Bolivian Bonds Jump After Senate Approves Bill to Monetize Gold

(Bloomberg) -- Bolivian bonds jumped after the country’s Senate approved late Thursday a central bank bill that would allow the government to monetize its gold reserves, a key step to ease a dollar shortage and tame a growing financial crisis.

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After a long debate, lawmakers passed the bill through the two required rounds of votes. It now goes to President Luis Arce for his signature to turn it into law.

The new legislation will allow the Andean nation’s central bank to undertake operations with its gold reserves in international markets, generating extra dollars to improve its financial position.

Bolivia’s dollar bonds were among the best performers in emerging markets early on Friday. Notes due in 2028 rose as much as 1.5 cents, the most in two weeks, to 58 cents on the dollar, according to indicative pricing data compiled by Bloomberg. Bonds maturing in 2030 also gained. Prices for the notes recently recovered after plummeting over 40% earlier this year due to dwindling reserves.

The country has burned most of its international reserves and recently faced difficulties to pay for fuel imports. The central bank stopped publishing reserves data in early February, when they stood at about $3.5 billion, out of which $2.6 billion was gold, suggesting only the precious metal is left.

While the Arce administration says the ability to operate with its gold in markets will halt the “low liquidity” Bolivia is going through, opposition lawmakers criticized the bill by saying it’s not a structural solution to the current economic crisis.

Senator Silvia Salame called it a “patch” to allow Arce’s administration to stabilize the country’s situation until the 2025 presidential elections.

Finance Minister Marcelo Montenegro said the gold reserves will be replenished by buying the commodity from local producers in bolivianos.

Read More: Financial Chaos at 12,000 Feet: Dollars Are Vanishing in Bolivia

--With assistance from Zijia Song and Ezra Fieser.

(Updates with market reaction from lead.)

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