Andean Group - August 2026

José Gabriel Espinoza, Bolivia’s economy and finance minister, predicted during a 22 July interview with Spanish newswire EFE that the country faces a GDP contraction of between 0.7% and 1% in 2026. This is largely a result of the mass protests and road blockades that took place over 53 days in May and June [EB-26-06]. Espinoza said that prior to the unrest, Bolivia was experiencing an “accelerated recovery” from the financial woes of 2025, when he said that under the previous government led by Luis Arce (2020-2025) the fiscal deficit reached 12%, inflation hit 21%, and GDP contracted by just over 1%. Despite the setback to growth, Espinoza expressed confidence that inflation would fall to single digits by the end of this year.

The protests reflected the force of left-wing opposition to the economic reforms introduced by President Rodrigo Paz since he took office in November last year. This bitter medicine, the Paz administration insists, is necessary for Bolivia’s long-term health. One measure that Espinoza singled out as a success was the decision on 28 June to move away from the dollar peg which had been in force since 2011. This had seen the exchange rate held at B$6.86/US$1 for dollar purchases and B$6.96/US$1 for sales. The new, flexible market-based exchange rate was aimed at addressing problems of falling foreign-exchange reserves and dollar shortages, which had led to a parallel exchange market that was rapidly diverging from the official rate.

The official exchange rate at the time of launch in late June 2026 was B$9.73/US$1, or a devaluation of approximately 30% from the old pegged rate; by 4 August it stood at B$12.08/US$1. Although this indicates a near halving of the value of the boliviano since June, the government argues that the official rate had lost all meaning given the growth of the black market. Looking forwards, the change should boost Bolivian exports while making imports more expensive.

The trade surplus had been positive before the protests, Espinoza said, standing at US$1.3bn between January and April. This was driven by the mining sector, which he described as a “locomotive” that was causing “economic activity to begin to quickly recover”. The government also delivered an overall fiscal surplus during those months of 0.5% of GDP, he said, signifying a major tightening of the public finances compared with the situation under Arce.

After more than seven weeks of roadblocks, the economic panorama has deteriorated significantly. According to Espinoza, average family incomes for 2026 are expected to be 11% lower than they would have been otherwise. The roadblocks’ impact, in the form of shortages and higher prices of some goods, would continue “in the coming weeks and months”, he said. Espinoza also noted that the economy is growing more vulnerable to roadblocks compared to previous years, given the diminishing production and export of natural gas, which was exported via pipelines and therefore less impacted by road closures.

Nevertheless, the Paz administration is hoping for a bounceback. It is still expecting a fiscal deficit of 9% of GDP, down three percentage points from 2025, and year-end inflation of 7-9% – lower than the target in the national budget of 14%.

IMF deal

The government received a significant financial boost on 29 July when it reached a staff-level agreement with the International Monetary Fund (IMF) under which it will receive US$1.9bn over 36 months via the IMF’s Extended Fund Facility (EFF). This was notably lower than the US$2.5bn-$2.8bn that Espinoza said he was expecting on 22 July, just a week before the deal was announced.

The funding will be contingent on the Paz administration continuing with its reform agenda, including fiscal reforms to reduce the public debt, strengthen institutions, and ensure public spending is targeted and efficient. Other areas of focus will be continuing to modernise the monetary and exchange rate regime, building financial sector resilience, and enhancing competitiveness and governance to promote private investment.

Implementing these measures will pose further political difficulties for Paz. One of the main groups behind the protests earlier this year, the umbrella trade union Central Obrera Boliviana (COB), had demanded that the government rule out IMF borrowing, as a condition for ending the blockades, due to the many strings that the lender attaches to its loans. Under Arce, congress also acted as an impediment to further borrowing, although this was largely due to internal party politics within the then ruling Movimiento al Socialismo (MAS). With the MAS now reduced to a rump in congress, Paz may have an easier time getting lawmakers to sign off on IMF credit.