Bolivia has all but exhausted its Special Drawing Rights from the International Monetary Fund, deepening a currency crisis in one of Latin America’s poorest nations.
(Bloomberg) — Bolivia has all but exhausted its Special Drawing Rights from the International Monetary Fund, deepening a currency crisis in one of Latin America’s poorest nations.
The country had just 39.09 million SDRs, reserve assets that work like an overdraft and come with no conditions, according to IMF data as of March 31. That’s equivalent to about $53 million, less than 10% of its allocation and a fraction of the funds available earlier this year.
It’s another red flag for Bolivia, where the little of what’s left in foreign reserves is locked up in gold that the government isn’t allowed to convert into US dollars. The central bank stopped publishing reserves data in early February, when they stood at about $3.5 billion, out of which $2.6 billion was gold.
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Since then, two of the three major rating firms have cut Bolivia’s credit score citing a confidence shock, and long lines have formed at the central bank as people try to obtain scarce foreign currency.
“The landscape is unsettling because there’s a crisis of confidence in the government’s capacity to sustain the exchange rate,” said Luis Gerardo Prato, a senior economist at Torino Capital in Caracas.
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Reserves have been dropping since peaking at $15.5 billion in 2014 as the government burns through cash to maintain the 11-year-old fixed exchange-rate regime. As the crisis mounts, money managers have been ditching the Andean nation’s bonds at the fastest pace on record to make them the worst in emerging markets this year, according to a Bloomberg index.
The government can still maneuver by tapping multilateral organizations, Prato said. Authorities could raise short-term rates for local dollar deposits or approve a controversial law to convert gold reserves into cash — though a bid to allow that failed to advance in congress two weeks ago.
–With assistance from Matthew Bristow.
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