IMF, Bolivia reach $1.9B financing deal amid crisis

The International Monetary Fund announced on Wednesday that it has reached a staff-level agreement with Bolivia on a $1.9 billion, three-year financing program under the Extended Fund Facility, as the South American nation seeks to stabilize an economy facing its deepest crisis in decades.wtvbam+1

A Lifeline Below Expectations

The deal, if approved by both the IMF's Executive Board and Bolivia's Congress, would mark Bolivia's first multi-year IMF arrangement since 2006. However, the package falls short of what the government had anticipated. Economy Minister Gabriel Espinoza said just last week that Bolivia was "days away" from a deal worth $2.5 billion to $2.8 billion.wmbdradio+1

The IMF said the program could unlock more than $5 billion in total financing from the World Bank, the Inter-American Development Bank, and other multilateral lenders. Bolivia's economy has been strained by declining natural-gas production, fiscal deficits exceeding 10% of GDP, and nearly exhausted foreign-currency reserves.wtvbam

Reform Conditions and Political Risks

The financing is tied to economic reforms under President Rodrigo Paz, who took office in November and has cut fuel subsidies and reduced public spending to stabilize finances. Those austerity measures triggered anti-government protests and roadblocks that disrupted the economy for nearly two months earlier this year.wtvbam

"The new administration has launched a decisive reform plan to address these challenges and restore macroeconomic stability," the IMF's Joana Pereira said in a statement. "The IMF-supported program is designed to back these efforts, rebuild resilience, and help put the economy on a job-rich and sustainable growth path."imf+1

Congressional Hurdle Ahead

The program faces a potential obstacle in Bolivia's Congress, where IMF borrowing remains politically sensitive. In 2020, the IMF approved over $300 million in crisis financing for Bolivia during the pandemic, but Congress withheld authorization and the funds went unused before being repaid early.wtvbam

Bolivia adopted a floating exchange rate on July 15, abandoning a longstanding currency peg as part of its broader stabilization effort. Bolivian dollar bonds were little changed on Wednesday following the announcement, with yields hovering between 8% and 9%.riotimesonline+1