Andean Group - October 2026

Bolivia received the first US$211.3m instalment of a US$1.9bn loan agreement with the International Monetary Fund (IMF) on 6 October. Although the funds will ameliorate a difficult fiscal situation and facilitate more fuel imports to address shortages that have been causing significant economic and political difficulties for President Rodrigo Paz’s government, the conditions of the IMF agreement are likely to cause further headaches.

President Paz promulgated the loan agreement on 20 September after it was approved by congress earlier that month, with the IMF’s executive board issuing its own final approval on 2 October. The funds will be provided over a 36-month period via the IMF’s Extended Fund Facility (EFF). The IMF said in July that it expects the loan agreement 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 US$5 billion over the program period.”

In theory, this will ease some of the fiscal pressure on Paz for much of the remainder of his presidential term, which is due to end in 2030. In reality, however, Paz’s ability to remain in power until then is not certain; his administration was severely rocked by massive protests against its economic policies in May and June this year, and the IMF has prescribed further bitter medicine which Bolivia’s powerful trade unions and left-wing opposition groups may attempt to spit out.

Bolivia’s persistently low international reserves, which consist primarily of gold rather than hard currency, have increased the urgency of international financing agreements. According to the central bank, foreign currency reserves at the end of the third quarter of 2026 totalled just US$474m, down 28.4% compared to the previous quarter. Gold reserves, meanwhile, increased by 17.6% in Q3 to total US$3.4bn.

The delivery of the remainder of the loan will be contingent on the government’s ability to implement the macroeconomic reforms identified by the IMF as crucial for the country’s long-term economic stability. The areas of focus identified by the IMF include: decreasing public debt by strengthening fiscal institutions and improving spending efficiency; rebuilding international reserves (including promoting a more flexible exchange rate regime); increasing financial sector resilience and promoting private sector-led growth; and introducing reforms to improve governance, transparency and the business environment in order to promote private investment.

On 2 October the IMF’s deputy managing director and acting chair, Nigel Clarke, noted the efforts made by the Paz administration over the past year to address macroeconomic imbalances, but also stressed that the success of the programme would depend on “sustained implementation, robust contingency planning, and multilateral support”.

One area that is likely to remain contentious is the fuel subsidy, which has already been partially cut back by the Paz government. The previous administration, led by left-wing former president Luis Arce (2020-2025), had budgeted the cost of the subsidy at around US$56m per week in 2025, amid concerns that the policy was both expensive and wasteful, with fuel smuggling and black-market reselling rife.

Paz made phasing out this policy a key promise of his electoral campaign, and signed a decree to that effect in December 2025. However, amid protests and a global surge in fuel prices caused by the war in the Middle East, he later froze gasoline prices until January 2027. He resumed the government’s cost-cutting drive on 18 September with the elimination of diesel subsidies, leading to a price increase of 83% and raising the risk of a new round of protests. These have so far been limited; 28 September saw a 24-hour stoppage of transport services in response to the measure, although this was enacted unevenly across the country, with Santa Cruz facing the most disruption.

Further unrest could ensue from the IMF deal, however. The main trade union federation, Central Obrera Boliviana (COB), has denounced the IMF plan, saying it will increase living costs for working families. Former president Evo Morales (2006-2019), who still holds formidable influence over a large chunk of the left-wing opposition, has also slammed the agreement, claiming that its objective is to weaken public control over the economy, shutter state companies, and privatise the country’s natural resources. On 11 September Morales cited article 320 of the constitution, which says that “the state is independent in all domestic economic policy decisions, and will not accept impositions or conditions on this policy by states or Bolivian or foreign banks or financial institutions, multilateral entities, or transnational companies”.

In response to the congressional approval of the IMF deal, unions called for a national assembly to coordinate their opposition, raising the possibility of further road blockades and street protests. For now, these may be deterred by the state of emergency which Paz declared to end the previous round of roadblocks in June, under which the army can be deployed to disperse protesters. Congress voted on 17 September to extend the state of emergency for a further 90 days. Whilst this may dissuade would-be demonstrators, it also raises the risk of violent clashes if protests do take place.

The wider context of a rightwards shift in politics across the Americas could play in Paz’s favour. The US State Department described the road blockades earlier this year as an attempted coup, and Paz has worked to align Bolivia with the US on regional security policy. So far, however, Washington’s political backing for Paz has not translated into concrete economic deals with major US firms. Long-strained relations with neighbouring Chile, which has advanced much further than Bolivia in the exploitation of its lithium reserves, are also improving following the election of the like-minded President José Antonio Kast, who was due to visit La Paz on 16 October.

Paz met with US Secretary of State Marco Rubio on the sidelines of the UN General Assembly in late September, with Rubio praising the reforms being implemented and offering US support. Paz’s approach to the protests also aligns with that of other leaders across the region who have shown their willingness to crack down strongly on perceived threats to security. He is likely to feel bolstered by both congressional and international support for his approach, whereas Morales, who due to the ongoing threat of arrest remains holed up in his political stronghold of Chapare, Cochabamba department, seems an increasingly isolated figure in the region.

There is, however, the issue that the IMF funding may simply not be enough to address the scale of Bolivia’s economic problems. International credit ratings agency Fitch warned on 24 August that the perilously low levels of dollar reserves could jeopardise the BCB’s ability to address volatility in the newly flexible exchange rate, following the removal of the dollar peg in June.

Fitch also warned of ongoing fuel shortages – Bolivia imports over 80% of its diesel – as a further source of dollar demand. Indeed, the IMF deal is just the first step in what is likely to be a long road towards macroeconomic stability, and it remains to be seen if Paz can retain the support he needs, both in congress and on the streets, to ensure this takes place.