Government Creates Refinancing Program for Subnational Governments

Bolivia has created a voluntary program to help subnational governments reorganize their finances, but the measure does not cancel their debts. Decree 5686 establishes the Territorial Financial Readjustment Program for departments, municipalities, regional governments and Indigenous campesino governments.

The Economy Ministry has 20 days to draft rules governing access to the program and the conditions for refinancing. The plan will be applied case by case, taking into account the current financial situation of each government.

Under the decree, the ministry may coordinate with autonomous territorial entities and their public creditors to support temporary deferrals when needed to protect liquidity and aid financial recovery. Such deferrals will not mean the forgiveness or extinction of obligations.

The government and subnational authorities reached agreements allowing municipal and departmental debts to be eased through rescheduling with state entities. Officials compared the process to a person restructuring a bank loan: the debt is reprogrammed, but it still must be paid.

The decree also creates a Reserve Account at the Central Bank of Bolivia. Governments joining the program must maintain the account, which will serve as a guarantee mechanism and can be used to pay restructured debts. Municipal entities belonging to the Federation of Municipal Associations had not yet commented, although their previously stated position differed from the government’s proposal.

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The deferral will not imply the forgiveness or extinction of the obligations of the autonomous territorial entities.