By Lucinda Elliott and Rodrigo Campos
July 29 (Reuters) – The International Monetary Fund has reached a staff-level agreement with Bolivia on a $1.9 billion financing program, the IMF said on Wednesday, as the country seeks to stabilize an economy facing its deepest crisis in decades.
The three-year deal, which requires approval from the IMF’s Executive Board and Bolivia’s Congress, would help the country rebuild foreign reserves and ease a dollar shortage that has constrained imports and fueled inflation.
Bolivia’s economy has been hobbled by declining natural-gas production, fiscal deficits exceeding 10% of GDP and nearly exhausted foreign-currency reserves, the IMF said in a 2025 review. President Rodrigo Paz has cut fuel subsidies and reduced public spending to stabilize finances, but the measures triggered protests and roadblocks that disrupted the economy for nearly two months earlier this year.
If approved, the deal would mark Bolivia’s first multi-year IMF arrangement since 2006. It is, however, below considerably lower than the government’s expectations of $2.5 billion to $2.8 billion.
The fund said it would not comment on expectations, adding that the size of the fund’s support “reflects the outcome of discussions between IMF staff and the Bolivian authorities and is based on the country’s balance-of-payments’ financing needs and the program’s objectives.”
The IMF also said the deal could spur financing from the World Bank, the Inter-American Development Bank and other multilateral lenders for a total of more than $5 billion.
The financing is contingent on economic reform under Paz, who took office in November.
“The new administration has launched a decisive reform plan to address these challenges and restore macroeconomic stability,” the IMF’s staff team head Joana Pereira said in a statement.
Bolivia’s Economy Ministry hailed the agreement, saying it would support the government’s plan to restore stability and rebuild investor confidence.
“We said that the first thing to do was to get the house in order, to understand what (funding) was actually needed,” Economy Minister Gabriel Espinoza told reporters on Wednesday.
Bolivian dollar bonds were little changed in price on Wednesday, with yields hovering between 8% and 9% depending on maturities.
“Now the heavy lifting begins,” said Thomas Christiansen, head of emerging market fixed income at UBP in London. “It remains to be seen whether the population can stomach the reforms which, frankly, are needed.”
POLITICAL HURDLES
The agreement could still face significant obstacles in Congress, where IMF borrowing remains politically and the ruling coalition lacks a majority.
One of the main groups behind the recent anti-government demonstrations, the Bolivian Workers’ Central (COB), demanded that that the government rule out IMF borrowing as a condition for ending the blockades earlier this year.
Eleuterio Mamani, a member of the COB, said last week that the government was fast-tracking legislation, despite warnings from labor leaders that the measures could deepen social tensions and worsen the economic crisis by year-end.
In 2020, Bolivia was approved more than $300 million in IMF crisis financing during the COVID pandemic under a transitional interim government, but it could not use the cash after Congress withheld authorization. The central government repaid it early, calling the operation irregular and costly.
Graham Stock, senior emerging market sovereign strategist at RBC BlueBay Asset Management in London, described the deal as “good news” for Bolivia, but cautioned that the government remained politically weak and had struggled to secure support for spending cuts and other economic measures.
“But international support is useful, the U.S. would like to see Bolivia do well, and the rest of the region would like to see it do well,” he said.
(Reporting by Rishabh Jaiswal in Bengaluru, Daina Beth Solomon in Mexico City, Lucinda Elliott in Buenos Aires, Daniel Ramos in La Paz and Rodrigo Campos in New York; additional reporting by Marc Jones and Andrea Shalal; editing by Sanjeev Miglani)
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