New Bolivian government returns “irregular and onerous” IMF loan

23 March 2021

In February, Bolivia returned a $346 million loan to the IMF, claiming the loan was “irregular and onerous.” In its announcement, the Central Bank of Bolivia said that the loan jeopardised “the country’s sovereignty and economic interests.” It also claimed the loan agreement violated the Bolivian constitution. The loan was issued in April 2020 under the IMF’s Rapid Financing Instrument in response to the Covid-19 pandemic. The loan agreement was made with Bolivia’s interim government, which came to power following the 2019 Bolivian political crisis. In October 2020, rescheduled elections saw the MAS party return to government led by new President Luis Arce, who has recently criticised the interim government for having attempted a “return to neoliberalism.”

The Latin American Network for Economic and Social Justice (Latindadd) welcomed the loan return as a reaffirmation of the country’s economic policy sovereignty. It noted that the five-year maturity on the loan is short in the context of a crisis, and that, despite the loan not including formal conditions, it featured concerning recommendations for medium-term fiscal consolidation measures (see Observer Autumn 2020). Patricia Miranda, a Bolivian debt justice advocate with Latindadd, commented, “The IMF loan would have helped in terms of liquidity, but it would have only increased our fiscal problems in a few years. The need for additional financing is a fact for Bolivia, but the fiscal consolidation language under the agreement was concerning and would likely lead to continued reliance on the IMF over the longer term. Bolivia anticipated these risks and said no to the contradictions between the IMF’s rhetoric on fair recovery and the actual harmful policies that it is putting in practice in the context of crisis.”