Bolivia's Bold Move: Ending a 15-Year Dollar Peg

Bolivia has announced a shift to a flexible exchange-rate system, ending its long-standing dollar peg to restore macroeconomic stability. The Central Bank will oversee this shift, which aims to attract investment, as the country negotiates with the IMF for a financing program worth $2.5 billion.

In a landmark move, Bolivia is transitioning to a flexible exchange-rate system, as confirmed by the economy ministry on Friday. This ends a dollar peg that has been in place for over 15 years.

The policy shift, overseen by Bolivia's Central Bank, aims to reinforce macroeconomic stability, retain external competitiveness, and stabilize the balance of payments, according to a decree from the economy ministry. This transition is a key aspect of Bolivia's broader strategy to normalize currency markets and encourage investor confidence.

For years, Bolivia maintained an official exchange rate since 2011, pegging the boliviano between 6.86 and 6.96 per dollar. However, declining forex reserves and a dollar shortage led to a parallel market where rates topped 20 bolivianos at times.