Bolivia faces a severe fuel shortage as its gas reserves dwindle and exports fall. A $1.9 billion IMF loan aims to steady the economy, but it requires subsidy cuts and austerity that could fuel more unrest.
Bolivia's proven gas reserves stand at an estimated 3.7 trillion cubic feet as of April, and the country is running short of fuel as energy prices rise owing to the ongoing war in Iran. No successful gas discoveries have occurred in recent years, and the fall in gas revenues has left the economy suffering.
Falling output leaves Bolivia exposed
Exports fell by almost 60 per cent over the last decade as production declined. Yet Bolivia still relies heavily on natural gas, which accounts for around 70 per cent of its electricity mix.
Meanwhile, the fall in gas revenues has left the economy suffering as inflation soars and imported goods become less affordable. The source traces the crisis to years of underinvestment and government decisions, including spending fossil fuel revenues on social programmes and fuel subsidies after Evo Morales took control of the industry in 2006.
IMF loan comes with austerity strings
In September, Congress approved a $1.9 billion IMF loan, and the IMF's Executive Board signed off on October 2. The government must now cut fuel subsidies and significantly reduce public spending, and it is expected to scrap further gasoline subsidies from the beginning of next year.
President Rodrigo Paz acknowledged the pressure. According to Oilprice.com, he warned: "International prices are forcing us to make complex choices."
The loan is expected to unlock up to $4 billion more in financing from the World Bank and other lenders. However, there are major concerns that the plan will raise living costs for households already struggling.
Protests and a possible import future
Last December's subsidy cut led to widespread protests, and road blockades by protesters followed over several weeks in June and July.
To ease shortages, the government plans to triple the fund financing refined fuel purchases. Experts warn that Bolivia could become a net fossil gas importer by around 2030.
Source: Oilprice.com
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