Bolivia ushers in a new political and economic phase as Rodrigo Paz, who emerged victorious from the October 19 runoff election, prepares to take office on November 8, inheriting one of the country’s most acute crises since the hyperinflation of the 1980s. His administration will face an immediate task: stabilising a shattered economy marked by shrinking reserves, chronic fiscal deficits and a weakened productive base after two decades of heavy state intervention.

The victory of Paz, a centrist senator from the Christian Democratic Party (PDC), marks the definitive end of the hard-left Movement for Socialism (MAS) era that began with Evo Morales in 2006. According to Bolivia’s electoral tribunal, Paz secured 54.5% of the votes against conservative former president Jorge Quiroga’s 45.5%. Fitch Ratings described the result as politically significant, noting that the new Congress is “more favourable to coalition-building” after MAS lost nearly all its seats in the Chamber of Deputies. Yet, it warned that the magnitude of the macroeconomic adjustment required “could generate social tensions”.

The depth of Bolivia’s financial exhaustion is alarming. The Central Bank’s liquid reserves are virtually depleted, forcing the government to rely on gold sales to meet external debt payments. Fitch estimates that these operations have generated over $2bn since 2023 but warns they are unsustainable, particularly ahead of a $333mn bond maturity due in March 2026. Oxford Economics places the probability of sovereign default at around 45% in its baseline scenario and near certainty under an adverse one.

Bolivia’s macroeconomic indicators underscore the gravity of the situation. The fiscal deficit stood at 11.2% of GDP in 2024, while inflation has accelerated to nearly 20%—its highest level in four decades. Gas production, once the main source of export revenue, has halved since 2014, transforming Bolivia into a net importer of diesel and petrol. In recent years the shortage of foreign exchange has disrupted fuel imports, creating persistent nationwide queues.

Financial markets responded cautiously to Paz’s victory. According to LSEG data cited by Reuters, Bolivian sovereign bonds due in 2028 rose by 1.4 cents to 82 cents on the dollar after the election, with yields still above 21%. Oxford Economics reported that yields briefly fell to 12.8% as investors speculated on a shift toward “more orthodox” macroeconomic management. However, analysts warned that the movement was driven by short-term trading rather than confidence in fundamentals. The International Institute of Finance’s Jonathan Fortun noted that “the liquidity of these bonds is minimal—one moderate order can move prices by several points.”

The IMF question

The central dilemma for Paz’s economic strategy lies in whether Bolivia will turn to the International Monetary Fund. Both presidential candidates had met with IMF officials before the run-off, the Fund confirmed. During his campaign, perhaps in a bid to lure disillusioned MAS voters, Paz rejected austerity-driven IMF programmes, favouring a gradual correction. Yet, economists, including RBC BlueBay’s Graham Stock, told Reuters that “there is little alternative to an IMF arrangement” given Bolivia’s inability to finance its fiscal needs independently. Citi analysts went further, stating the issue is not if Paz engages the Fund, but how quickly.

A potential IMF agreement would likely condition disbursements on cuts to energy subsidies and a realignment of the fixed exchange rate, which currently diverges sharply from the informal market rate. JPMorgan analysts emphasised the need for “front-loaded fiscal consolidation” to restore external balance. However, Oxford Economics cautioned that such reforms could trigger unrest, recalling that Bolivia’s last IMF-backed stabilisation efforts in the 1980s sparked widespread protests.

Paz’s economic platform blends decentralisation with market reform. His so-called “50/50 model” proposes an even fiscal redistribution between the central government and regional administrations, reversing the current 80/20 imbalance. He has also pledged to liberalise exports, rationalise taxation under a single low-rate scheme, and create a credit system favouring small producers. His concept of “capitalism for all” aims to preserve social spending while gradually phasing out fuel subsidies, maintaining targeted assistance for vulnerable groups.

The new government’s immediate priorities include resolving the fuel shortage through agreements with “friendly nations” such as Brazil, Argentina and the United States, and stabilising the exchange rate by creating a special currency fund supervised by the Central Bank. Paz has vowed to restore relations with the US, severely strained under leftist rule after Morales expelled Washington's ambassador back in 2008.

Paz’s PDC lacks a parliamentary majority, controlling only 49 of 130 lower house seats and 16 of 36 in the Senate. Although the legislature now includes a larger contingent of pro-business parties, consensus-building remains uncertain after years of MAS dominance. The Oxford Economics report stresses that successful reform “will depend on forging durable congressional alliances—something Bolivia has struggled to achieve”.

Meanwhile, domestic stability is far from guaranteed. The Central Obrera Boliviana (COB), the country’s main labour union, has already warned it will resist any rollback of social gains. And former president Morales still commands a loyal base in coca-cultivating regions capable of mobilising protests as soon as much-needed reforms start to bite, potentially complicating the early phase of the new administration.

Bolivia’s outlook remains fragile. Fitch forecasts no GDP growth in 2026, followed by a modest recovery in 2027 as inflation drops back to single digits. Oxford Economics expects a contraction of 1.2% next year. Without structural reforms, such as overhauling energy policy, restoring institutional credibility and attracting investment, Paz’s moderate strategy risks delaying, rather than averting, the inevitable reckoning.

Speaking to EFE, economist Alberto Bonadona said Bolivia “is no longer simply in recession—it is structurally paralysed.” For president-elect Rodrigo Paz, managing that paralysis without igniting social unrest may determine whether his presidency jumpstarts recovery or merely prolongs decline.