According to the specialized economics magazine The Economist, the drop in Net International Reserves (RIN) and The shortage of dollars are indicators that the Bolivian economic model, promoted by the Movement Towards Socialism (MAS) in the last 17 years, is generating uncertainty and placing this sector of said country on the brink of financial collapse.
Let us remember that between 2006 and 2016, the then Government of Bolivia that presided over Evo Morales achieved significant growth thanks to natural gas exports. Yet he spent much of those profits on inefficient state-owned companies and refused to adjust his policies when gas prices fell. Since then, public debt has increased and a persistent and high fiscal deficit has been recorded for a decade.
“The International Monetary Fund expects growth to slow to 1.8% this year. In 2021, Bolivia had a current account surplus of 2% of the Gross Domestic Product. But, the IMF expects that this year it will turn into a deficit of 2.5%. Bolivia’s reserves are unlikely to be able to make up the financing gap. The situation has probably deteriorated further since the last time the bank published weekly data in February,” reported The Economist magazine.
Uncertainty due to the fall in reserves and shortage of dollars
In recent months, Bolivia has experienced a scenario of uncertainty due to the fall in NIRs, since they went from US$12,000 million in 2012 to less than US$3,500 million, according to the latest figures for this year. In addition, this coincided with an increase in the demand for dollars in that country and then, it was observed how people went to private banks or exchange houses in search of this currency.
“Bolivians are taking out their savings, exchanging them for dollars and keeping them at home. In the week prior to March 12, the Central Bank sold US$24 million to the public. In this regard, a money changer from Camacho avenue, in La Paz, states “he used to buy US$3,000 a day and sell half. Today we can’t even get US$500”, indicates The Economist magazine.
In recent weeks, Bolivians have gathered at the doors of the Central Bank and exchange houses to buy dollars. Photo: Daily Today
Another worrying factor in Bolivia is the public debt because it stands at 80% of GDP. It obtains a very high regional and world average for a lower-middle-income country. Faced with this scenario, the economist from the Bolivian Catholic University (UCB), Carlos Gustavo Machicado, warns that a balance of payments crisis is coming very similar to the one Bolivians experienced in 1982 because that country entered hyperinflation.
For his part, the former director of the Central Bank of Bolivia, Gabriel Espinoza, estimates that the inflation will reach 6% by the end of the year, which represents a high figure for the country. In this sense, the specialized economics medium affirms that the president “Luis Arce cannot deny Bolivia’s problems for much longer.”
Source: Larepublica
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