President Rodrigo Paz announced a sweeping economic decree aimed at stabilizing public finances, confirming the government will not reinstate fuel subsidies despite rising inflation pressures. The move underscores Bolivia’s commitment to fiscal discipline amid ongoing economic challenges.
- President Rodrigo Paz introduced a new economic decree effective January 2026
- Fuel subsidies will not be reinstated, despite inflation reaching 6.7% YoY
- Primary fiscal deficit targeted at 1.2% of GDP by end-2026, down from 2.8% in 2025
- Mining and hydrocarbon sector revenues targeted to grow 11% annually via revised royalties
- Bolivian peso (BOB) rose 2.4% against the U.S. dollar following the announcement
- Central bank maintains 10.5% benchmark interest rate to control inflation
President Rodrigo Paz of Bolivia has formally introduced a new economic decree, outlining measures to strengthen fiscal sustainability and curb public spending. The decree, effective immediately, includes adjustments to state-owned enterprise operations, revised tax collection protocols, and a freeze on non-essential government expenditures. Notably, the administration has reaffirmed its decision not to resume fuel subsidies, which were suspended in 2023 due to budgetary strain. Key fiscal targets set by the decree include reducing the primary fiscal deficit to 1.2% of GDP by the end of 2026, down from an estimated 2.8% in 2025. The government also plans to increase revenue collection from mining and hydrocarbon sectors through revised royalty structures, aiming to boost state income by 11% annually over the next two fiscal years. This includes a 5% rise in mineral export taxes and new fees on foreign investment in lithium extraction projects. Market participants have reacted cautiously to the announcement. The Bolivian peso (BOB) strengthened by 2.4% against the U.S. dollar in early trading, reflecting investor confidence in the government's fiscal strategy. However, inflation remains elevated, with consumer prices rising 6.7% year-on-year in December 2025, driven largely by food and transportation costs. The central bank has maintained a benchmark interest rate of 10.5%, the highest in Latin America, to combat inflationary pressures. The decree affects public utilities, state-owned enterprises like Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), and contractors in infrastructure and energy sectors. While long-term economic stability is expected, short-term social unrest remains a risk, particularly in low-income urban and rural communities dependent on subsidized fuel and transport. The government has pledged to redirect savings from subsidy cuts toward targeted social assistance programs, including expanded access to healthcare and school nutrition.