LatinNews Daily - 2 June 2025

*The International Monetary Fund (IMF) has concluded an Article IV Consultation with Bolivia, outlining a number of concerns over the country’s economic direction. The IMF’s executive directors “expressed concern over Bolivia’s acute fiscal and external imbalances and unsustainable policy mix and called for urgent actions to address the overvalued exchange rate, bolster foreign reserves, and implement sustained fiscal consolidation”. Warning that “inaction could lead to a painful disorderly adjustment”, they “stressed that the untenable peg to the US dollar and depleted international reserves call for a decisive shift in the monetary policy framework”. The IMF also highlighted “a decline in hydrocarbons production, a slowdown in services activity, and a drop in soy crops and related manufacturing due to ‘El Niño’ effects.” These issues came on top of “disruptions from road blockages and scarcity of foreign exchange (FX) – given critically low international reserves – fuels and other critical inputs” which have contributed to Bolivia’s annual inflation rate reaching 10% at the end of 2024, its highest level in over a decade. Meanwhile, “the combination of FX shortages, slowing activity, and depreciation of the parallel exchange rate resulted in a compression of the current account deficit to 2.7 percent for 2024” while “the fiscal deficit surpassed 10 percent of GDP in 2023-24 with declining hydrocarbon revenues, tax exemptions, increased social spending, and higher interest payments”. This fiscal deficit has been largely financed by the central bank due to external financing difficulties.

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