The Fund revealed a preliminary agreement with Bolivia for a new $1.9 billion program intended to support the country's fiscal position. This 36-month arrangement requires approval from the IMF executive board before the initial payout can be released.
Lengthy negotiations between the IMF and Bolivian authorities led to this agreement. It also arrives after the government introduced major policy changes, such as reducing fuel subsidies and moving away from a 15-year fixed exchange rate to a more flexible system.
According to the IMF's statement, "Key elements of the program include restoring fiscal sustainability, strengthening social safety nets and building resilience in the financial sector, along with the modernization of the exchange rate regime."
Bolivia will receive a smaller amount than initially anticipated in early discussions with the IMF. The country had targeted a $3.3 billion package, which would have required exceptional access relative to its quota. However, the final loan falls under normal access, capping it at $2 billion.
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Moreover, the program aims to attract further funding. "The IMF-supported program is expected to help catalyze additional financing from the World Bank, the Inter-American Development Bank, and other development partners, contributing to a broader financing package of over $5 billion over the program period," the IMF said in the statement.
The government has already taken steps to fix things. The recent decisions to allow a more flexible exchange rate and cut fuel subsidies were painful but necessary steps to secure IMF support.
To strengthen reserves for potential market interventions, authorities expect support from foreign loans, trade surpluses, remittances, and bringing back dollars held outside the official banking system - estimated by the central bank at about $4 billion.
Bolivia's economic troubles have been building for years. The country's reliance on natural gas exports, once a steady source of foreign currency, has declined as reserves shrank. Meanwhile, expensive fuel subsidies strained public finances, forcing the government to borrow and draw down international reserves. The shift to a more flexible exchange rate is expected to help stabilize the currency market and encourage dollar inflows from remittances and exports.
This IMF deal occurs alongside strengthening relations between Bolivia and the United States. During the 53-day road protests in May and June demanding President Rodrigo Paz's resignation, Bolivia joined the "Shield of the Americas" initiative and received millions in U.S. aid covering humanitarian assistance and counter-narcotics efforts.
Bolivia's 2031 government bonds momentarily erased declines following the announcement, based on indicative price data gathered by Bloomberg. The dollar-denominated securities saw minimal movement at 10:55 a.m. in New York on Wednesday.
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