Bolivia’s Congress has approved a $1.9 billion loan programme from the International Monetary Fund (IMF), in a major political victory for President Rodrigo Paz.
However, trade unions have warned that the austerity measures attached to the deal could trigger renewed protests and increase living costs.
Paz’s Christian Democratic Party does not control a majority in Congress. Nevertheless, centrist and right-wing parties backed the IMF programme after the long-ruling leftist Movement Towards Socialism (MAS) was reduced to just two seats in the 130-member lower house and none in the Senate.
“This is a historic step for Bolivia,” Paz said after Friday’s vote.
The IMF loan is intended to address Bolivia’s prolonged economic crisis, but it still requires approval from the IMF’s Executive Board before funds can be released.
Bolivia previously earned billions of dollars from natural gas exports. However, years of underinvestment have caused gas production to decline, leaving the country short of foreign currency needed to pay for imported fuel.
The government has spent heavily on fuel subsidies to keep petrol and diesel prices low. According to officials, the subsidies have depleted foreign reserves and contributed to fuel smuggling.
Under the IMF programme, the government is required to reduce fuel subsidies and control public spending. Paz has already increased fuel prices and plans to completely remove the subsidy by January.
Officials expect the IMF agreement to help unlock an additional $5 billion in financing from the World Bank and other international lenders.
However, Bolivia’s main trade union federation, the Bolivian Workers’ Central, has rejected the plan, arguing that cuts to fuel subsidies will further increase the cost of living for struggling households.
The country experienced weeks of road blockades in June and July, with protesters demanding Paz’s resignation. Congress has also extended a state of emergency, originally declared to help clear blocked roads, for another 90 days.
The IMF programme therefore comes as the government faces the challenge of stabilising Bolivia’s finances while dealing with strong opposition from unions and protesters.
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