Bolivia drops long-held dollar peg
Bolivia has ended its 15-year dollar peg and adopted a flexible exchange-rate system. The move comes amid dollar shortages, weak reserves and talks with the IMF for at least $2.5 billion in financing.
LA PAZ: Bolivia has moved to a flexible exchange-rate system, ending a long-standing peg to the US dollar in a major policy change announced by the government on Friday.
The shift will be overseen by the central bank and is intended to support economic stability, according to a decree issued by the economy ministry. The ministry said the move is meant to strengthen the broader economy, protect competitiveness abroad and help restore balance in external accounts.
Bolivia had kept its official exchange rate effectively fixed for years, with the boliviano set at 6.86 per dollar for purchases and 6.96 for sales since 2011. But pressure on foreign-exchange reserves and a worsening shortage of dollars contributed to the rise of a parallel market, where the US currency at times traded near 20 bolivianos.
The government had more recently been using a reference rate of about 9.90 bolivianos to the dollar for most commercial and financial dealings. After the decree was issued, the central bank updated its website to show an official exchange rate of 9.73 bolivianos per dollar as of Monday, indicating a depreciation of roughly 30%. The policy change comes as Bolivia seeks to normalise currency markets, improve investor confidence and negotiate a financing programme of at least $2.5 billion with the International Monetary Fund while facing acute dollar scarcity.
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