Fears of Recession and Shrinking Foreign Reserves Spark Bank Run in Bolivia

In Bolivia, people are flocking to banks to withdraw their US dollar savings as the mineral-rich country experiences a sudden currency shortage amid rumors of an impending recession.

The government blames speculators for the bank run, even though the central bank acknowledges a declining foreign exchange reserve.

By the end of 2022, Bolivia had differentiated itself from other Latin American economies with low inflation and high export earnings, with some analysts describing the country as an “economic miracle”.

The Bolivian government is spending billions of dollars on gasoline subsidies because it fears a public outcry if citizens have to pay more money to fill their car tanks.

The South American country is one of the largest exporters of natural gas, as well as gold and agricultural products such as soybeans.

Although people are feeling the economic downturn, the government is optimistic about future growth. It expects national GDP growth to reach 5% this year. The IMF, on the other hand, estimates less than 2% growth.

Some analysts blame the government’s left-leaning policies for the economic downturn. The country nationalized its hydrocarbon reserves, generating massive export earnings for several years. Nevertheless, foreign investors fled the territory in fears of high uncertainty. Bolivia is now importing hydrocarbons.

Although the commodity boom was halted in 2014, Bolivia continued to use its foreign exchange reserves. However, the COVID outbreak has stalled the economy, and the nation is now on the verge of running out of US dollars, according to the Associated Press.