Bolivia says it has six tons of gold as collateral in foreign banks

Dec. 5 (UPI) — The new president of the Central Bank of Bolivia, David Espinoza, said six tons of the country’s international gold reserves are used as collateral for debt in six foreign banks.

Espinoza said most of Bolivia’s gold is held in banks in Germany, the United Kingdom and the United States rather than in domestic vaults.

Espinoza presented a detailed report Thursday on the state of the reserves in both foreign currency and gold. He warned that the fiscal policy applied during the administration of former President Luis Arce made heavy use of gold to finance liquidity.

He said the Central Bank bought gold on the domestic market and exported 56.3 tons in recent years to obtain foreign currency and meet immediate liquidity needs.

He said this fiscal policy left Bolivia “on the brink of a hyperinflationary spiral,” similar to the one seen in the 1980s, the local newspaper El Deber reported.

Bolivia appears to have a stable 23 tons of gold in reserves — the legal minimum is 22. Espinoza described the 6.6 tons that were “ignored or used” without regulatory clarity as “atypical operations,” Unitel reported.

“This is concerning. We are reviewing all operations to verify whether legal procedures were followed. It is part of the previous government’s legacy,” he said.

According to the information provided, Bolivia’s international reserves totaled $3.277 billion as of Tuesday. Espinoza said only about $75 million of that amount is liquid foreign currency, with most of the reserves held in gold.

He said “the total in foreign currency fell from $709 million in 2022 to just $166 million in 2023, and today we are near $50 million.”

He added that the situation is a direct result of the Arce administration’s economic policies, which “exhausted the foreign currency cushion” and left the country almost entirely dependent on gold.

Espinoza’s fiscal analysis was equally critical. He said Bolivia has recorded 11 consecutive years of fiscal deficit, a pattern he called “absolutely irresponsible.”

The figures released by the Central Bank of Bolivia on the state of the international reserves and the fiscal deficit are “alarming,” former president of the Tarija College of Economists Fernando Romero told the digital outlet La Brújula.

For Romero, the most serious issue is the fiscal deficit.

He said the official figures released by the outgoing government do not match those reported by Espinoza. While June reports pointed to a deficit of about $2.6 billion, the Central Bank said the real figure had exceeded $6.45 billion at that time.

By the end of the Arce administration in October, the fiscal deficit had reached about $7.22 billion, according to the information provided by Espinoza.