Bolivia is experiencing a deepening fuel crisis driven by severe shortages of diesel and petrol, with the government now exploring unconventional solutions, including cryptocurrency transactions, to address the problem.

On March 10, the administration of President Luis Arce issued Decree 5348, authorising state-owned Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) to purchase foreign currency through the national financial system and utilise "virtual assets" for fuel imports, marking a significant policy shift for the country.

"We have the resources, what we lack are foreign currencies," YPFB President Armin Dorgathen told La Razón. He explained that the company would convert Bolivianos to cryptocurrency equivalents at the daily dollar exchange rate to pay for fuel imports.

This represents a remarkable reversal from Bolivia's previous stance on digital currencies. In 2014, the Central Bank of Bolivia (BCB) banned cryptocurrencies outright, deeming it illegal to have any currency not issued or regulated by the Bolivian government. However, facing economic pressures, the BCB reversed this position in June last year, paving the way for financial institutions to conduct transactions with digital assets.

The root of the crisis

The crisis stems from Bolivia's long-standing structural economic challenges. Despite being a gas exporter for decades, the country now imports 86% of its diesel and 56% of its petrol needs due to declining domestic production, according to government figures cited by Infobae.

A key factor exacerbating the situation is Bolivia's fuel subsidy policy. The government sells fuel at approximately $0.53 per litre—less than half the international reference price of $1.20-$1.24. In 2024 alone, these subsidies cost Bolivia nearly $2bn, according to Bloomberg reports.

Hydrocarbons Minister Alejandro Gallardo acknowledged in a press conference that "the main problem we face is obtaining foreign currency to pay our various suppliers." He attributed part of the difficulty to what he termed a "political boycott" in the Legislative Assembly, where opposition forces and dissidents from the ruling leftist Movimiento al Socialismo (MAS) party—loyal to former President Evo Morales—have blocked the approval of external credits worth over $1.6bn.

Widespread impact

The shortage has triggered significant economic and social disruption across Bolivia. In Santa Cruz, the country's economic powerhouse, farmers have blocked key highways in protest, threatening the summer harvest of essential crops like soybeans, corn and rice.

Public transport has been severely affected, with only 35-50% of services operational, according to Bismark Daza, leader of the November 16 Transport Federation. "There is no diesel at any pump at the moment. Today we woke up with a total shortage," Daza told radio interviewers.

EFE news agency reported extensive queues at petrol stations throughout the country, with some closing entirely and others rationing fuel. The crisis has even affected municipal waste collection and flood debris removal services during the rainy season.

In addition, at least 500 tanker trucks have been stranded at the Paraguayan border for more than 20 days due to non-payment by the Bolivian government, according to transport industry leaders.

Proposed solutions

The government's immediate response includes authorising YPFB to sell diesel at international prices to productive sectors and mining operations. Additionally, authorities plan to militarise the entire fuel distribution chain to prevent smuggling and unauthorised use, which reportedly costs the country $600mn annually.

Longer-term strategies include increasing domestic production, with plans to substitute 80% of diesel imports through construction of a new plant, expanding dispatch capacity at Arica port, and boosting biodiesel production.

Klaus Frerking of the Agricultural Chamber of the East (CAO) warned that higher fuel prices would increase costs throughout the supply chain, potentially raising food prices and threatening food security. The chamber estimates that Santa Cruz alone requires 3.3mn litres of diesel daily to maintain its economy.

As the crisis unfolds, Bolivia's unprecedented shift to cryptocurrency—spurred by severe economic woes—could offer a blueprint for developing economies navigating financial constraints in an increasingly digital world.