• 1 day Three Renewable Energy IPOs To Watch
  • 2 days Bitcoin Nears $13,000 As PayPal Joins The Crypto Fray
  • 3 days DOJ Declares The Obvious: Google Is A “Monopoly”
  • 5 days Alibaba Is About To Make History Again
  • 6 days Robinhood Users Are Latest Target Of Pandemic Hackers
  • 8 days The Hydrogen Boom Will Provide A $200B Boost To Wind And Solar Energy
  • 9 days Will The 5G Rollout Overshadow This Major Merger?
  • 10 days Corporate Bitcoin Holdings Boost Crypto Confidence
  • 10 days Indonesia Rolls Out Augmented Reality Innovation To Combat COVID
  • 11 days Banks Are Getting Rich On Pandemic Overdrafts
  • 11 days The Real Reason China Is Betting Big On Renewables
  • 12 days Europe Wants To End The Big Tech Monopoly
  • 12 days New Breakthrough Could Transform Rare Earth Mining
  • 13 days Waymo Set To Roll Out Fully Self-Driving Vehicles
  • 14 days Aramco Dividend Won’t Cover Saudi Budget Gap
  • 15 days Credit Card Debt Plummets Amid COVID
  • 16 days Biden Plan Targets “Wealthy” Taxpayers
  • 17 days McAfee Arrested In Spain On Tax Evasion Charges
  • 17 days South Asia Is Set To Unleash A Flurry Of IPOs
  • 18 days U.S. Takes Stake In Irish Battery Metal Producer
Frank Knopers

Frank Knopers

Frank Knopers has studied Business Administration at the University of Twente in Enschede and obtained a Master degree in Financial Management with his research on the…

Contact Author

  1. Home
  2. Commodities
  3. Other

Troubled Venezuela Recovers Gold From Swap With Citigroup

Venezuela

The central bank of Venezuela has paid $172 million to the American bank Citigroup to recover the gold it had swapped with the bank. According to Reuters, the precious metal was previously provided by the central bank as collateral for a dollar loan.

Venezuela has used a part of its gold supply in recent years to take out dollar loans from foreign banks, but due to the new American sanctions, U.S. banks are no longer allowed to carry out these swaps. As a result, Venezuela had no other option than to end the currency swap with Citigroup and to return the gold.

The reversal of this currency swap shows that Venezuela still managed to get enough dollars to repay the loan. The country however is still in trouble, because the American sanctions made it almost impossible for companies and financial institutions in Venezuela to do business via American banks.

Crisis in Venezuela

Venezuela has ended up in a severe financial crisis due to a combination of low oil prices and a failed economic policy. The oil price has recovered to some extent, but the Latin American country is hardly benefiting from this. Due to the crisis, there was little investment in the oil industry, resulting in a decrease in oil production. This makes it even more difficult to restore the balance of payments.

Venezuela is strongly dependent on dollars for its imports, but due to the declining oil revenues, the flow of dollars became increasingly scarce. The problem was so bad that the central bank started to offer their gold as collateral to various banks, in exchange for dollar loans. The central bank made a similar deal with Deutsche Bank in order to get dollars from their gold hoard.

Due to the financial crisis in Venezuela, the gold reserves of the country declined by over 50 percent in a few years, from around 360 tonnes in 2014 to just 150 tonnes at the end of 2017. The central bank had to use part of its gold supply to pay for imported goods.

By Frank Knopers via Geotrendlines.com

More Top Reads From Oilprice.com:

Back to homepage

Leave a comment

Leave a comment