Bolivia: to replenish its stock of liquidity, the country could sell 50% of its gold reserves

2023-05-06T12:34:44.312Z

Highlights: In Bolivia, the Senate adopted, Friday, May 5, after long hours of debate a law allowing its central bank to sell its gold reserves. Ten years ago, the Andean country held more than $15,000 million in its international reserves. Today they have fallen to 3,500 million. According to the government, this shortage of cash is linked to the rise in fuel prices since the beginning of the war in Ukraine. To replace these quantities of gold transformed into banknotes, the Minister of Finance announced that they would buy some directly from local Bolivian producers.

In Bolivia, the Senate adopted, Friday, May 5, after long hours of debate a law allowing its central bank to sell its gold reserves. An approach that could allow the country to get out...

Bolivia: to replenish its stock of liquidity, the country could sell 50% of its gold reserves

An example of the crisis affecting the country: Bolivians queue in front of the Central Bank of Bolivia to exchange bolivianos for dollars at a cheap rate. © Jorge Bernal / AFP

Text by: RFI Follow

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In Bolivia, the Senate adopted, Friday, May 5, after long hours of debate a law allowing its central bank to sell its gold reserves. An approach that could allow the country to emerge from the financial crisis in which it is mired, by replenishing its stock of liquidity.

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If gold is abundant in Bolivia, greenbacks are scarce. Ten years ago, the Andean country held more than $15,000 million in its international reserves. Today they have fallen to 3,500 million. According to the government, this shortage of cash is linked to the rise in fuel prices since the beginning of the war in Ukraine.

Buy-back from producers

And selling 50% of its gold reserves would allow it to replenish its foreign exchange reserves. And to replace these quantities of gold transformed into banknotes, the Minister of Finance, Marcelo Montenegro, announced that they would buy some directly from local Bolivian producers.

But, according to economist Gonzalo Chavez, if foreign exchange reserves have been divided by three, it is mainly because of bad investments, combined with a constant public deficit since 2014. It is around 7% of Bolivia's GDP. Gas exports were also halved. For the opposition, this bill voted in the Senate will not be a miracle solution, to face a crisis structurally installed in the country.

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Bolivia: to replenish its stock of liquidity, the country could sell 50% of its gold reserves

Bolivia: to replenish its stock of liquidity, the country could sell 50% of its gold reserves

Buy-back from producers

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