Bolivia Strikes $1.9 Billion IMF Deal and Pulls the Plug on Diesel Subsidies

In a hurried session on Friday, lawmakers in La Paz gave the green light to a roughly $1.9 billion financing package from the International Monetary Fund. It was a rare moment of consensus for President Rodrigo Paz’s centre‑right administration, which has been scrambling to steady a battered economy.

Just hours after the vote, Paz announced that the government would stop subsidising diesel – the fuel that powers most trucks, buses and tractors across the Andes‑bound nation. Gasoline, still used mainly for private cars, will stay subsidised for the time being, though the president has already trimmed that support over the past few months.

The Senate gave its nod a day after the lower house approved the deal, clearing the last legislative hurdle for a three‑year program aimed at replenishing dwindling foreign‑exchange reserves and easing sky‑high inflation. The IMF first publicised a staff‑level agreement in July, after months of talks with Paz’s market‑friendly team, which took power last year following nearly two decades of socialist rule.

While the loan still needs the IMF’s executive board sign‑off before any cash flows, Economy Minister Christian Morales told senators the money would act as a confidence‑boost for other lenders – the World Bank, the Inter‑American Development Bank and private financiers – potentially unlocking about $5 billion in extra credit.

That optimism, however, comes with a steep price tag. The IMF’s conditions include cutting fuel subsidies, a move that threatens to reignite street protests. Bolivia saw weeks of road blockades in June and July, with demonstrators demanding Paz’s resignation. In response, Congress extended a 90‑day state of emergency, granting the military broader powers and suspending some civil liberties to clear the highways.

Labor groups, led by the Bolivian Workers’ Central, slammed the loan, warning that spending cuts required by the IMF will push up the cost of living and squeeze already‑strapped families. Still, most centrist and right‑leaning deputies rallied behind the pact, while the once‑dominant Movement Toward Socialism (MAS) now holds just two seats in the 130‑member lower house and none in the 36‑seat Senate.

Fuel shortages have been a chronic headache since 2023, exacerbated by a slump in natural‑gas exports that used to fund gasoline and diesel imports. The war in Iran has lifted global oil prices, turning subsidies into a huge drain on the state budget.

“No one can buy something expensive and sell it cheap,” Paz declared late Friday, insisting diesel would now be sold at market rates. To soften the blow, he unveiled a $79 million cash‑transfer program for roughly 2.9 million Bolivians and promised low‑interest loans for truckers, small businesses and farmers who will feel the pinch.

He also pledged to redirect the money previously spent on fuel subsidies toward schools, hospitals and road maintenance, arguing the shift will finally end the persistent diesel shortages that have disrupted harvests and delayed imports.

“With this measure we guarantee supplies 24 hours a day, seven days a week,” Paz said, trying to assure a wary public that the change will bring stability rather than chaos.

The IMF’s board will meet next month to give final approval. If the deal moves forward, Bolivia could see a modest revival in confidence, but the social and political backlash may linger as the country navigates the uneasy path between fiscal discipline and popular discontent.