Bolivia approves $1.9 billion IMF loan and scraps diesel subsidies to combat shortages

Congressional approval of the IMF facility

Bolivia's Senate ratified a $1.9 billion financing package with the International Monetary Fund on 18 September 2026, following approval by the Chamber of Deputies on 17 September. The 36-month program under the IMF's Extended Fund Facility represents the country's first multi-year arrangement with the lender since 2006. The legislative coalition supporting President Rodrigo Paz passed the measure after the Movement Toward Socialism (MAS) party was reduced to two seats in the 130-member lower house and zero in the Senate. The program requires formal ratification from the IMF Executive Board before funds are disbursed, and officials estimate it will unlock more than $5 billion in additional financing from institutions including the World Bank and the Inter-American Development Bank.

“These resources do not belong to an administration, they are intended to shield our reserves, stabilize the economy and open real opportunities for investment and employment.”

Immediate termination of fuel subsidies

Following the Senate vote, President Paz announced the complete elimination of state subsidies on diesel fuel, transitioning the domestic market to unified pricing tied to global benchmarks. State expenditures on fuel subsidies previously reached roughly $2.6 billion annually, or about $55 million per week, which drained central bank reserves. Paz argued that the policy had enabled widespread cross-border smuggling rather than supporting domestic productive sectors. Diesel previously retailed at a fixed rate of 18 bolivianos (around 1.56 euros), but pump prices will now fluctuate according to international market levels. The administration stated that the policy change will eliminate retail queues and ensure continuous supply across the country.

“From today diesel will cost the same as it costs us to buy it abroad.”

Fiscal targets and international reserves

Economy Minister Christian Morales defended the stabilization package before the legislature, detailing the country's severe balance of payments constraints. Morales reported that the administration inherited $3.17 billion in net international reserves, of which only $52 million remained in liquid currency, following years of declining natural gas export revenues. Under the agreement, the government committed to curbing central bank monetary financing of public debt and adopting a more flexible exchange rate regime. The Ministry of Economy projected that the fiscal deficit will decrease from 9.1% of gross domestic product in 2026 to 6.4% in 2027, reaching 3.8% in 2028. Officials also projected net international reserves to rise to nearly $6 billion by the end of 2026, almost $8 billion in 2028, and around $9.07 billion in 2031.

20269.1%

20276.4%

20283.8%

2026

9.1 %

2027

6.4 %

2028

3.8 %

Data from the article text

Social compensation and opposition response

To offset rising fuel expenses, the government announced direct social spending initiatives funded by the subsidy reductions. Approximately 2.9 million citizens will receive the Bono Pepe 2 cash transfer, supported by an 874 million boliviano budget. The administration also raised the Bono Juancito Pinto student stipend from 200 to 300 bolivianos per child, and allocated up to 800 million bolivianos for preferential credit lines at an annual interest rate near 6% for freight transporters, artisans, and small retailers. However, the Bolivian Workers' Central union federation condemned the measures, warning that removing subsidies will increase living costs. On 17 September, Congress extended an existing 90-day state of emergency that had been instituted after transport and union blockades disrupted roads across Bolivia in June and July.