantee substantial debt relief, officials said, which will be used to benefit the country and its population.

"Venezuela will fulfill its commitments sustainably and will do so under the conditions that the Venezuelan people deserve, building a solid path to recover well-being, justice, and social equality," the statement said.

In 2017, during his first presidential term, Donald Trump slapped financial sanctions on Venezuela in a bid to restrict the Maduro regime's access to capital.

In January, an extraordinary U.S. military operation saw American troops capture Venezuelan President Nicolás Maduro. He was brought to the U.S., where he was indicted on narco-terrorism conspiracy and other charges alongside his wife Cilia Flores.

Both Maduro and Flores have denied any wrongdoing.

Foreign sanctions have severely impacted Venezuela's economy over the past decade, with the country defaulting on its debts and public sector liabilities ballooning.

According to independent financial think thank OMFIF, Venezuela's defaulted debts total at least $150 billion, or over 200% of its gross domestic product. The country stopped making payments on its public debts in 2017 as it entered hyperinflation.

But under interim President Delcy Rodriguez, relations appear to have thawed. In April, the Trump administration lifted sanctions on Rodriguez's government. Trump said earlier this year that Venezuela would ship sanctioned oil to the U.S., which would be sold at market rates with the proceeds controlled by the White House.

He also said American oil giants would invest billions of dollars in Venezuela to revive its oil industry.

Venezuela, a founding member of OPEC, sits on the largest proven oil reserves in the world at 303 billion barrels or 17% of global reserves, according to the U.S. Energy Information Administration.

On Tuesday, Trump posted a map of Venezuela on Truth Social where the country was labeled the "51st state" of the U.S.

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

The organizations paused their dealings with Venezuela in 2019 over government recognition issues. Past election results declaring Maduro the winner had been disputed, sparking protests in the capital city Caracas.

Investor appetite for Venezuelan government bonds has surged since the U.S. deposition of Maduro in January, with the notes spiking in value in the immediate aftermath of America's extraordinary military operation in the country.

The country's benchmark 10-year sovereign bond has almost doubled in price since January, and rallied further after the news of its debt restructuring plans broke on Wednesday. Bonds issued by state-owned oil firm PDVSA have also surged in value this year, spiking 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.