Bolivia ended cheap diesel on the day it approved the IMF loan, and the agreement already puts gasoline on the clock for 2027

What was decided

On the night of September 18, hours after the Senate approved the US$1.9 billion loan from the International Monetary Fund, President Rodrigo Paz announced the end of the diesel subsidy in a national broadcast. Supreme Decree 5716 took effect the next day and took the price per liter from 9.80 to 17.95 bolivianos, an increase of about 83%.

More than the price, the rule changed. Diesel no longer has a fixed price and now follows an international reference, with a band of 5% up or down. It can now rise — and also fall — without needing a new decree. The same text revoked the two provisional decrees of the previous five weeks, among them the one of August 16, which had created two prices for the same fuel, and set to zero until the end of 2027 the import tariff on part of the gasoline, to make room for private importers.

The president justified the decision by saying the country could not buy dear, sell cheap and watch the fuel be diverted.

Why now

The subsidy had existed since 2005 and for years was sustained by gas export revenue. That revenue shrank: production fell from 61 million cubic meters per day in 2014 to about 27 million. Today Bolivia imports about 95% of the diesel and 60% of the gasoline it consumes, and spends around US$90 million per week on it — in dollars the central bank does not have.

The government calculates that the diesel subsidy alone cost US$55 million per week. Since the end of the fixed exchange rate on June 29, the boliviano has lost value, and keeping the price frozen became more expensive in the same proportion. In the week before the decree, the government had also raised from 2 billion to 6 billion bolivianos the limit the Treasury could pass on to the state company YPFB to cover the difference.

What the IMF lends, and what it asks

The 36-month program lends the equivalent of US$1.9 billion, at 3.47% interest per year and a term of up to ten years for each disbursement. The Fund's board approved it on October 2, and the Central Bank of Bolivia confirmed on October 6 the first disbursement: US$211.3 million, earmarked for reserves.

The comparison helps size the choice. That first disbursement equals less than four weeks of the diesel subsidy, by the government's own figures. The value of the program lies less in the Fund's money than in what it unlocks: according to the government, the agreement opens the way to another US$4 billion from other multilateral institutions.

In exchange, Bolivia committed to reducing the deficit and current spending, to not financing the Treasury with central bank money issuance, to keeping the exchange rate flexible and to eliminating all fuel subsidies from January 2027. The program's targets, according to the coverage, include bringing the deficit to 9.2% and inflation to 14.2%.

Who pays for the adjustment

Diesel moves the country's trucks, intercity buses and farm machinery. That is where the increase hit first.

The truckers who haul fuel threatened to stop work and reached an agreement with the government on September 20; they said that filling up for one trip went from about 10,000 to 18,000–20,000 bolivianos. The drivers' confederation called a national strike for September 28, which split after a new decree brought benefits to the sector. In La Paz, interprovincial fares rose between 19% and 25%. On October 15, YPFB and the fuel truckers agreed on a freight rate adjustment, which still depends on a cost study. At the end of September, gasoline ran short again in Santa Cruz, Cochabamba and La Paz; the state company attributed the shortage to problems with tanker trucks.

To compensate, the government announced a bonus for 2.9 million people, a credit line of 800 million bolivianos at 6% per year for carriers and small merchants, an increase in the school bonus from 200 to 300 bolivianos and a tax exemption on imports of goods intended for production.

The effect on prices still shows little in the official numbers. Cumulative inflation for the year went from 3.01% in August to 3.88% in September, a month in which the new price was in force for only twelve days. Surveys by television stations in Santa Cruz markets recorded a kilo of rice going from 7 to 15 bolivianos, but they are not an official index. The government projects inflation of 14% in 2026; economists interviewed by the coverage say 17% to 20%.

What is still missing

Diesel was the most expensive subsidy, but not the only one. Gasoline, cooking gas and vehicle gas still have fixed prices. According to data from the state company and the regulator, 80% of public transport vehicles run on gasoline, vehicle gas or a combination of the two — it is gasoline, more than diesel, that moves the cities.

The commitment to the Fund provides for the end of all these subsidies from 2027. On September 21, the presidential spokesman said that removing them is not on the agenda.

The two positions can coexist only for a short time. The following disbursements depend on Fund reviews, and the 2027 budget is, according to the coverage, the first major test of the program. Meanwhile, the IMF projected on October 13 a 3% contraction of the Bolivian economy in 2026, the worst result in South America.

Reading

The fiscal trade is clear: an expense that consumed scarce dollars gave way to a price that the consumer pays in full, and the change unlocked a program that could bring much more than the Fund itself lends.

The political trade is riskier. The government did the most visible part of the adjustment all at once, faced the transport operators and for now contained the reaction. The hardest part — the gasoline that moves the cities — was left for a date already signed with the IMF and that the government itself says it is not discussing. It is in that gap that the program will be tested.