Bolivia ends diesel subsidy

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Bolivia said on Friday it will axe its diesel subsidy after Congress approved a multi-million-dollar loan from the International Monetary Fund to stabilize the Andean nation’s finances.

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The country has suffered its worst economic crisis in four decades as the subsidy policy drained the treasury’s international dollar reserves.

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The Bolivian government centralizes gasoline and diesel imports, purchasing them at international prices and reselling them at a loss.

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“We have decided that, starting today, diesel will cost the same as what we pay to purchase it abroad,” President Rodrigo Paz said in an address broadcast on state television.

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The government said this month it had agreed to end all fuel subsidies by 2027 under an agreement with the International Monetary Fund (IMF) on a $1.9 billion bailout.

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The conditions of the loan include ending the generous fuel subsidies that had left a huge hole in the country’s currency reserves, leaving the state short of money to import fuel and other essentials.

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A decision on gasoline subsidies was still pending.

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Soon after he took office in November last year, Paz announced he was eliminating the subsidies, raising domestic fuel prices to bring them into alignment with international prices.

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But when the US-Israel war with Iran caused global oil prices to rocket, the government dug deep again to absorb the difference with the new domestic price.

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Under the deal with the IMF, the government would no longer be allowed to keep fuel prices artificially low.

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To cushion the impact, the government would increase spending on some social programs.

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Paz recently doubled the price of diesel for large consumers such as farmers, arguing that cross-border fuel smuggling was causing fuel shortages.

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The price hike sparked protests but there has not been a resumption yet of the mass anti-government protests and blockades that paralyzed parts of the country in May and June.

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AFP

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