Politics

A crucial test of Bolivia’s new government has just been passed. The country’s lower house approved President Rodrigo Paz’s reworked Bolivia budget for 2026, a plan built to shrink a yawning deficit while trying to coax production back to life.

According to Bolivian outlets La Razon and La Patria, the Chamber of Deputies passed the revised spending law on Saturday, July 4, after more than five hours of debate. The bill now moves to the Senate for review before the president can sign it.

The approval matters because the budget is Paz’s first full fiscal blueprint, and getting it through a fragmented Congress where he lacks a majority was far from guaranteed. His economy minister framed the vote as the fruit of negotiation between rival blocs.

President Rodrigo Paz’s first full budget cleared its first chamber on July 4. (Photo: Internet reproduction)

What the Bolivia budget sets out to do

The headline aim is discipline. Economy Minister Jose Gabriel Espinoza said the reworked plan targets a fiscal deficit of about nine percent of the economy, a sharp cut from the much larger gap inherited from the previous government.

A fiscal deficit is simply the shortfall when a state spends more than it collects, covered by borrowing. Bolivia’s had ballooned during the commodity boom’s long unwinding, so narrowing it is central to restoring confidence with lenders.

To that end the revised text trims planned central-government wage spending by roughly 976 million bolivianos and bars the budget from being used to rubber-stamp past financial acts, a nod to the transparency Paz has promised.

Incentives to restart production

The other half of the plan is a push to revive the private economy. The budget waives import duties and value-added tax for five years on inputs, seeds, drones, tools, capital goods and industrial plant for the farming, industry, construction, transport and mining sectors.

The logic is to lower the cost of investment and let strategic sectors bring in technology cheaply. It extends an approach Paz began by decree, and echoes an earlier tariff cut this year that Bolivia used to ease the squeeze on importers.

There is also money for public universities, with an increase of about 410 million bolivianos, most of it for salaries and the rest for research. The mix of cuts and targeted spending is what allowed different blocs to back the text.

A budget passed in a fragile economy

The setting makes the vote consequential. Bolivia is in its first recession in four decades, its foreign-currency reserves are thin, and a shortage of dollars has fed fuel queues and periodic road blockades over the past year.

Against that, the government has been rebuilding credibility, having placed a one-billion-dollar bond in May and secured billions in multilateral financing. A ratified budget adds to that story by showing the new administration can move its agenda through Congress.

The caution is that a target is not an outcome. Independent forecasters, including the International Monetary Fund, have been more pessimistic than the government on growth and inflation, so the nine percent goal will be judged on delivery, not intention.

Why it matters beyond Bolivia

For a foreign reader, the vote is a marker of whether Paz’s stabilization plan can survive contact with a divided legislature. The budget was the clearest near-term test of that, and it cleared its first chamber.

The next signals to watch are the Senate vote and, beyond it, whether the deficit target holds as the year unfolds. Neighbours, lenders and investors in Bolivia’s gas and lithium will be reading the outcome closely for what it says about the country’s direction.

What did Bolivia’s Congress approve?

The Chamber of Deputies passed President Paz’s reworked 2026 budget on July 4, after more than five hours of debate, and sent it to the Senate. It targets a fiscal deficit of about nine percent of output and adds tax breaks for productive sectors.

What incentives does the Bolivia budget include?

It waives import duties and value-added tax for five years on inputs, seeds, drones, tools, capital goods and industrial plant for the farming, industry, construction, transport and mining sectors, aiming to lower investment costs and bring in technology.

Why is this budget important?

It is the first full budget of the Paz government, passed in a Congress where he lacks a majority, while Bolivia is in recession with scarce dollars. Approving it signals the administration can move its stabilization agenda through a divided legislature.