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🇵🇾 Paraguay /Economy & Trade

Bolivia’s central bank suspends dollar purchases and imposes reserve requirement on banks

From ABC Color · () Spanish

Translated from Spanish and summarized by DistantNews. Read the original for the full story.

At a glance

Newswire Official statement New plan
  • The Central Bank of Bolivia suspended new dollar purchases and imposed a restricted reserve equal to 3% of banks’ boliviano deposits.
  • The bank said the measures would protect the currency’s purchasing power, absorb liquidity and prevent further pressure on the foreign-exchange market.
  • Bolivia’s official dollar rate has risen from 9.73 to 12.60 bolivianos since the flexible exchange-rate regime replaced the fixed system on June 29.

Bolivia’s central bank has temporarily stopped new dollar purchases and introduced a mandatory monetary reserve for banks, seeking to contain pressure in the foreign-exchange market.

The Central Bank of Bolivia said its liquid international reserves had exceeded $1 billion in recent weeks. That level, it said, provided room to meet international payment obligations, ease possible currency-market pressure and prepare for expected external disbursements.

One anticipated source of funds is $1.9 billion linked to an agreement with the International Monetary Fund. The government of President Rodrigo Paz has sent the agreement to Bolivia’s parliament for review and possible approval.

To safeguard the internal purchasing power of the national currency.

· Central Bank of BoliviaThe bank gave this as one reason for suspending new dollar purchases and introducing the reserve measure.

The bank also imposed a restricted monetary reserve that it said would sterilize part of the liquidity generated in recent weeks and support price stability. The requirement is mandatory for commercial banks and absorbs an amount equivalent to 3% of their boliviano-denominated deposits.

Bolivia has operated under a flexible exchange-rate regime since June 29, replacing a fixed system that had been in place for 15 years. The official rate began at 9.73 bolivianos per dollar and reached 12.60 on Tuesday, compared with 6.96 bolivianos, the rate in force since late 2011.

Microbusiness owners, traders and other groups have urged the government to restore a fixed exchange rate, saying the flexible system does not suit them. The central bank has said the regime will not change, although it will act to prevent overreactions. It recently said the flexible system had generated more than $400 million, in addition to $1.134 billion in liquid reserves. Total reserves stood at $4.255 billion on Aug. 14.

To prevent further pressure in the foreign-exchange market.

· Central Bank of BoliviaThe bank cited this objective in its explanation of the new measures.
About this summary

Originally published by ABC Color in Spanish. Translated, summarized, and contextualized automatically by DistantNews, with a note on how the source frames the story. Not individually reviewed before publishing. How this works.

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