Bolivia is currently facing a severe economic crisis and may default on its debt obligations unless it secures new foreign financing.
“We are doing our best to avoid a default,” said President Luis Arce, as reported by AFP on Friday, June 20, 2025.

“We have the will to repay our debts, but how can we do that if we lack the resources?” he added.

As a background, Bolivia's foreign debt has reached US$13.3 billion (approximately Rp218 trillion). The country's main creditors include the Inter-American Development Bank (IDB), the Development Bank of Latin America and the Caribbean (CAF), the World Bank, and China.

However, President Arce was unable to convince parliament to authorize borrowing an additional US$1.8 billion from international financial institutions. Bolivia urgently needs around US$2.6 billion by December to fund fuel imports and external debt payments.

“We’ve made the worst deals as a nation,” he said.
“When you have foreign debt, you’re supposed to pay the principal and interest while incoming disbursements from new loans balance the outflow of dollars. That isn’t happening in Bolivia right now,” he explained.

According to the World Bank, Bolivia’s debt represents over 37% of its Gross National Income (GNI). The country last defaulted on its debt in 1984.

Previously, President Arce had rejected calls for his resignation amid a worsening economic crisis marked by shortages of foreign currency, fuel, and essential goods. Nonetheless, he announced that he will not run for re-election in August, following a sharp drop in his approval rating to just 9.0%, one of the lowest in South America, based on data from the polling firm Latinobarometro.

It’s important to note that Bolivia is home to around 12 million people, most of whom are indigenous. Despite possessing abundant natural resources like natural gas and lithium, Bolivia remains one of the poorest countries in South America.

In 2023, the state-owned oil company YPFB revealed that Bolivia had run out of its key export commodity, natural gas, due to a lack of investment in new exploration. This dramatic drop in gas exports led to a plunge in foreign currency reserves, leaving Bolivia unable to import sufficient fuel—which is heavily subsidized for domestic consumption.

Annual inflation in May soared to 18.4% year-on-year (YoY), the highest level in nearly two decades. Meanwhile, the local currency, the Boliviano, has continued to lose its value.

Bolivia’s woes have been exacerbated by a power struggle between President Arce and his former ally-turned-rival, former President Evo Morales, who has repeatedly mobilized his supporters in mass protests over the past year demanding Arce’s resignation.
Arce, who took office in 2020, has accused Morales of leveraging the nation’s economic hardship for political gain. At least four police officers and one protester died during violent clashes last week.