Bolivia is facing a severe fuel shortage as its natural gas reserves dwindle after years of underinvestment, with proven reserves estimated at 3.7 trillion cubic feet as of April and gas exports down almost 60 percent over the last decade, OilPrice reported in an analysis published on Saturday. Natural gas still accounts for around 70 percent of the country’s electricity mix, so the production decline reaches power supply as well as transport fuel.
The fiscal structure built on gas is unwinding with it. After the state took control of the industry in 2006, fossil fuel revenues funded public spending, expensive fuel subsidies and a fixed exchange rate pegged to the US dollar. With those revenues falling, inflation has risen, imported goods have become less affordable, and the government has already increased fuel prices, with further gasoline subsidy removal expected from the beginning of next year.
International financing has become the bridge. Bolivia’s Congress approved a 1.9 billion dollar loan from the International Monetary Fund in September, the IMF Executive Board approved it on October 2, and the terms require strict austerity measures, including fuel subsidy cuts and significantly reduced public spending. The loan is expected to unlock up to 4 billion dollars more in financing from the World Bank and other lenders, and in September the government announced plans to triple the fund financing refined fuel purchases to mitigate diesel shortages.
The adjustment has already produced unrest. A reduction in fuel subsidies last December led to widespread protests, poor quality gasoline ruined thousands of vehicles in February, and road blockades ran for several weeks in June and July. In July the energy minister authorised the private sector to import and sell refined fuels, and experts cited in the report warn that Bolivia could become a net fossil gas importer by around 2030, a reversal for a country that was a significant regional exporter.