Can the BCB Control Inflation?
Since late 2023, Bolivia has been experiencing an accelerated and widespread inflationary process, with year-on-year inflation reaching 18.46% in May 2025 and sharp increases in both tradable goods —affected by the dual exchange rate— and non-tradables, as well as core inflation. The persistent fiscal deficit, financed by the Central Bank through monetary issuance, has weakened the exchange rate regime, eroded institutional credibility, and limited the BCB's ability to control inflation. Without credible fiscal consolidation and the restoration of the Central Bank's autonomy, inflationary pressures will continue to intensify.
Jun 10, 2025
Bolivia: A History of Fiscal Incontinence
In recent years, Bolivia has experienced a persistent inability to maintain fiscal balance, exacerbated by its dependence on extraordinary revenues from natural resources. Moreover, in recent months, inflation has accelerated, surpassing double digits. This post analyzes, from a historical perspective, how recurring fiscal deficits and their financing through the Central Bank have contributed to inflationary cycles. Based on this diagnosis, two concrete proposals are presented—a fiscal rule and the reform of Article 22 of the BCB Law—as complementary measures to strengthen macroeconomic sustainability.
May 20, 2025
Banking in Bolivia as of March 2025: Betting on the Short Term
As of March 2025, Bolivia's banking system shows clear signs of a short-term-oriented strategy in response to a challenging macroeconomic environment. Balance sheet expansion has focused on temporary investments, particularly in instruments issued by the Central Bank (BCB), reflecting increased liquidity channeled to that institution. Meanwhile, credit portfolio growth has slowed (5.4% annually), and banks face challenges in attracting time deposits, relying increasingly on current and savings accounts, which are more volatile and sensitive to confidence shocks. Delinquency remains high and is concentrated in rescheduled loans, still representing around 15% of the total. While system profitability has improved, it has done so by leveraging low-risk, highly liquid placements, suggesting reduced financial intermediation to the real economy. Overall, the system is protecting itself, prioritizing liquidity, but sacrificing credit depth in a context of structural fragility and growing dependence on the BCB.
May 2, 2025