Bolivia’s Congress approves $1.9 billion IMF loan as removal of diesel subsidies sparks protest threats

Bolivia’s Congress has given the green light to a $1.9 billion loan agreement with the International Monetary Fund, backing President Rodrigo Paz’s government in its efforts to tackle the country’s severe economic crisis.

The Senate ratified the agreement one day after it passed the lower house, removing the final legal obstacle to the three-year financing program. The plan aims to replenish dwindling foreign currency reserves and stabilize Bolivia’s economy, which has been hit by high inflation and weak growth.

The staff-level agreement was announced by the IMF in July, following several months of negotiations with the Paz administration. However, disbursement of the funds can begin only after the program is approved by the IMF’s Executive Board.

Economy Minister Christian Morales told senators that the agreement is expected to strengthen other financial institutions’ confidence in the government. According to him, the World Bank, the Inter-American Development Bank and other institutions could help Bolivia secure around $5 billion in additional financing.

Just hours after the congressional vote, President Paz announced the immediate removal of subsidies for diesel used by buses, trucks and tractors. The measure is among the requirements of the agreement with the IMF, while gasoline, which is mainly used by private vehicles, will remain subsidized for the time being.

The conditions imposed by the IMF, particularly the elimination of fuel subsidies, could trigger a new wave of protests. During June and July, Bolivia faced weeks of protests and roadblocks that brought large parts of the country to a standstill.

Meanwhile, Congress has decided to extend by 90 days the state of emergency declared by Paz during the protests. The measure authorizes military intervention to clear blocked roads and allows for the suspension of certain civil liberties.