Bolivia Targets Tax Reform and Spending Cuts with $750M IDB Financing Package

Bolivia's reform program focuses on improving how the government plans its finances, allocates public resources and collects tax revenue to support essential public services.

Bolivia is set to receive a $750 million financial package from the Inter-American Development Bank (IDB) to support economic stabilization, improve public finances and strengthen the country's fiscal management. Approved by the IDB's Board of Executive Directors, the financing will help the government address economic challenges through budget support and reforms designed to improve the management of public resources. The package forms part of a broader economic reform program agreed with the International Monetary Fund (IMF) in October 2026, with support from the international community.

The financing includes a $500 million special development loan intended to provide budget support and help stabilize Bolivia's economy during a period of fiscal adjustment. A separate $250 million policy-based loan will support changes to government spending, taxation and public investment, helping the country establish a more sustainable fiscal position. Together, the two operations will provide financial assistance and support policy reforms intended to strengthen economic management and reduce pressure on public finances.

Bolivia's reform program focuses on improving how the government plans its finances, allocates public resources and collects tax revenue to support essential public services. The proposed measures include reviewing energy subsidies, improving control over government payroll spending and strengthening the management of public investment projects. Changes to tax policies and administration are also expected to make the country's tax system simpler and more effective, creating a stronger foundation for fiscal stability.

$500 Million Loan to Support Economic Stabilization

The IDB's $500 million special development loan will provide direct budget support to Bolivia as the government implements its broader macroeconomic stabilization program. This financing is intended to help the country manage immediate budgetary pressures and support economic adjustments under the reform framework agreed with the IMF in October 2026. The operation forms part of international financial support for Bolivia's efforts to restore economic stability and strengthen confidence in its fiscal management.

The special development loan comes with a seven-year repayment period and a three-year grace period, giving the government time before principal repayments begin. Its interest rate will be based on the Secured Overnight Financing Rate (SOFR), a benchmark used in international financial markets. The financing arrangement is designed to provide resources for economic stabilization without requiring the entire principal to be repaid in the early years of the program.

Fiscal Reforms to Improve Government Spending and Tax Collection

The $250 million policy-based loan will support reforms addressing major challenges in Bolivia's public financial management, including the efficiency of government expenditure and the sustainability of fiscal policies. A central part of the program involves strengthening macrofiscal planning so that government authorities can better coordinate budget decisions, spending priorities and fiscal targets. Improved planning is expected to help Bolivia manage public resources more effectively and support decisions that contribute to greater financial stability.

Energy subsidy reform is another important component, with the government expected to rationalize subsidy spending as part of efforts to improve the efficiency of public expenditure. The program also covers payroll expenditures and public investment management, focusing on more effective allocation of government funds and stronger oversight of spending. These reforms are intended to help the government control expenditure and direct available resources toward public priorities within a more sustainable fiscal framework.

Bolivia's tax system will also undergo changes designed to simplify tax policies and strengthen the administration responsible for collecting government revenue. Simpler tax rules and more effective administrative processes could make tax compliance easier and improve the government's ability to manage revenue collection. Stronger public spending controls and tax administration are expected to support the country's efforts to improve fiscal sustainability.

Long-Term Financing to Support Bolivia's Economic Reform Program

The $250 million policy-based loan represents the first of two planned programmatic operations supporting Bolivia's fiscal reform agenda, with each operation remaining financially independent despite their technical connection. The first operation will concentrate on macrofiscal planning, public expenditure reforms, public investment and improvements to the country's tax system. This structure allows the IDB to support a broader reform process through separate financing arrangements linked to the country's economic policy priorities.

The policy-based loan has a 20-year repayment period and a 7.4-year grace period, providing a longer financing horizon than the special development loan. Both loans carry interest rates linked to SOFR, with repayment arrangements reflecting their different purposes and financing structures. The combined $750 million package is expected to support Bolivia's economic stabilization efforts and provide financial backing for reforms intended to strengthen public finances over the coming years.