Bolivia: Between inflation and the lack of Central Bank independence
Bolivia is facing a macroeconomic crisis marked by rising inflation, a loss of international reserves, and a persistent fiscal deficit. After years of stability driven by high commodity prices, since 2014 the country has experienced a drop in gas export revenues, leading the Central Bank of Bolivia (BCB) to finance the government's deficit through monetary issuance. This has generated distrust in the national currency, a parallel dollar market, and unanchored inflation expectations. The lack of BCB independence worsens the situation, as it acts more like an arm of the Executive than an autonomous institution. To restore stability, fiscal discipline and central bank independence are needed—and ultimately, dollarization may need to be considered if trust in monetary policy cannot be restored.
Mar 9, 2025
