Two months following President Luis Arce’s new law, Bolivia’s Central Bank bought 205 kg of gold to boost its declining foreign reserves.
The bank says the new buys are nearly 30% of gold acquired in 12 years. The law paves the way for more gold purchases. This will help increase Net International Reserves (NIR).
Bolivia’s central bank uses gold reserves for foreign currency. This strengthens the country’s liquid assets. It helps Bolivia meet debt payments and repay bonds from 2013.
The law ensures smooth global payments and better liquidity. It aims to keep Bolivia’s economy stable.
In February, foreign reserves were at $3.538 billion. This is one of the lowest levels since 2014. By April’s end, reserves had dropped to $3.158 billion.
Last May, President Arce enacted the new gold law. It allows direct purchases from local gold producers. The law also lets the bank trade gold globally.
The bank must keep at least 22 tons of gold. It reports its gold activities to lawmakers every four months.
Reserve levels are falling due to a cash crunch. The government says this is due to unusual currency demand.
Background
Foreign reserves have been a key issue for Bolivia for years. In 2014, the reserves peaked at over $15 billion. Since then, they’ve been on the decline.
The drop in reserves has put the economy under strain. Bolivia’s government has been trying different strategies to improve the situation. The new gold law is one such step. It aims to provide a stable asset that can be liquidated quickly.
Gold is a globally recognized store of value. Countries often use gold to back their currency. Bolivia’s move to buy gold is not unique. Many nations are increasing their gold reserves.
President Arce’s government sees this as a way to improve economic stability. The focus is on local gold producers, encouraging domestic industry. The plan also aims to enhance Bolivia’s standing in the global market.