Bolivia's Congress has approved a $1.9 billion (€1.65 billion) loan agreement with the International Monetary Fund, handing the conservative government a crucial victory in its struggle to contain a deepening economic crisis. The vote came as unions threatened to resume protests that paralyzed the country earlier this year.
Shortly after the legislative green light, President Rodrigo Paz announced an immediate end to subsidies on diesel, the fuel that powers Bolivia's trucks, buses, and tractors. Gasoline, used mainly by private car owners, remains subsidized for now, though Paz had already trimmed that support in recent months.
The Senate ratified the agreement a day after the lower house, clearing the final legislative hurdle for the three-year financing programme. The deal is designed to replenish Bolivia's dwindling foreign reserves and stabilize an economy hit by high inflation and weak growth.
A conditional lifeline
The IMF first announced a staff-level agreement in July after months of negotiations with Paz's market-friendly administration, which took office last year following nearly two decades of socialist rule. The programme still needs approval from the IMF's executive board before funds are released.
Economy Minister Christian Morales told senators that the deal would boost confidence among other lenders, including the World Bank and the Inter-American Development Bank, potentially unlocking around $5 billion in additional financing. But the assistance comes with strict conditions, including the elimination of fuel subsidies, a step that threatens to reignite unrest.
In June and July, weeks of road blockades brought much of the South American nation to a standstill as protesters demanded Paz's resignation. Congress on Thursday extended for another 90 days a state of emergency that allows military intervention and the suspension of some civil liberties to quell disturbances.
The Bolivian Workers' Central, the country's main labour federation, and other unions have fiercely opposed the IMF loan, warning that required spending cuts would drive up living costs and deepen hardship for low-income families.
Despite lacking a majority, Paz's Christian Democratic Party secured support from centrist and right-wing lawmakers who dominate both chambers. The Movement Toward Socialism, which ruled Bolivia for nearly two decades after Evo Morales took office in 2005, now holds just two of 130 seats in the lower house and none in the 36-member Senate.
Declining natural gas exports have deprived Bolivia of billions of dollars it once used to import gasoline and diesel, leading to chronic fuel shortages that began in 2023 and have persisted under Paz. Surging global oil prices, exacerbated by the Iran war, have made subsidies even more burdensome.
“No one can buy something expensive and sell it cheap,” Paz said in his late-night declaration that diesel would now be sold at international prices.
To cushion the blow, he announced about $79 million (€68.8 million) in cash assistance for roughly 2.9 million Bolivians, along with preferential loans for truckers, small businesses, and producers facing higher diesel costs. He pledged to redirect subsidy spending toward schools, hospitals, and roads.
Paz also promised the change would end the country's persistent diesel shortages, which have disrupted harvests and delayed deliveries of imported goods. “With this measure, we guarantee supplies 24 hours a day, seven days a week,” he said.
The move echoes broader global trends: EU fuel prices have hit record highs as refining costs climb, and the Iran war has driven up energy costs worldwide. For Bolivia, the end of diesel subsidies marks a painful but necessary step toward economic stability, though the political fallout is far from over.
