Bolivia’s Congress approves $1.9bn IMF loan amid protest threats

Bolivias legislature voted to approve a $1.9 billion lending arrangement with the International Monetary Fund, a move hailed by President Rodrigo Paz as a crucial step to address the countrys balance-of-payments difficulties. The programme marks the countrys first multi-year IMF arrangement since 2006 and still requires final approval from the IMFs Executive Board before any funds are released.

The government says the loan is designed to tackle a crisis driven by a long-term decline in natural gas production and the depletion of foreign reserves after years of heavy fuel subsidies. To keep petrol and diesel affordable, past administrations subsidised prices to levels below many major producers, a policy officials now say has drained reserves and encouraged a black market in smuggled fuel.

As part of the IMF package, President Paz must continue cutting subsidies and reining in public spending. He has already raised fuel prices and announced plans to eliminate the subsidy entirely by January. Bolivian officials also say the agreement should unlock roughly $5 billion in additional financing from the World Bank and other lenders.

The vote passed despite Pazs Christian Democratic Party lacking a congressional majority; centrist and right-leaning parties that now control the legislature backed the programme after the Movement for Socialism (MAS) was reduced to two seats in the 130-seat lower house and lost its Senate representation. The main union federation, the Bolivian Workers Central, denounced the deal, warning subsidy cuts will raise living costs for households and could prompt renewed protests similar to the road blockades that paralysed parts of the country in June and July. Congress also extended a state of emergency, originally declared to clear those blockades, for another 90 days.