Bolivia is preparing to shift from its long-standing exchange rate framework toward a floating-rate system as the government advances a policy described as foreign-exchange unification. Government officials say the change paves the way for a financing agreement with the International Monetary Fund after the reform is implemented.
Christian Morales, the deputy minister of Treasury and Public Credit, informed investors on Monday that the currency adjustments could be put into effect as soon as this week. His remarks were made during an investor call arranged by an investment bank, and were reported by people who took part in the call.
According to attendees, Morales framed the policy move as a unification of foreign-exchange rates and indicated the central bank would preserve the authority to intervene in the new floating-rate arrangement when deemed necessary. That retained capacity for intervention was presented as part of how the transition would be managed.
For more than a decade Bolivia maintained a fixed exchange-rate band of 6.86 to 6.96 bolivianos per U.S. dollar, a system in place since late 2011. In recent periods, however, authorities began publishing a weaker reference rate as available foreign currency sources diminished, a development that officials said made holding to the peg more difficult.
The currently published reference rate stands at roughly 10 bolivianos per dollar. That level represents a depreciation exceeding 40% relative to the historic fixed band.
The government’s expectation that an IMF financing agreement will follow the currency reform was conveyed by officials in the same communications that outlined the unification plan. Beyond that expectation, the public statements noted above are the extent of the official detail available about timing, mechanics or terms of any prospective financing.
Context and implications
The announcement signals a significant alteration in Bolivia’s exchange-rate framework after more than a decade of a fixed band. Officials emphasized both the need to reconcile multiple exchange rates and the central bank’s continuing capacity to act within the new system.