Key facts
- The IMF and Bolivia have reached a staff-level agreement on a $1.9 billion financing program.
- The three-year deal aims to stabilize Bolivia's economy, which is facing significant challenges.
- Approval is needed from the IMF's Executive Board and Bolivia's Congress.
- The program is contingent on economic reforms implemented by President Rodrigo Paz.
- The agreement could unlock over $5 billion in total financing from multilateral lenders.
The International Monetary Fund (IMF) has reached a staff-level agreement with Bolivia on a $1.9 billion financing program, the organization announced on Wednesday. This three-year deal, which requires approval from both the IMF's Executive Board and Bolivia's Congress, is intended to help stabilize the South American nation's economy, which is currently facing its most severe crisis in decades.
Bolivia's economic struggles stem from declining natural-gas production, fiscal deficits exceeding 10% of GDP, and nearly depleted foreign-currency reserves. President Rodrigo Paz has initiated austerity measures, including cuts to fuel subsidies and public spending, to address these challenges. However, these measures have previously led to anti-government protests and roadblocks.
If approved, this would be Bolivia's first multi-year IMF arrangement since 2006. The proposed financing package is lower than the Bolivian government's initial expectations, which ranged between $2.5 billion and $2.8 billion. The IMF indicated that this agreement could encourage additional financing from other multilateral lenders, such as the World Bank and the Inter-American Development Bank, potentially bringing the total to over $5 billion.
Joana Pereira of the IMF stated that the new administration has launched a decisive reform plan to restore macroeconomic stability, and the IMF-supported program is designed to back these efforts. Bolivia's Economy Ministry welcomed the agreement, asserting it would support the government's program to rebuild confidence and strengthen the country's growth outlook.
Despite the agreement, the program may encounter political sensitivity in Congress, where IMF borrowing has been contentious. In 2020, Bolivia could not utilize over $300 million in crisis financing approved by the IMF because Congress withheld authorization, leading the central government to repay the funds early.