Paz's government is moving forward with its 'Chainsaw Plan' to reduce the fiscal deficit inherited from the socialist Luis Arce
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The new Bolivian Government announced on Tuesday a deep adjustment to the General State Budget (PGE) 2026, which was prepared during the administration of the socialist Luis Arce, with the goal of reducing spending by at least 30%, guided by the successful "Chainsaw Plan" of Javier Milei in Argentina.
The decision was communicated by President Rodrigo Paz and the Minister of Economy, José Gabriel Espinoza, who stated that the original project replied more to political criteria than to the country's real needs.
To move forward with the reform, the Executive requested that the Chamber of Deputies return the bill sent by the previous government. Paz strongly criticized the inherited document: "We are going to reformulate that budget, which was for spending and not for investment, not for the promotion of the economy, not for Bolivians," he said.
El presidente boliviano Rodrigo Paz.
Espinoza, meanwhile, explained that an article will be added to enable the Executive to review and modify the PGE until February 2026, under a strict rule of fiscal spending reduction. "At the very least, we are going to reduce fiscal spending by 30% for 2026," he stated.
He detailed that this drastic decrease will involve "a thorough process of reviewing public spending and restructuring institutions," especially aimed at a "very strong reduction in current spending." The minister specified that a cut of that size would mean "about four percentage points of GDP" in terms of fiscal deficit reduction.
At the same time, he announced the elimination of four taxes: on large fortunes, financial transfers (ITF), gambling, and business promotions, through the presentation of three bills to the Legislative Assembly.
Thorough review of the State and public companies
Espinoza emphasized that the adjustment will include a rigorous evaluation of public companies created in recent years. He pointed out that many of them received resources without generating income or justifying their operation. "They are not operating, they have no production, they have no technical or economic justification," he questioned.
El presidente boliviano Rodrigo Paz.
The criterion will be clear: any company that doesn't generate operating income will stop receiving state funds. Once the current contracts are completed, a technical and financial evaluation will be carried out to determine their continuity.
Criticism of Arce's budget
The PGE project presented by Arce's government included growth projections of 0.9%, inflation of 10.1%, and a fiscal deficit of 10.3%. Espinoza criticized that in recent years the budget has become a tool for "political marketing" rather than an instrument for planning:
"An inflated growth figure was set and a low one for inflation, and certain data were manipulated so that the numbers would fit on paper," he denounced.
Paz's Government insisted on the need to "recover the budget tool," considering that this document is the central expression of fiscal policy. The goal is to present a balanced budget in March 2026, after the extraordinary review process.
