Bracing for State Bankruptcy: Bolivia's Struggle Amid Economic Turmoil
Bolivian Head of State, Arce, Issues Alarm over Potential Bankruptcy Amidst Ongoing Economic Turmoil
In the heart of South America, Bolivia fights an uphill battle against an escalating economic crisis, leaving President Luis Arce to warn of impending state bankruptcy without further financial aid. "Got the bills, but gonna run outta cash?" Arce quipped to AFP. The economic downturn has sparked protests and flagging approval ratings for the President.
Bolivia's external debt weighs heavy at $13.3 billion, a hefty 37% of its gross national income—according to the World Bank. Major creditors include the Inter-American Development Bank, the Development Bank of Latin America (CAF), the World Bank, and China. Speaking frankly, Arce admitted, "We've been squeezing lemon juice from a rock as a nation." Despite frequent replenishing through old loans, fresh capital inflows are currently absent, creating a financial conundrum.
Thus far, Arce's attempts to secure $1.8 billion from international institutions haven't fared well in the Bolivian parliament. By December, around $2.6 billion will be required for fuel imports and outstanding debt payments. The economic crisis manifests in crippling currency and fuel shortages, as well as staple food scarcity. In May, inflation hit a staggering 18.4% year-on-year, the highest level in nearly two decades. The Bolivian currency also plummets in value.
Despite the storm of criticism, the 61-year-old Arce, hailing from the Movement for Socialism (MAS) party, has steadfastly refused to resign. However, he has pledged not to run for re-election in the upcoming presidential election in August. Although Arce's approval ratings, at 9% according to the Latinobarómetro polling institute, are among the lowest in South America, he remains stubbornly in power.
Yet, the economic crisis shows no signs of abating, sparking political and social unrest on the verge of the general elections in late 2025. The worsening conditions—rising inflation, shortages, and currency devaluation—demoralize support for President Arce and his administration. Social unrest intensifies as living costs soar and access to healthcare and basic services deteriorates. As voters face declining living standards, questions about the government's management of the crisis arise.
Sources: ntv.de, AFP
Extra Insights:
Bolivia grapples with a crippling inflation rate of 22.6% annually as of early 2025 and a steep escalation to 18.46% by May 2025, drastically affecting the cost of living and disproportionately impacting working-class and rural families. Essential goods such as chicken, beef, and vegetables have seen price surges between 4% and 25% year-on-year. Fuel and food scarcity is aggravated by the boliviano's catastrophic exchange rate on the black market, trading as high as 20 bolivianos per USD compared to the fixed official rate of around 6.9 bolivianos per USD. Bolivia's foreign currency reserves dwindle to approximately $2.1 billion, barely enough to cover two months of imports, and public debt has ballooned to 84% of GDP. The political turmoil surrounding the economic crisis threatens to isolate the country from international credit markets. The dismal state of Bolivia's economy, combined with fears of state bankruptcy and default, place immense pressure on Arce as voters consider his handling of the crisis ahead of the 2025 elections.
- In the midst of the economic turmoil, President Arce has urged the implementation of community and employment policies to mitigate the impact of rising living costs on Bolivian citizens.
- Given the mounting economic challenges, Arce has appealed for aid in personal-finance management and debt-management strategies from international financial institutions.
- As the political and social unrest escalates, attention shifts towards the general-news segments, focusing on the policies to be implemented by potential political candidates in the upcoming elections, particularly their plans for addressing the country's crippling debt and economic instability.
