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Bolivia

Author(s):
International Monetary Fund
Published Date:
January 2010
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I. Background

1. In recent years, Bolivia benefited from a sharp improvement in terms of trade. Increased export volumes of gas and mining—the result of large investments in hydrocarbon and mining sectors earlier this decade—and the concurrent boom in commodities prices led to a 230 percent increase in export receipts between 2005 and 2008. Real GDP growth, which averaged 3.4 percent annually during 1996–2005, increased to an average of 5.2 percent in 2006–08, peaking at 6.1 percent in 2008.

2. The external and fiscal positions strengthened sharply during the boom years. Larger export receipts, coupled with higher taxation of the hydrocarbon sector and moderate rates of increase in government spending (Box 1), led to substantial external current account and fiscal surpluses, which averaged 11.8 percent of GDP and 3.8 percent of GDP respectively in 2006–08. These surpluses contributed to the build-up of a comfortable reserves buffer, which—added to the debt relief obtained under MDRI—turned Bolivia into a net external creditor in 2008. Gross public sector debt declined to less than 40 percent of GDP by 2008 and net public sector debt to only 20 percent of GDP, thanks to the accumulation of substantial deposits at the central bank.1 However, despite the highly favorable trends, private investment remained subdued, amid political tensions and lingering uncertainty about property rights.

3. The administration that took office in early 2006 has focused on expanding the social safety net and improving infrastructure. The government strategy has been to distribute the rents of the natural resource sectors through transfer programs, which are benefiting the poorest segments of the population (Box 2). In addition, investment in infrastructure has gradually increased, to improve access to basic services (water and sanitations, energy) and the transport network (mainly roads).

4. Meanwhile, Bolivia has experienced profound political changes. A centerpiece of this process of change was the adoption of a new constitution in early 2009, which assigns the state a greater role in economic development, including as the main stakeholder in key strategic industries. On December 6, 2009, President Morales—the first president from an indigenous background—was re-elected for a five-year period with continued strong popular support. While social unrest subsided following the approval of the new constitution, the political environment has remained complex in light of continuing regional tensions that complicate fiscal policy coordination between the central and departmental levels of government, and in particular regarding the use of hydrocarbon-derived resources and related expenditure responsibilities.

5. In completing the 2008 Article IV Consultation, the Executive Board found that macroeconomic policies were broadly appropriate, and stressed the need for structural reforms as well as improvements in the investment climate. In the fiscal area, Directors recommended improving the efficiency and equity of the tax system, better balancing spending responsibilities and revenue at different levels of government, gradually reducing hydrocarbon subsidies to improve targeting of social policies, and strengthening the budget process. Directors advised introducing prudential regulations to mitigate market risks and credit risks from dollarization, a deposit insurance scheme, and the adoption of legislation governing corporate bankruptcy and restructuring. There has been some progress in the implementation of financial sector reforms and preparations to address fiscal issues are ongoing, including with support of Fund’s technical assistance.

Box 1.Fiscal Stance During the Commodity Price Boom1/

Since 2005 the government has significantly increased its take on the hydrocarbons sector. The special hydrocarbon tax (IDH) effectively increased royalties on hydrocarbon production to 50 percent. At the same time, contracts with foreign companies were re-negotiated, the national oil company (YPFB) was given exclusive rights for the commercialization of hydrocarbon products, and oil companies were re-nationalized. Boosted by high international prices for oil, gas, and mining products, commodity-related fiscal revenues increased from 6.8 percent of GDP in 2005 to 13.4 percent of GDP in 2008.

Bolivia stands out for using a large part of higher commodity revenues to build macroeconomic buffers during the 2005–08 boom. Compared with other commodity exporters in the region, Bolivia saw the largest increase in commodity revenue and only a moderate increase in public expenditure.

Real revenue and primary expenditure growth

(average annual growth, in percent 2005-08)

1/ For details, see Regional Economic Outlook, Western Hemisphere Department, October 2009.

Box 2.Social Programs

Bolivia remains one of the poorest countries in Latin America. In 2007, 60 percent of the population lived in poverty, and 38 percent in extreme poverty. Extreme poverty is particularly high among the indigenous population (61 percent, compared with 25 percent of the rest of the population). With a Gini coefficient of about 0.6, Bolivia features one of the most unequal income distributions in the region. Malnutrition, limited access to basic infrastructure (water, sanitation, and electricity) and insufficient health and education facilities inhibit breaking the poverty cycle.

The government has taken significant steps to reduce poverty and improve the social safety net. Various government agencies are implementing a number of social programs. Among them is the extreme poverty eradication program Plan Vida, featuring a phased approach with an initial focus on the poorest geographic areas. Cash transfers are an important component of social policies, including:

  • Renta Dignidad is a universal pension introduced in 2008—replacing and augmenting the former Bonosol—for all Bolivians aged 60 and above, equivalent to about US$340 per year, with reduced benefits for those receiving any other pension. It is financed by a fixed share of the special hydrocarbon tax (IDH), with contributions from all levels of government.

  • Bono Juancito Pinto was established in 2007 as a conditional cash transfer program that aims to reduce school drop-out rates by offering an annual cash transfer equivalent to about US$30 for all children attending public primary schools.

  • Bono Juana Azurduy is a conditional cash transfer program introduced in 2009 for pregnant women and young children, aiming at improving maternal care, reducing infant mortality, and improving nutritional attainment; the equivalent of about US$150 is paid for regular pre-natal and pediatric medical checkups.

Social spending, percent of GDP, 2007-2009
200720082009
Anti-poverty spending14.214.014.0
of which Health3.13.1
Education5.25.1
Cash transfer programs1.11.72.0
Renta Dignidad 1/0.81.41.5
Bono Juanicito Pinto0.30.30.3
Bono Juana Azurduy0.2

For 2007 estimates for Bonosol.

For 2007 estimates for Bonosol.

The authorities reported that social policies are yielding important results, including a reduction in extreme poverty of 4.8 percentage points in 2008 (especially in rural areas), a decline in school dropout rates from 5.2 percent to 2.8 percent following the introduction of the Bono Juancito Pinto, and a reduction in the illiteracy rate.

II. Recent Economic Developments and Outlook for 2010

6. Despite the adverse impact of the global crisis, Bolivia remains in a position of low vulnerability. Central bank’s foreign reserves have remained at historically high levels, boosted by large valuation gains on non-U.S. dollar assets and the new SDR allocation,2 and are equivalent to about 20 months of imports of goods and services and more than 100 percent of deposits in the banking sector, thus providing adequate safeguards in the face of external shocks.3

7. While activity slowed down with the global recession, the impact has been milder than in other countries in the region (Figure 1). Real output growth is projected to slow to 3¼ percent in 2009 as a result of lower export volumes, mostly due to reduced gas demand from Brazil, and weakened domestic absorption due to the negative terms of trade shock and falling remittances. Lower food prices and a slowdown in domestic demand have contributed to a sharp decline in the 12-month inflation rate, which stood at 0.8 percent in October and is projected at 1 percent by end-2009. Lower commodity exports and remittances have resulted in a sharp narrowing of the external current account surplus to about 3½ percent of GDP, compared with 12 percent of GDP in 2008 (Figure 2 and Table 4).

Figure 1.Bolivia: Real Sector Developments

Bolivia’s economy has weathered the global recession well. Real GDP growth is expected to decelerate to 3¼ percent in 2009 due to lower gas exports to Brazil, and weakening of domestic demand and falling remittances. Still Bolivia’s rate of growth is the highest in the region. Inflation has declined sharply, and is projected at 1 percent by end-2009.

Source: Central Bank of Bolivia and Fund staff estimates.

Figure 2.Bolivia: External Developments

The external current account surplus will narrow sharply in 2009 mainly on account of lower export prices. Central Bank’s foreign reserves remain at historically high levels, with Bolivia turning into a net external creditor in 2008.

Source: Central Bank of Bolivia and Fund staff estimates.

8. A moderately countercyclical policy mix has supported domestic demand. The combined fiscal surplus is expected to narrow by 4 percentage points of GDP to an almost balanced position in 2009, largely due to lower hydrocarbon and tax revenue (by 5 percentage points of GDP) (Figure 3 and Table 2). In parallel, the central bank reduced open market operations while letting the short-term policy interest rates decline to almost zero (Figure 4), in the context of a decline in foreign-currency inflows that had sharply slowed money creation. This is being transmitted gradually into banks’ deposit and loan rates, which remain at record low levels (1½ percent and 8½ percent respectively). With regard to exchange rate policy, since October 2008 the central bank has effectively pegged the Boliviano to the U.S. dollar, following a period of negative crawl (i.e., gradual appreciation) that started in mid-2005.4

Figure 3.Bolivia: Fiscal Developments

Lower commodity prices and export volumes, combined with subdued domestic demand, are projected to shift Bolivia’s fiscal position roughly into balance in 2009, after three years of substantial surpluses. Public sector debt has decreased significantly and domestic debt vulnerabilities have been reduced.

Source: Central Bank of Bolivia, Ministry of the Economy and Public Finances, and Fund staff estimates.

Figure 4.Monetary Developments

Monetary policy has been eased since July with the central bank reducing the net placements of open market operations.

Sources: Central Bank of Bolivia and Fund staff’s estimates.

9. The financial system has been barely affected by the global crisis owing to limited integration with international capital markets. With negligible foreign credit lines in banks’ balance sheets and no exposure to impaired foreign assets, banks have remained liquid, profitable, and well capitalized (Box 3 and Table 8). The strengthening of economic fundamentals and measures to induce voluntary Bolivianization of financial assets have led to a significant decline in dollarization (Box 4). Nonetheless, the authorities have increased marginal reserve requirements on dollar deposits to build up a higher foreign-currency liquidity cushion for banks, and also have tightened provisioning requirements, including through higher provisioning for dollar-denominated loans.

Box 3.Financial Sector Structure and Developments

Bolivia’s supervised financial system is composed of 63 institutions, with low shares of foreign and public ownership. The system includes commercial banks, microfinance institutions (fondos financieros privados (FFP)), credit cooperatives, credit associations (mutuales), mutual funds, pension funds, and other financial services entities (warehouses, leasing companies, and a second-tier bank). The system is dominated by domestic institutions with only 4 foreign banks altogether concentrating about 15 percent of banking system assets. Only two institutions are owned partially or totally by the state: a commercial bank, Banco Unión, representing about 7 percent of total bank assets, and a second-tier bank, Banco de Desarrollo Productivo (BDP), with assets accounting for about 1.5 percent of total financial system assets.

Financial system assets amount to US$ 10.4bn (about 60 percent of GDP) with commercial banks controlling over 78 percent of the system’s assets (excluding mutual and pension funds). Bolivian banks operate in line with traditional banking activities, but also engage in microfinance operations. In contrast, FFP’s are financial intermediaries oriented exclusively to microcredit.

Credit to the Private Sector1/

(Index, January 2000 = 100)

Sources: IMF, International Financial Statistics; and IMF staff calculations.

1/ Index constructed using the simple average of monthly growth rates within each group.

2/ Excludes Bolivia, Suriname, and Venezuela.

Financial institutions in Bolivia rely almost entirely on deposits. On average, deposits constitute about 90 percent of total liabilities, most of them in demand and savings accounts (52.6 percent of total deposits). FFP’s rely more on bank financing, which represents about 20 percent of total liabilities. On the asset side, balance sheets are very liquid, in particular banks, with almost half their assets in liquid instruments including central bank paper. FFP’s maintain a larger fraction of their assets in loans due to the dynamism of microfinance. Overall, credit to the private sector has exhibited a moderate nominal expansion in recent years, declining in relation to GDP from 42 percent in 2004 to about 33 percent in 2009.

Key financial soundness indicators are broadly in line with regional averages. Capital adequacy is only slightly lower than the region’s average, although a greater difference exists when comparing equity/assets ratios. While delinquency is higher in Bolivia, provisioning levels are also higher and have improved markedly in recent years. Profitability has remained at healthy levels.

Bolivia and Latin America Banking System Indicators
200420052006200720082009 1/
Capital adequacy ratio
Latin America 2/15.915.615.114.514.615.3
Bolivia14.914.713.312.613.713.4
Equity/assets
Latin America10.210.210.410.510.410.4
Bolivia11.511.310.09.69.38.6
Non-performing loans
Latin America5.64.03.02.62.43.0
Bolivia14.011.38.75.64.34.1
Provisions/Non-performing loans
Latin America129.0140.1159.5176.1180.0160.0
Bolivia84.285.9106.5132.4153.7181.0
Return on assets
Latin America1.62.02.12.11.91.9
Bolivia-0.10.71.31.91.71.6
Return on equity
Latin America15.318.920.920.919.818.6
Bolivia-1.26.413.321.220.319.7
Sources: Global Financial Stability Report, October 2009, and ASFI.

October for Bolivia, and May-June for most Latin American countries.

Simple regional average.

Sources: Global Financial Stability Report, October 2009, and ASFI.

October for Bolivia, and May-June for most Latin American countries.

Simple regional average.

The Financial System Supervisory Authority (ASFI) was put in charge of the consolidated supervision of all financial intermediaries (banks and non-banks), as well as the insurance and securities market. Since its creation in early 2009, ASFI has continued expanding the supervisory and regulatory perimeter to include cooperatives and other financial institutions. In the area of prudential regulation, ASFI introduced countercyclical provisioning requirements in addition to specific and generic provisioning requirements.

Box 4.Dollarization Trends and Policies

Dollarization has declined markedly in recent years in line with improving macroeconomic fundamentals, the authorities’ efforts to promote market instruments in Bolivianos, and large net interest-rate differentials. Empirical evidence in the case of Bolivia suggests that improvements in the fiscal balance and the reserve position have a large negative impact on the demand for dollar denominated debt instruments.1/ While there was a slight increase in the share of dollar deposits at the height of the global crisis, the trend is similar to that observed in other highly-dollarized economies, possibly reflecting a temporary rebalancing of private sector portfolios, and lower interest-rate differentials.

Banking System Deposit Dollarization

(In percent)

Expected returns1 and dollarization of bank deposits

(in percent)

Sources: Central Bank of Bolivia, and Fund staff estimates.

1/ One-month deposits.

2/ Moving average effective interest rate adjusted by depreciation.

The authorities have adopted a number of measures to make individuals and banks internalize the risks in dollar-denominated financial intermediation. Measures include:

  • Marginal cash reserve requirements: financial intermediaries are subject to a marginal cash reserve requirement of 30 percent of deposits in US$ above the level observed on September 30, 2008.

  • Provisioning requirements for dollar-denominated loans: Since early 2009, dollar-denominated loans classified as “A” (best quality) are required to constitute an additional provision of up to 1.5 percent.

  • Financial transaction tax: the tax, at a rate of 0.15 percent for both credits and debits, applies on dollar denominated accounts while transactions in Bolivianos are exempted.

  • Bid-ask FX spread: since mid-2005 the central bank began gradually increasing the differential between the buying and selling rate (now at 1.4 percent) to discourage currency shifts.

Vesperoni and Orellana, Dollarization and Maturity Structure of Public Securities: The Experience of Bolivia, WP/08/157.

10. The macroeconomic outlook for 2010 is favorable. Real GDP growth is expected to pick up to 4 percent, reflecting mainly a recovery of hydrocarbon exports and public investment, and still favorable terms-of-trade, with inflation projected to rise to about 4 percent. The external current account surplus is expected to narrow moderately to 2½ percent of GDP, as a result of increased domestic absorption, while the overall balance of payments is projected to remain positive.

Bolivia: Selected Economic Indicators
Est.Proj.
20062007200820092010
Real GDP (percent change)4.84.66.13.34.0
CPI (end-of-period, percent change)4.911.711.81.04.0
Overall fiscal balance (percent of GDP)4.51.92.80.1-0.3
of which: Non-hydrocarbons fiscal balance (percent of GDP)-5.7-5.9-8.4-8.3-7.7
Current account balance (percent of GDP)11.312.012.13.52.6

III. Policy Discussions

11. There was agreement that the policy response to the international crisis has been appropriate. The central bank argued that the temporary pegging of the exchange rate has been necessary to avoid excessive exchange rate volatility and protect gains from dedollarization, while the comfortable level of international reserves provided ample space to face episodic capital outflows. In parallel, the central bank eased monetary policy beginning in early 2009, thereby supporting domestic demand. On the fiscal front, the authorities allowed automatic stabilizers to operate and protected social and investment expenditure despite the significantly lower revenue. The authorities emphasized that social programs have had an important effect in sustaining domestic consumption, as transfers are oriented towards low income households with high propensity to consume.

A. Macroeconomic Policies

12. The overall fiscal position is projected to shift into a small deficit of 0.3 percent of GDP in 2010. Staff projections suggest that hydrocarbon and tax revenue would remain broadly stable, while the surplus of public enterprises would increase by 1.7 percent of GDP, mostly on account of better results at the state-owned oil company (YPFB), associated with higher gas exports. On the expenditure side, the budget envisages an increase in current and capital expenditure. Budget allocations for wages and pensions would increase by about 10 percent in nominal terms, allowing for a recomposition of real wages after a few years of declines in real terms. Investment, in turn, will pick up at YPFB to advance the industrialization of natural gas, increase production in existing fields, and address other bottlenecks along the production chain. It is expected that this investment (US$ 600 million in 2010, or 3.1 percent of GDP) would be financed by a special credit line from the central bank that was established by law in 2008.5

13. The main downside risk to the outlook stems from lower commodity prices and export volumes, should the global economy rebound falter. Staff estimates that a decline in oil prices to just below US$50 per barrel in 2010—an event with a 15 percent probability according to current option contracts on oil futures—would have an impact on the external and fiscal balances of 4.8 percent of GDP and 3.8 percent of GDP respectively. While overall reserve cushions would be adequate to prevent the adjustment of fiscal policy in this scenario—if proved temporary—the central administration could face financing difficulties, since the financial cushion of the Treasury is estimated to be relatively small. Upside risks include the possibility of a stronger than expected improvement in commodity prices.

14. Staff advised tightening monetary conditions as the economy gathers momentum and the government gradually implements its investment plans. In particular, since government spending is envisaged to expand, the monetary impulse should be withdrawn—especially if external interest rates were to increase—to absorb excess liquidity in the banking system, which stands at about 12 percent of deposits. The mission argued that this would reduce the risks of excessive credit creation, foreign-exchange pressures, and pick-up in inflation. The authorities indicated that they would tighten monetary policy as warranted by inflation and balance of payments developments. For now, they considered that higher credit expansion was needed to support the economic recovery.

15. The central bank indicated its readiness to resume adjustments under the crawling peg, in either direction, upon the emergence of external imbalances. However, in the event of pressures toward appreciation, the authorities indicated that they would, at the same time, seek to avoid an excessive erosion of competitiveness vis-à-vis neighboring countries. While there was agreement that there is no immediate need to alter the exchange rate given high and stable international reserves and no significant signs of exchange rate misalignment (Box 5), staff did not see competitiveness issues to be a near-term concern and advised that exchange rate adjustments resume as soon as external conditions implied that significant bank intervention would be needed to maintain the current rate.

Box 5.Exchange Rate Assessment

Staff estimates suggest that the Boliviano is broadly in line with fundamentals, with evidence of some undervaluation. These estimates are based on CGER methodologies: the macroeconomic balance (MB) approach, the equilibrium real exchange rate (ERER) approach, and the external sustainability (ES) approach.1 While the three approaches point to some undervaluation, all the estimates of undervaluation are smaller than 10 percent, with an average of less than 5percent. Based on this—and given that the projected current account in the medium term is close to the estimated norm—staff considers the Boliviano to be close to equilibrium.

Bolivia: ER Assessment
REER Deviation from Equilibrium 1/
(in percent)
MB approach-1.3
ES approach-3.1
ERER approach-8.9
Average-4.4
Source: Fund staff estimates.

Undervaluation (-), overvaluation (+)

Source: Fund staff estimates.

Undervaluation (-), overvaluation (+)

The MB approach points to no real effective exchange rate (REER) misalignment. The REER would need to appreciate by only 1¼ percent to close the difference between the underlying current account balance (CAB) and the estimated equilibrium CAB, or current account norm. This result hinges on an underlying CAB equal to 3½ percent of GDP, and a norm estimated at 2.8 percent of GDP. This level of the current account norm reflects mainly relatively high petroleum trade balances and low old-age dependency ratios.

The ES approach suggests that the Boliviano is slightly undervalued. Under this approach there is a small undervaluation of about 3 percent, if we assume that Bolivia’s net foreign assets stabilize at the end-2008 level.

Finally, the ERER approach points to some undervaluation. The model explains the REER on the basis of the terms of trade, net foreign assets, public expenditure, FDI, and relative productivity. The appreciation of the REER in the last quarter of 2008 (mainly a result of trading partners’ currency depreciation) almost eliminated the undervaluation observed in 2006–08. However, as the currencies of trading partners recovered in the recent months, the REER depreciated, causing an undervaluation with respect to the estimated equilibrium level of about 9 percent.

There are uncertainties associated with the application of these methodologies to Bolivia. They do not fully incorporate the implications of the exhaustion of a natural resource within a predictable time-frame, and the associated intergenerational considerations that may drive net asset accumulation in the near term. In addition, current account volatility is particularly high in Bolivia because of commodity price fluctuations, which makes it difficult to separate underlying trends from temporary changes, thus complicating the estimation of the underlying current account balance. Finally, the Bolivian economy has experienced large structural changes in recent years; hence, past values of fundamental variables may be poor guides of their appropriate future levels.

For details on these methodologies, see IMF Occasional Paper 261 (2008).

16. Staff encouraged the authorities to consider replacing the crawling peg, over the medium term, with a more flexible exchange rate regime, to enhance the capacity to respond to external shocks. The authorities concurred that monetary policy should focus primarily on price stability, while allowing the exchange rate to adjust to different external environments. However, they emphasized that a further substantial decline in dollarization would be needed before abandoning the crawling peg regime. Moreover, they emphasized that there is still a strong channel of transmission from the exchange rate to inflation, and that the crawl gives them some flexibility to adjust to different external scenarios. Staff noted that under the crawl, terms-of-trade volatility would demand skillful liquidity management, and suggested that a fiscal rule to smooth out commodity-price fluctuations would facilitate the move towards more flexibility by reducing the volatility of external imbalances (during oil price booms and busts). To enhance credibility of monetary policy, staff recommended avoiding in the future central bank financing of the government or public corporations.

B. Structural Policies

17. The government is embarking on profound legal changes called upon by the new constitution. The authorities estimate that around 100 laws will need to be approved, including on key structural issues such as intergovernmental relations, the exploitation of natural resources (hydrocarbons, minerals) and land.

Supply Side Policies

18. The authorities attach importance to strategic partnerships with the private sector to achieve sustained growth. Their development strategy envisages the expansion of natural resource production and its industrialization, which would demand large investments. The authorities’ intention is to allow private participation in the capital and management of public enterprises, or to engage in production/service agreements with the private sector, to achieve higher leveraging capacity and facilitate the adoption of modern management techniques and technology. They are working on legal reforms to foster the efficiency of public corporations and provide the tools for effective management, including wage policy and procurement. Staff highlighted that removing expeditiously uncertainties in the legal framework would have benefits for private sector investment, particularly in the hydrocarbon sector. This should be accompanied by a strategy geared specifically to attracting private investment and, more generally, improving the business climate. To help develop the domestic credit market, staff advised introducing modern procedures for the restructuring of private firms, including in the case of bankruptcy, as recommended by the 2003 FSAP to better protect creditors’ claims. The authorities noted that they are working on legislation to set up a guarantee fund for medium-size businesses and insurance for agricultural activities, initiatives that would improve access to credit.

Fiscal Reforms

19. The authorities are working on a number of initiatives to improve the fiscal policy framework. There was broad agreement on the need to address five important issues:

  • Tax reform. This is needed to broaden the non-hydrocarbon tax base to reduce fiscal vulnerability to commodity price shocks and improve the efficiency and equity of the tax system. The authorities are working on a number of measures, with support of technical assistance from the Fund, to make the tax system more progressive.6

  • Reform of intergovernmental fiscal relations. The constitution draws a road map for the decentralization of government activities, which will start with the approval of the Law of Autonomies in 2010. While reform in this area is likely to be gradual, moving toward a better balance between revenue assignments and spending responsibilities at different levels of government is essential for the central administration to regain strength in its finances, including to finance countercyclical fiscal policy. This will require a pragmatic revision of expenditure responsibilities across levels of government and an appropriate adjustment of the revenue sharing arrangements in the context of the Fiscal Pact (Box 6).

  • Long-term framework for the management of natural resource wealth. The authorities are considering adopting a formal framework for the fiscal management of natural resource wealth to enhance macro-fiscal policy effectiveness and serve as a guide to the conduct fiscal policy in the face of volatile external factors. Such a framework will help introduce intergenerational considerations in the exploitation of nonrenewable natural resources and provide for the stabilization of domestic demand through a saving/withdrawal rule to smooth out price fluctuations. Financial savings should be placed in a special government fund with the central bank. Consistent with this approach, the assessment of the fiscal position could be made on the basis of the non-natural-resource balance.

  • Public enterprise reform. In addition to the legislation referred to earlier, there is a need for measures to mitigate potential risks to the Treasury from state-owned enterprises. Staff suggested having all state-owned firms subject to annual independent audits and eliminating any fiscal or quasi-fiscal functions by these enterprises. In addition, the Ministry of Economy and Public Finance should develop expertise in the financial operations of the large firms, in particular YPFB. The coverage of public sector accounts should be expanded to include all public enterprises, and their performance reflected in the budget and related documents.

  • Public sector financial management. As new laws are required to govern the public sector financial administration, the authorities are working on measures to improve the budget process, including with technical assistance from the Fund.

Box 6.Regional Autonomy and Revenue-sharing Arrangements1/

The new constitution, ratified in February 2009, calls for the establishment of four subnational autonomies (departments, regions, municipalities, and indigenous autonomies) and specifies which competencies may or may not be exercised by each level of government. Autonomy statutes, defining the vertical and horizontal distribution of competencies will be drafted, and—subject to passing a local referendum—submitted to the constitutional court for consideration and approval. The Law on Autonomies and related legislation—expected to be passed in 2010—will govern this process, and implementation is expected to begin in 2011.

The government has started work to determine the cost of competencies in key areas such as health, education, and infrastructure, based on historic data, to determine the resource transfer that may need to accompany the devolution of competencies in these areas. Resources are intended to be transferred in line with expenditure responsibilities and after assessing the execution capacity of subnational entities. The re-organization of intergovernmental fiscal relations will be managed through a negotiation process known as the Fiscal Pact.

The current revenue-sharing arrangement directs around 55 percent of hydrocarbon revenue2/ and 20 percent of other tax revenue to subnational governments and universities. The distribution is not linked to the actual expenditure needs of subnational governments, but is largely determined by their own hydrocarbon production and size. Thus, regional disparities in socioeconomic development remain significant and natural resource endowments continue to be the determinant factor of regional wealth. Through successive changes in revenue sharing, the central administration’s fiscal position has deteriorated steadily, while hydrocarbon revenue windfalls and low spending-execution rates by subnational governments—due to earmarking arrangements and capacity constraints—have led to surpluses and significant deposit accumulation.

Subnational fiscal operations, 2006-2009, percent of GDP
2006200720082009(p)
Overall balance4.52.64.30.4
Central administration1.91.6-0.3-1.6
Prefectures (departments)0.80.60.2
Municipalities1.10.60.3
Hydrocarbon revenue 1/
Non-financial public sector11.611.310.610.5
Central administration6.44.73.93.9
Prefectures (departments)4.84.84.84.7
Municipalities0.31.51.51.5
Universities0.10.40.40.4

IDH, royalties and excise tax on fuel.

IDH, royalties and excise tax on fuel.

A better balance between overall revenue assignments and spending responsibilities would improve resource allocation. By revisiting the automatic link between hydrocarbon and subnational revenue, pro-cyclical features of subnational spending could be reduced and subnational budget predictability improved. At the same time, such balance would help achieve fiscal neutrality of the decentralization process and rebalance the financial position of the central administration. Earmarking provisions for the use of hydrocarbon revenues could be relaxed to achieve an optimal mix of current and capital expenditure. As regional autonomies begin to exercise their tax authority it will be important to strengthen subnational revenue administration and coordinate tax policies nationally.

See Hydrocarbon Revenue Sharing Arrangements, accompanying Selected Issues Paper (2009).

Shared hydrocarbon revenue includes IDH, royalties, and the excise tax on fuel.

20. Staff encouraged the authorities to revisit the policy on energy subsidies, with a view to creating additional fiscal space for better-focused social programs. Staff noted that in addition to the direct cost to the budget of about 2 percent of GDP in 2010, there are additional costs—from domestic sales at prices below international reference prices—that are putting pressure on the finances of public enterprises, notably YPFB, and represent a significant opportunity cost.

Financial Sector Policies

21. Staff welcomed recent regulations to strengthen liquidity and credit risk management and suggested to press ahead with pending structural reforms and maintain strong supervision. Staff expressed concern that the new constitution, by eliminating the ability of the central bank to assume any liabilities of failed banks, may limit bank resolution capacity, and encouraged the authorities to establish a deposit insurance scheme, in line with FSAP recommendations. The authorities indicated that financial safety net arrangements were under review and would be addressed when new financial legislation is proposed. There was agreement that a priority in supervision would be to closely supervise credit developments, and that the policy of ASFI—the financial sector regulatory and supervisory body—to expand the perimeter of regulation to non-bank intermediaries was appropriate. The authorities were also encouraged to request an update of the original FSAP assessment conducted in 2003.

22. The authorities agreed that activities of the Financial Intelligence Unit (UIF) should be strengthened. While legislation on anti-money laundering appears to be adequate, the definition of terrorist financing activities and its criminalization should be incorporated to the law. Normalization of relations with the EGMONT Group of Financial Intelligence Units and with the Financial Action Task Force of South America (GAFISUD) would be important to avoid negative reputational effects and to benefit from international cooperation, maintain best practices, ensure information exchange, and improve training and sharing of expertise. The adequacy of the size and budget of the UIF should be assessed to ensure that it can conduct its operations effectively.

IV. Medium-Term Outlook

23. Over the medium-term, growth is projected to stabilize around 4 percent, inflation to remain in the low single digits, and the external current account surplus to be maintained. Growth would be driven mainly by expansion in the hydrocarbon and mining sectors, as well as by somewhat higher public investment. The current account surplus, in the range of 2–2½ percent of GDP, would reflect both higher gas exports (due to a recovery of international prices and higher export volumes to Brazil) and higher imports (in particular those associated with investment projects in hydrocarbon and mining). Under this scenario, international reserves would continue to strengthen while the gross and net public debt would follow downward trends.7 The projected external current account surpluses would contribute to a steady increase in the BCB’s net international reserves and the maintenance of safe liquidity cushions. In the fiscal area, after registering a small deficit in 2010, the overall balance would return to small surpluses, of about ½ percent of GDP. Hydrocarbon-related revenue would stabilize at about 10 percent of GDP, and public investment would increase to about 11½ percent of GDP. The non-hydrocarbon deficit would stabilize at 8 percent of GDP during the projection period.

24. The authorities saw the staff’s scenario as subject to upside risks, arising inter alia from the possible implementation of additional investment to further expand gas and mineral production, and to industrialize these natural resources (Box 7). In acknowledging these upside risks, staff emphasized that positive shocks could give rise to mounting appreciation pressures over the medium- and long term, which would have to be addressed by some combination of fiscal and exchange rate adjustment. Staff noted that policy responsiveness in this context would be helped by a move to a more flexible exchange rate regime (as discussed in paragraph 16).

25. Staff suggested that, while the baseline medium-term outlook is consistent with domestic and external stability, intergenerational equity considerations might warrant a reduction of the non-hydrocarbon deficit from projected levels. At current production levels, proven reserves are expected to last about 50 years.8 In order to extend the use of hydrocarbon resources beyond this time horizon, the fiscal accounts would need to be strengthened to generate additional savings. For example, staff estimates suggest that saving an additional 1 percent of GDP annually over the next 50 years would extend the hydrocarbon revenue stream by an additional 5 years. Additional savings would provide the basis for building a special fiscal fund, over and above the projected accumulation of central bank international reserves, to allow for the use of hydrocarbon-related resources while maintaining adequate international reserves. While acknowledging the importance of this issue, the authorities suggested that the intergenerational benefits from higher savings out of hydrocarbon resources would have to be balanced against those from development-related expenditure. Moreover, management of hydrocarbon resources needed to be placed in the broader context of the overall natural resource management, including the incipient but highly promising development of Bolivia’s massive reserves of lithium—demand for which is likely to rise sharply in coming years as world production of batteries for electric vehicles increases.

Box 7.Upside Risks to Potential Growth

Significant upside risks to potential growth in Bolivia stem from the implementation of various large investment projects envisaged in the National Development Plan but not included in the staff’s baseline scenario. Hydrocarbons, mining, and the electricity sector would receive the bulk of these large investments.

  • Hydrocarbons. YPFP’s plan envisages an increase in production to 100 millions of cubic meters per day (mm3/d) in the medium term, from about 40 mm3/d in 2008. To meet this target, both new markets for the additional production and large investments are required. YPFB’s investment plan entails investments in exploration and exploitation, transportation and storage, refining capacity, and about 900,000 new household connections in the national gas network. Moreover, the plan envisages key industrialization projects, such as the construction of two separation plants to increase GLP volumes, a project to produce liquids from natural gas, and the construction of a fertilizers plant. Total investments under the plan for 2010-15 would amount to $11.3 billion, of which $7.5 billion would correspond to the state company.

  • Mining. The strategy of the sector envisages substantial investments in exploration, exploitation, and—especially—industrialization. Plans for the production and industrialization of lithium, which represents half of the world’s reserves and remains unexploited, are particularly important. A pilot project will start to be implemented next year (aiming at producing 30,000 tons by 2014) in Salar de Uyuni (the world’s largest salt flat), where there are approximately 140 million tons of metallic lithium. Several foreign companies have already shown interest in exploiting Bolivia’s lithium reserves, and the authorities estimate total potential investments in this area at $800 million.

  • Electricity. Six large projects—mostly hydroelectric—are in the pipeline for 2010–25, which would more than double the current production capacity of about 1,100MW.

The authorities plan to attract FDI and to develop public-private partnerships to undertake part of these large investment projects. To this end, they intend to promote risk-sharing contracts between the key public enterprises and foreign investors. This is perceived as a key factor to gain capital, technology, know-how, and managerial skills. Key legal reforms are needed to pave the way to attract foreign investment and to implement the ambitious investment plans.

V. Staff Appraisal

26. Despite the global crisis, the Bolivian economy has performed well in 2009. Real GDP growth has decelerated due to lower gas exports and a weakening of domestic demand due to falling remittances and lower terms of trade, with inflation declining sharply. The external current account and public sector balances, while strongly impacted by the adverse external shocks, would remain in surplus. NIR have reached record high levels, offering ample coverage of monetary aggregates and, thereby, reducing financial/external vulnerabilities. The financial sector remains sound, with ample levels of liquidity, low nonperforming loans, and adequate provisioning.

27. The authorities’ strategy to deal with the external shock has been appropriate. In the face of external risks, the central bank halted the appreciation of the boliviano, providing a stable nominal anchor to avoid exchange rate volatility and protect important gains from recent de-dollarization, while using reserves to address temporary capital outflows in late 2008. Interest rates were reduced to stimulate credit demand and support domestic activity. Fiscal policy focused on protecting social and infrastructure spending—although the latter suffered from execution delays—while accommodating the cyclical downturn in revenue.

28. As the macroeconomic outlook for 2010 is favorable, the policy mix should be adjusted. Real GDP growth is expected to pick up reflecting mainly a recovery of hydrocarbon exports and public investment, while inflation is projected to rise moderately. The external current account is expected to remain in surplus while the overall fiscal position is expected to shift into a small deficit. As public expenditure provides further stimulus and the economy rebounds in 2010, the authorities should tighten monetary conditions to prevent excess liquidity in the banking sector, excessive credit creation, foreign-exchange pressures, and a pick-up in inflation.

29. The overall fiscal position remains sound, but the central administration could face financing constraints if oil prices were to fall. Under baseline projections, gross and net public debt are expected to decline gradually over the next few years, consolidating an already strong fiscal position. Because of imbalances between the hydrocarbon-revenue sharing arrangement and spending responsibilities, however, financial savings have been primarily accumulated at subnational level and public enterprises. The financial cushion of the Treasury is estimated to be relatively small, and the central government remains vulnerable to oil price developments. Contingency financing plans should be prepared with a view to protecting investment and social spending.

30. While the fiscal position is consistent with macroeconomic stability and is projected to result in lower public debt over the medium term, reliance on revenue from natural resources, particularly hydrocarbons, remains high. Thus, and also on intergenerational equity grounds, the authorities should consider strengthening the non-hydrocarbon balance and generate additional savings to extend the use of hydrocarbon resource wealth beyond its physical depletion. To this end, a number of structural reforms would be helpful and staff welcomes various initiatives under consideration by the authorities. These include, most importantly, stronger direct taxation and the simplification of the tax system; a rebalancing of spending responsibilities and revenue assignments across different levels of government; and a framework for the fiscal management of natural resources. Gradually phasing out fuel subsidies would create fiscal space to increase savings and targeted social spending.

31. The authorities appropriately stand ready to modify the rate of crawl of the exchange rate, if needed. Maintaining a stable exchange rate has been useful to address uncertainty in the context of the international economic crisis. While there is no significant evidence of misalignment nor exchange-rate pressures, the authorities should monitor these aspects closely and stand ready to reintroduce a positive or negative rate of crawl, as appropriate. Over the medium term, as lower dollarization is more entrenched and domestic financial markets develop further, the authorities should set the stage for greater exchange rate flexibility. An important precondition for a credible and independent monetary policy will be to avoid additional central bank financing of the government or public corporations. Minimizing fiscal dominance, including through fiscal stabilization rules as suggested above, would facilitate the conduct of monetary policy.

32. In the financial sector, the authorities should focus on pending structural reforms and maintain a strong financial supervision. As a priority, the authorities should consider creating a deposit insurance scheme and take advantage of the favorable economic environment to finalize the institutional framework to allow the orderly exit of failed institutions. ASFI should continue supervising credit developments closely while expanding the perimeter of regulation and supervision to include cooperatives and other unregulated financial institutions. Legislation on anti-money laundering and the operations of the Financial Intelligence Unit should be strengthened.

33. Improving the investment climate remains a top priority. As the authorities intend to fundamentally reform the legal and institutional framework, it will be important that the laws under preparation to implement the constitution are consistent with ensuring a clear and stable framework for private investment. The authorities should take advantage of these legal reforms to introduce modern procedures for the restructuring of private firms, including in the case of bankruptcy, which would help develop the domestic credit market.

34. It is proposed that the next Article IV consultation with Bolivia be held on the standard 12-month cycle.

Table 1.Bolivia: Selected Social and Economic Indicators
I. Social and Demographic Indicators
Area (sq. km)1,084,380
Arable land (percent of land area, 2003)2.8
Population (2008)
Total (million)9.7
Annual rate of growth, 1991-2002
(percent a year)3.5
Density (per sq. km.)8.9
GDP per capita (US$) 20081,714.3
Population characteristics
Life expectancy at birth in years (2007)65.5
Crude birth rate (per thousand, 2007)27.3
Crude death rate (per thousand, 2007)7.6
Infant mortality (per thousand live births, 2007)47.6
Under 5 mortality rate (per thousand, 2008)57.0
Income distribution (2005)
Gini coefficient0.6
Distribution of urban labor force, in percent (2003)
Agriculture38.3
Industry and mining11.4
Services50.3
Poverty rate in percent (2006)59.9
Unemployment rate in percent (2006)8.0
Access to electricity (2006)
Percent of dwellings76.2
Urban95.2
Rural23.9
Access to safe water (2006)
Percent of population86.0
Urban96.0
Rural69.0
Education
Adult literacy rate in percent (2007)90.7
Net enrollment rates, in percent
Primary education (2007)93.7
Secondary education (2007)69.9
GDP (2008)
Billions of U.S. Dollars16.6
Billions of bolivianos120.7
Sources: Bolivian authorities; World Bank Development Indicators, and Fund staff estimates and projections.

For historical data, the investment-savings balance, as measured in national accounts, differs from that in the balance of payments due to adjustments in the former associated with estimations of re-exports and smuggling.

Includes nationalization costs and net lending.

Excludes reserves from the Latin American Reserve Fund (FLAR) and Offshore Liquidity Requirements (RAL).

Foreign assets valued at market prices.

Official (buy) exchange rate.

Projections based on WEO’s August 28 Vintage.

II. Economic Indicators
Est.Proj.
200620072008200920102011201220132014
(Annual percentage changes)
Income and prices
Real GDP4.84.66.13.34.04.04.04.04.0
GDP deflator13.77.410.4-1.54.13.42.72.82.8
CPI inflation (period average)4.38.714.03.53.33.73.53.53.5
CPI inflation (end-of-period)4.911.711.81.04.03.53.53.53.5
(In percent of GDP)
Investment and savings
Total investment13.915.217.616.117.117.417.717.717.8
Public sector8.19.49.88.18.99.39.59.59.5
Private sector5.75.87.88.08.38.18.28.28.3
Gross national savings26.428.629.019.619.719.419.719.819.9
Public sector12.611.312.58.28.69.59.99.89.9
Private sector13.817.316.511.411.19.99.810.010.0
Investment/saving balances 1/12.513.411.53.52.62.02.02.22.2
Public sector4.51.92.80.1-0.30.20.40.40.4
Private sector8.011.58.73.42.81.81.61.81.7
Combined public sector
Revenues and grants34.334.538.932.534.334.735.134.034.0
Of which:
Hydrocarbons related revenue10.29.312.89.410.510.810.910.110.1
Expenditure29.832.836.532.634.734.734.833.833.7
Current19.620.023.022.424.023.423.322.322.2
Capital 2/10.212.813.410.210.811.311.511.511.5
Overall balance4.51.72.80.1-0.30.20.40.40.4
Of which:
Balance before nationalization costs4.52.64.30.4-0.30.20.40.40.4
Non-hydrocarbons balance, before nationalization cost-5.7-5.9-8.4-8.3-7.7-8.7-8.7-8.0-8.1
Total net public debt41.926.820.619.618.316.915.314.012.7
Total gross NFPS debt55.240.937.539.437.436.135.134.433.5
External sector
Current account 1/11.312.012.13.52.62.02.02.22.2
Merchandise exports33.633.538.827.429.029.429.028.628.1
Of which: natural gas14.514.819.011.212.913.513.212.912.6
Merchandise imports24.426.030.024.927.227.627.126.626.3
Terms of trade index (percent change)15.25.814.7-10.12.8-0.7-2.6-2.0-2.0
Gross Central Bank foreign reserves 3/4/
In millions of U.S. dollars3,1935,3197,7228,8439,2579,5769,89210,25610,618
In percent of broad money62.275.184.783.777.973.470.668.165.8
Exchange rates
Bolivianos/U.S. dollar (end-of-period) 5/7.937.576.97
REER, period average (percent change)-0.42.914.7
(Changes in percent of broad money at the beginning of the period, unless otherwise specified)
Money and credit
NFA of the financial system31.335.434.610.25.84.94.23.73.0
NDA of the financial system-12.9-3.7-12.56.66.74.83.33.84.1
Of which: credit to private sector (percent of GDP)34.733.130.333.036.138.540.141.743.4
Broad money18.531.722.216.812.59.77.57.57.1
Interest rates (percent, end-of-period)
Yield on treasury bills in local currency5.47.38.6
Yield on treasury bills in U.S. dollars4.94.64.0
Memorandum items:
Nominal GDP (in billions of U.S. dollars)11.513.316.617.619.120.521.923.425.0
Oil prices (in US dollars per barrel) 6/64.371.197.061.576.579.581.083.084.8
Sources: Bolivian authorities; World Bank Development Indicators, and Fund staff estimates and projections.

For historical data, the investment-savings balance, as measured in national accounts, differs from that in the balance of payments due to adjustments in the former associated with estimations of re-exports and smuggling.

Includes nationalization costs and net lending.

Excludes reserves from the Latin American Reserve Fund (FLAR) and Offshore Liquidity Requirements (RAL).

Foreign assets valued at market prices.

Official (buy) exchange rate.

Projections based on WEO’s August 28 Vintage.

Sources: Bolivian authorities; World Bank Development Indicators, and Fund staff estimates and projections.

For historical data, the investment-savings balance, as measured in national accounts, differs from that in the balance of payments due to adjustments in the former associated with estimations of re-exports and smuggling.

Includes nationalization costs and net lending.

Excludes reserves from the Latin American Reserve Fund (FLAR) and Offshore Liquidity Requirements (RAL).

Foreign assets valued at market prices.

Official (buy) exchange rate.

Projections based on WEO’s August 28 Vintage.

Table 2.Bolivia: Operations of the Combined Public Sector(In percent of GDP)
Est.Proj.
200620072008200920102011201220132014
Total revenue and grants34.334.438.932.534.334.735.134.034.0
Current revenue30.931.131.530.430.130.430.229.929.7
Tax revenue27.827.828.527.427.027.427.327.026.7
IDH and royalties9.49.08.58.68.28.68.68.48.3
Other Taxes18.418.820.018.818.818.818.718.518.4
Direct taxes4.73.84.54.64.44.64.64.64.6
Of which: Corporate income tax3.13.03.73.93.73.93.93.93.9
Indirect taxes13.615.015.514.314.414.214.114.013.8
Of which: VAT6.87.17.46.56.76.66.66.56.4
Excise taxes on fuel2.22.32.11.91.81.81.71.71.6
Nontax revenue3.13.33.03.03.03.03.02.93.0
Public enterprises operating balance0.80.44.91.02.72.52.71.92.0
Central bank operating balance0.71.31.20.10.50.71.11.11.1
Grants1.81.61.21.01.11.11.11.11.1
Total spending29.831.834.632.134.634.534.633.733.6
Current expenditure19.620.022.722.323.823.323.122.222.1
Wages and salaries 1/7.99.28.79.79.89.69.69.69.6
Goods and services1.82.02.22.42.42.42.42.42.4
Interest2.52.52.02.12.22.12.01.91.9
Domestic1.51.71.41.61.51.41.31.21.2
Foreign1.00.80.60.50.70.70.70.70.7
Transfers1.52.16.44.75.04.74.63.83.8
Of which: Fuel subsidies1.20.73.51.92.11.91.71.01.0
Social programs 2/0.72.32.22.22.22.22.22.2
Pensions3.63.43.13.53.73.73.73.63.5
Other2.30.90.2-0.20.80.80.80.80.8
Capital expenditure10.211.811.99.810.811.311.511.511.5
Of which: YPFB0.00.90.00.73.11.91.81.71.6
net lending0.81.4
Overall balance before nationalization4.52.64.30.4-0.30.20.40.40.4
Of which: non-hydrocarbon balance 3/-5.7-5.9-8.4-8.3-7.7-8.7-8.7-8.0-8.1
Nationalization cost0.00.81.60.30.00.00.00.00.0
Overall balance after nationalization4.51.72.80.1-0.30.20.40.40.4
Financing-4.5-1.7-2.8-0.10.3-0.2-0.4-0.4-0.4
External0.41.01.31.31.01.31.41.51.4
Disbursements2.93.23.53.13.02.52.42.52.4
Amortizations-2.5-2.1-2.1-1.8-2.0-1.2-1.1-1.0-1.0
Other External-0.1-0.10.00.00.00.00.00.00.0
Domestic-4.9-2.8-4.1-1.4-0.7-1.5-1.8-1.9-1.8
Banking system-6.2-3.2-5.4-2.4-0.7-1.5-1.8-1.9-1.8
Of which: Central Bank-6.2-3.0-5.0-2.6-0.7-1.5-1.8-1.9-1.8
Commercial banks0.1-0.2-0.40.20.00.00.00.00.0
Pension funds1.30.70.01.00.00.00.00.00.0
Other domestic0.1-0.31.30.00.00.00.00.00.0
Memorandum Items:3.8
Overall balance of the central administration1.91.6-0.3-1.6
Overall balance of subnational governments1.91.10.5
Prefectures0.80.60.2
Municipalities1.10.60.3
Poverty spending13.514.214.014.0
Hydrocarbon related revenue 4/10.29.312.89.410.510.810.910.110.1
Hydrocarbon balance10.28.512.88.77.48.99.18.48.5
Sources: Bolivian authorities and Fund staff estimates.

In 2007 the expenditure on universities was reclassified from other spending into its functional classification, increasing wages and salaries by 1,056 million. Bolivianos in that year.

Excludes part of Bonosol payments in 2007.

Non-hydrocarbon revenue minus overall expenditure plus YPFB capital expenditure.

Hydrocarbon related revenues are defined as IDH, royalties, and the operating balance of YPFB.

Sources: Bolivian authorities and Fund staff estimates.

In 2007 the expenditure on universities was reclassified from other spending into its functional classification, increasing wages and salaries by 1,056 million. Bolivianos in that year.

Excludes part of Bonosol payments in 2007.

Non-hydrocarbon revenue minus overall expenditure plus YPFB capital expenditure.

Hydrocarbon related revenues are defined as IDH, royalties, and the operating balance of YPFB.

Table 3.Bolivia: Operations of the Combined Public Sector(In Millions of Bolivianos)
Est.Proj.
200620072008200920102011201220132014
Total revenue and grants31,47335,42846,95339,94445,62949,66753,61755,56359,318
Current revenue28,38132,05238,02037,39240,00243,54146,21348,81851,846
Tax revenue25,52428,65934,41433,66335,97339,25441,67544,01346,675
IDH and royalties8,6459,26610,24910,52410,92112,34813,14413,76014,572
Other Taxes16,87819,39324,16523,13925,05126,90628,53030,25232,103
Direct taxes4,3573,9015,4145,6075,8776,5276,9677,4527,983
Of which: Corporate income tax2,8843,1414,4684,7754,9635,5495,9306,3366,773
Indirect taxes12,52215,49218,75117,53219,17420,37921,56422,80024,120
Of which: VAT6,2527,2748,9197,9638,8819,46410,03010,61911,246
Excise taxes on fuel2,0002,3832,5302,3642,4592,5582,6612,7672,878
Nontax revenue2,8573,3933,6063,7294,0294,2864,5384,8055,171
Public enterprises operating balance732.2384.55,969.71,188.93,538.03,619.34,074.03,080.63,555.0
Central bank operating balance6681,2971,4571266269331,6491,8671,996
Grants1,6921,6951,5051,2371,4631,5731,6811,7961,920
Total spending27,37232,76741,75439,40646,00849,38152,94854,98158,602
Current expenditure18,00020,59427,40227,34531,69733,28035,35936,18838,513
Wages and salaries 1/7,2309,43110,52111,94413,02713,70014,67815,71516,836
Goods and services1,6492,0312,6802,9723,2183,4593,6973,9504,222
Interest2,3182,6162,3862,5442,9302,9863,0593,1553,257
Domestic1,3581,7491,6811,9362,0102,0102,0102,0102,010
Foreign9608677066089209761,0501,1451,247
Transfers1,3962,1327,7175,8106,6106,7867,0106,2586,641
Of which: Fuel subsidies1,0656884,2642,3092,8192,7112,6541,6041,666
Social programs 2/6712,7322,6672,8883,1053,3183,5463,790
Pensions3,2843,4873,8004,3594,8995,2595,6355,8796,110
Other2,123897297-2841,0131,0891,2801,2311,447
Capital expenditure9,37212,17314,35212,06114,31116,10117,58918,79320,089
Of which: YPFB31890538364,1822,7882,7882,7882,788
net lending9811,694
Overall balance before nationalization4,1012,6615,199538-379285669581716
Of which: non-hydrocarbon balance 3/-5,246-6,050-10,191-10,183-10,196-12,424-13,231-13,071-14,161
Nationalization cost08681,87242000000
Overall balance after nationalization4,1011,7933,327118-379285669581716
Financing-4,101-1,793-3,327-118379-285-669-581-716
External3701,0631,6121,5811,3641,8792,0722,4732,422
Disbursements2,6953,2684,2323,7763,9593,6073,7364,1624,162
Amortizations-2,249-2,130-2,571-2,194-2,596-1,728-1,663-1,689-1,739
Other External-75-75-50000000
Domestic-4,471-2,856-4,938-1,700-985-2,164-2,741-3,054-3,138
Banking system-5,670-3,328-6,488-2,954-985-2,164-2,741-3,054-3,138
Of which: Central Bank-5,726-3,081-6,052-3,229-985-2,164-2,741-3,054-3,138
Commercial banks56-246-43627500000
Pension funds1,14974101,25500000
Other domestic50-2691,550000000
Memorandum Items:
Overall balance of the central administration1,7641,633-368-2,000
Overall balance of subnational government1,7571,154633
Prefectures734567241
Municipalities1,023587393
Poverty spending12,38414,61816,94417,248
Hydrocarbon related revenue 4/9,3789,60115,44311,55813,99915,49716,68816,44017,665
Hydrocarbon balance9,3478,71115,39010,7229,81712,70913,90013,65214,877
Sources: Bolivian authorities, and Fund staff estimates.

In 2007 the expenditure on universities was reclassified from other spending into its functional classification, increasing wages and salaries by 1,056 million. Bolivianos in that year.

Excludes part of Bonosol payments in 2007.

Non-hydrocarbon revenue minus overall expenditure plus YPFB capital expenditure.

Hydrocarbon related revenues are defined as IDH, royalties, and the operating balance of YPFB.

Sources: Bolivian authorities, and Fund staff estimates.

In 2007 the expenditure on universities was reclassified from other spending into its functional classification, increasing wages and salaries by 1,056 million. Bolivianos in that year.

Excludes part of Bonosol payments in 2007.

Non-hydrocarbon revenue minus overall expenditure plus YPFB capital expenditure.

Hydrocarbon related revenues are defined as IDH, royalties, and the operating balance of YPFB.

Table 4.Bolivia: Summary Balance of Payments(In millions of U.S. dollars, unless otherwise indicated)
Est.Proj.
200620072008200920102011201220132014
Current account1,3181,5912,015620489412446509541
Trade balance1,0601,0041,467445332356429475437
Exports, f.o.b.3,8754,4586,4484,8315,5276,0296,3666,7057,028
Exports, c.i.f.4,2464,8606,9785,3356,0616,6136,9497,3197,671
Natural gas1,6691,9713,1581,9752,4682,7772,8933,0223,147
of which: To Brazil1,3571,6062,8501,5811,9612,2582,3682,4892,608
volume (mmm3 p/day)24.426.930.522.324.027.028.029.030.0
price ($/000cf3)4.34.67.25.56.36.56.66.76.7
To Argentina280326307394507519525533540
volume (mmm3 p/day)5.14.62.55.05.65.65.65.65.6
price ($/000cf3)4.35.59.46.17.07.27.37.47.5
Mining1,0611,3871,9401,7631,8762,0522,0462,0512,031
Soy - related 1/237277329543539541585639672
Other1,2791,2251,5521,0551,1781,2431,4241,6081,821
Imports, c.i.f.-2,814-3,455-4,980-4,386-5,195-5,673-5,937-6,230-6,591
Services (net)-168-189-200-245-315-393-443-474-508
Income (net)-397-489-536-598-609-675-728-739-733
Of which: interest due on external public sector debt-133-109-111-98-119-116-114-120-128
Of which: investment income (net)-389-641-678-651-658-717-767-782-782
Transfers (net)8221,2661,2841,0181,0811,1241,1871,2461,345
Of which: HIPC assistance from grants4423200000
Capital and financial account198361359-59-75-93-129-146-178
Capital transfers 2/1,8131,18010000000
Direct investment (net)281366513274246298309300280
Gross investment5829531,302709846848859850830
Disinvestment and investment abroad-301-587-789-435-600-550-550-550-550
Portfolio investment (net)25-30-208-444-219-230-255-260-265
Public sector-1,543-1,067231423195269297354347
Disbursements337410588542568517536597597
Amortization-1,880-1,477-357-341-373-249-239-243-250
Other 3/00022200000
Fin system net foreign assets, excl. liquid asset requir-1091270-314-102-160-200-240-240
Nonbank private sector loans-25-52-21-26-150-170-180-180-180
Other, including errors and omissions-242-159-16028-279-100-100-120-120
Overall balance1,5161,9522,374561414319316363363
Financing-1,516-1,952-2,374-561-414-319-316-363-363
Memorandum items:
Current account (percent of GDP)11.412.012.13.52.62.02.02.22.2
Merchandise exports (percent of GDP)33.633.538.827.429.029.429.028.628.1
Merchandise imports (percent of GDP)-24.4-26.0-30.0-24.9-27.2-27.6-27.1-26.6-26.3
Gross official reserves (end-of-period)3,1935,3197,7228,8439,2579,5769,89210,25610,618
(In months of imports of goods and services)13.618.518.624.221.420.320.019.819.3
GDP (in millions of U.S. dollars)11,52613,29216,60217,62719,08620,52021,92823,43025,045
Sources: Central Bank of Bolivia; and Fund staff estimates and projections.

Excluding reexports.

In 2006 includes effect of MDRI debt relief from the IMF and the World Bank equivalent to US$ 1804.3 million. In 2007 includes effect of MDRI relief from IADB equivalent to US$ 1099 million.

Includes SRD allocation in 2009.

Sources: Central Bank of Bolivia; and Fund staff estimates and projections.

Excluding reexports.

In 2006 includes effect of MDRI debt relief from the IMF and the World Bank equivalent to US$ 1804.3 million. In 2007 includes effect of MDRI relief from IADB equivalent to US$ 1099 million.

Includes SRD allocation in 2009.

Table 5.Bolivia: Central Bank of Bolivia 1/
Est.Proj.
200520062007200820092010
(Flows in millions of Bolivianos, unless otherwise indicated)
Net international reserves 2/4,10510,27015,49117,4492,3722,788
(Flows in millions of U.S. dollars)5031,2891,9992,400340414
Net domestic assets-2,208-7,676-10,162-14,711-2,018-1,224
Net credit to the nonfinancial public sector-1,543-5,725-2,993-6,055-3,489-985
Net credit to financial intermediaries-604-1,620-6,131-8,9741,078-244
Of which: Open market operations (increase -) 3/-168-1,171-5,397-6,7455,130-2,147
Net medium- and long-term foreign liabilities (increase -)856-1285
Other items (net) 2/-69-336-1,0443293850
Currency issue1,8972,5945,3292,9403541,564
(Stocks in millions of Bolivianos, unless otherwise indicated)
Net international reserves12,78524,29140,70556,21557,19659,984
(Stocks in millions of U.S. dollars)1,5683,0505,2527,7328,2068,606
Net domestic assets-6,605-15,517-26,602-39,172-39,799-41,023
Net credit to the nonfinancial public sector236-6,952-9,337-14,096-15,064-16,049
Net credit to financial intermediaries627-1,455-7,906-17,461-18,016-18,260
Of which: Open market operations 3/-690-1,868-7,290-14,469-10,828-12,975
Net medium- and long-term foreign liabilities-220-212-207-214-1,967-1,962
Other items (net)-7,248-6,898-9,152-7,401-4,753-4,753
Currency issue6,1808,77414,10317,04317,39718,961
(Changes in percent of beginning-of-period currency issue)
Net international reserves95.8166.2176.6123.713.916.0
Net domestic assets-51.6-124.2-115.8-104.3-11.8-7.0
Net credit to the nonfinancial public sector-36.0-92.6-34.1-42.9-20.5-5.7
Net credit to financial private sector-14.1-26.2-69.9-63.66.3-1.4
Of which: Open market operations (increase -) 3/-3.9-19.0-61.5-47.830.1-12.3
Net medium- and long-term foreign liabilities (increase -)0.20.10.1-0.10.00.0
Other items (net)-1.6-5.4-11.92.32.30.0
Currency issue44.342.060.720.92.19.0
Memorandum items:
Currency issue (average stock in percent of GDP)5.67.19.812.714.314.8
Net international reserves 4/1,7143,1785,3197,722
NIR coverage of broad money (percent) 4/39.461.975.184.7
Sources: Central Bank of Bolivia; and Fund staff estimates.

Stocks and flows in foreign currency are valued at accounting exchange rates for 2005 and at the beginning of period exchange rate for 2006 onwards.

Includes valuation adjustments.

Includes direct placements to individuals

All foreign assets valued at market prices.

Sources: Central Bank of Bolivia; and Fund staff estimates.

Stocks and flows in foreign currency are valued at accounting exchange rates for 2005 and at the beginning of period exchange rate for 2006 onwards.

Includes valuation adjustments.

Includes direct placements to individuals

All foreign assets valued at market prices.

Table 6.Bolivia: Financial System Survey 1/2/
Est.Proj.
200520062007200820092010
(Flows in millions of Bolivianos, unless otherwise indicated)
Net short-term foreign assets6,24910,89214,41518,5566,4874,251
(Flows in millions of U.S. dollars)7661,3681,8602,552931610
Net domestic assets-1,998-4,469-1,502-6,6824,1844,948
Net credit to the public sector-2,134-5,760-3,482-6,675-3,026-985
Credit to the private sector1,0681,9584,4004,7833,0177,509
Net medium- and long-term foreign liabilities (increase -)-390-105359-6612515
Other items (net)-543-562-2,779-4,1283,943-1,582
Broad money4,2516,42312,91311,87510,6719,199
Liabilities in domestic currency3,4415,57811,51110,3824,9855,743
Foreign currency deposits8108451,4021,4935,6863,456
(Stocks in millions of Bolivianos, unless otherwise indicated)
Net short-term foreign assets19,49631,49446,82362,95967,70771,959
(Stocks in millions of U.S. dollars)2,3913,9546,0428,6609,71410,324
Net domestic assets15,2699,2126,7655645,94910,897
Net credit to the public sector2,361-4,884-7,760-13,181-13,667-14,652
Credit to the private sector30,77832,17136,53738,92640,54748,056
Net medium- and long-term foreign liabilities-3,326-3,368-3,006-3,491-4,864-4,859
Other items (net)-14,544-14,707-19,007-21,689-16,067-17,649
Broad money34,76540,70653,58863,52373,65782,856
Liabilities in domestic currency10,20615,78427,29538,41143,14248,885
Foreign currency deposits24,55924,92226,29325,11230,51533,971
(Changes in percent of beginning-of-period broad money)
Net short-term foreign assets20.731.335.434.610.25.8
Net domestic assets-6.6-12.9-3.7-12.56.66.7
Net credit to the public sector-7.1-16.6-8.6-12.5-4.8-1.3
Credit to the private sector3.55.610.88.94.710.2
Net medium- and long-term foreign liabilities (increase -)-1.3-0.30.9-1.20.40.0
Other items (net)-1.8-1.6-6.8-7.76.2-2.1
Broad money14.118.531.722.216.812.5
Liabilities in domestic currency11.416.028.319.47.87.8
Foreign currency deposits2.72.43.42.89.04.7
Memorandum items:
Broad money (average stock in percent of GDP)41.738.745.248.255.259.2
Credit to private sector (annual percentage change))4.513.66.54.218.5
Credit to private sector (average stock in percent of GDP)39.233.933.130.333.036.1
Financial system NFA coverage of deposits (percent)66.896.3115.7131.9117.6110.1
Dollarization (end-period stocks)
Foreign currency and dollar-indexed deposits84.276.265.052.653.052.0
Foreign currency and dollar indexed credit92.686.979.166.369.169.2
Sources: Central Bank of Bolivia; and Fund staff estimates and projections.

The financial system comprises the central bank; commercial banks and nonbanks; and the National Financial Institution of Bolivia and FONDESIF, which are state-owned second-tier banks.

Stocks and flows in foreign currency are valued at accounting exchange rates for 2005 and at the beginning of period exchange rate for 2006 onwards.

Sources: Central Bank of Bolivia; and Fund staff estimates and projections.

The financial system comprises the central bank; commercial banks and nonbanks; and the National Financial Institution of Bolivia and FONDESIF, which are state-owned second-tier banks.

Stocks and flows in foreign currency are valued at accounting exchange rates for 2005 and at the beginning of period exchange rate for 2006 onwards.

Table 7.Bolivia: Consolidated Commercial Banks and Non-bank Depository Institutions 1/
Est.Proj.
200520062007200820092010
(Flows in millions of Bolivianos, unless otherwise indicated)
Net short-term foreign assets2,144622-1,0761,1074,1151,463
(Flow in millions of U.S. dollars)26378-139152590210
Net domestic assets3783,3838,8848,0776,2816,290
Net credit to the public sector-590-35-490-6194620
Credit to the private sector1,0681,9584,4004,7833,0177,509
Net position with the central bank6141,8424,7535,97327363
Net medium- and long-term foreign liabilities (increase -)-398-110354-6502430
Other items (net)-315-272-134-1,4092,532-1,582
Deposits2,5224,0057,8089,18510,3977,753
Local currency deposits1,7123,1606,4067,6924,7114,297
Foreign currency deposits8108451,4021,4935,6863,456
(Stocks in millions of Bolivianos, unless otherwise indicated)
Net short-term foreign assets6,7127,2036,1186,74410,51111,974
(Stock in millions of U.S. dollars)8239047899281,5081,718
Net domestic assets22,45925,49134,35240,97247,06453,354
Net credit to the public sector2,1252,0681,5779141,3971,397
Credit to the private sector30,77832,17136,53738,92640,54748,056
Net position with the central bank2502,1286,88313,13714,08214,445
Net medium- and long-term foreign liabilities-3,106-3,156-2,798-3,277-2,897-2,897
Other items (net)-7,588-7,721-7,846-8,729-6,066-7,648
Deposits29,17132,69440,47047,71557,57565,328
Local currency deposits4,6117,77114,17722,60427,06031,357
Foreign currency deposits24,55924,92226,29325,11230,51533,971
(Changes in percent of deposits at the beginning of the period)
Net short-term foreign assets8.22.1-3.32.78.62.5
Net domestic assets1.411.627.220.013.210.9
Net credit to the public sector-2.2-0.1-1.5-1.51.00.0
Credit to the private sector4.16.713.511.86.313.0
Net position with the central bank2.36.314.514.80.10.6
Net medium- and long-term foreign liabilities (increase -)-1.5-0.41.1-1.60.50.0
Other items (net)-1.2-0.9-0.4-3.55.3-2.7
Deposits9.613.723.922.721.813.5
Local currency deposits6.510.819.619.09.97.5
Foreign currency deposits3.12.94.33.711.96.0
Memorandum items:
Credit to private sector (average stock in percent of GDP)39.233.933.130.333.036.1
NFA coverage of dollar deposits (percent)23.022.015.114.118.318.3
U.S. dollar and dollar-indexed deposits (in percent of total deposits)84.276.265.052.653.052.0
U.S. dollar and dollar indexed credit (in percent of total credit)92.686.979.166.369.169.2
Sources: Central Bank of Bolivia; and Fund staff estimates.

Stocks and flows in foreign currency are valued at accounting exchange rates for 2005 and at the beginning of period exchange rate for 2006 onwards.

Sources: Central Bank of Bolivia; and Fund staff estimates.

Stocks and flows in foreign currency are valued at accounting exchange rates for 2005 and at the beginning of period exchange rate for 2006 onwards.

Table 8.Bolivia: Selected Vulnerability Indicators
2005200620072008Sep

2009
Reserve adequacy(In US$ million, unless otherwise indicated)
Net international reserves 1/1,7143,1785,3197,7228,453
NIR coverage, in percent of:
Dollar deposits56.9101.6156.8223.6193.1
Total deposits47.977.4101.9117.7102.3
Broad money39.461.975.198.180.0
In months of imports of goods and services5.99.211.218.116.9
Net foreign assets of the financial system2,3913,9546,0428,6609,664
NFA coverage, in percent of:
Dollar deposits79.4126.4178.1250.7220.7
Total deposits66.896.3115.7131.9123.1
Broad money56.177.487.499.197.5
Debt ratios2/(In percent of GDP)
Total gross NFPS debt80.455.240.937.539.4
Domestic30.727.124.923.224.1
External49.628.216.114.315.3
Total net NFPS debt71.141.926.820.619.6
Private external debt13.410.29.37.77.3
Net International Investment Position-75.4-31.4-5.29.3
Commodity dependency
Hydrocarbon revenue (in percent of total revenues)1/23.433.030.040.630.9
Non-hydrocarbon fiscal balance (in percent of GDP)1/-8.9-5.7-5.9-8.4-8.3
Gas exports (in percent of total exports)38.943.144.249.049.9
Mining exports (in percent of total exports)19.527.431.130.136.5
Banking sector indicators 3/
Nonperforming loans (in percent of total loans)11.38.75.64.34.1
Restructured loans (in percent of total loans)22.516.210.77.15.6
Nonperforming and restructured loans (in percent of total loans)33.824.916.311.49.7
Capital adequacy ratio14.713.312.613.713.4
Profits after tax (in percent of equity)6.413.321.220.319.7
Cash and short-term investments as percent of total assets30.733.935.243.448.3
Composition of bank deposits(In percent)
Dollar deposits84.276.265.052.655.8
Inflation-indexed deposits2.13.34.25.00.0
Local currency deposits13.720.530.942.444.2
Memorandum items:
Fiscal balance (in percent of GDP) 2/-2.24.52.64.30.4
Total financial system deposits (US$ million)3,5784,1055,2226,5637,853
of which:
Sight deposits9341,0991,3711,4091,731
Savings deposits9281,1931,7442,0642,355
Sources: Central Bank of Bolivia; and Fund staff estimates and projections.

Foreign assets valued at market prices.

Debt and fiscal figures are end-2009 projections. Fiscal balance excludes nationalization costs.

As of October 31, 2009.

Sources: Central Bank of Bolivia; and Fund staff estimates and projections.

Foreign assets valued at market prices.

Debt and fiscal figures are end-2009 projections. Fiscal balance excludes nationalization costs.

As of October 31, 2009.

Table 9.Bolivia: Millennium Development Goals
First Observation2004200520062007Target 2015
Goal 1. Eradicate Extreme Poverty and Hunger
Target 1: Halve, between 1990 and 2015, the proportion of people whose income is less than one dollar a day.
Population below US$1 a day (in percent)41.2 (1990)36.737.724.1
Target 2: Halve, between 1990 and 2015, the proportion of people suffering hunger
Prevalence of child malnutrition (percent of children under 3)38.3 (1990)25.519.0
(2003)
Goal 2. Achieve Universal Primary Education
Target 3. Ensure that, by 2015, children will be able to complete a full course of primary schooling.
Net primary enrollment ratio (percent of relevant age group)94.094.592.793.7100.0
Percentage of cohort reaching grade 855.4 (1992)79.577.875.6100.0
Goal 3. Promote Gender Equality and Empower Women
Target 4. Eliminate gender disparity in primary and secondary education preferably by 2005 and to all levels of education by 2015.
Gender disparities at completion of primary education (percent)6.6 (1992)0.3-0.60.0
Gender disparities at completion of secondary education (percent)3.4 (1992)-0.4-1.50.0
Goal 4. Reduce Child Mortality
Target 5. Reduce by two-thirds, between 1990 and 2015, the under five mortality rate
Infant mortality rate (per 1,000 live births)89 (1990)47.630.0
Immunization against measles (percent of children under 12-months)68 (1994)84.582.695.0
Goal 5. Improve Maternal Health
Target 6. Reduce by three-quarters, between 1990 and 2015, the maternal mortality ratio.
Maternal mortality ratio (modeled estimate, per 100,000 live births)416 (1990)290104
Proportion of births attended by skilled health personnel (percent)27 (1995)59.661.965.070.0
Goal 6. Combat HIV/AIDS, Malaria, and Other Diseases
Target 7. Halt by 2015, and begin to reverse, the spread of HIV/AIDS
HIV prevalence, total (percent ages 15-24)1.8 (1990)13.419.319.213.0
Target 8. Halt by 2015, and begin to reverse, the incidence of malaria and other major diseases
Incidence of malaria (per 1,000 people)7.5 (1990)4.15.55.22.0
Incidence of tuberculosis cases cured (percent of diagnosed)52.6 (1995)80.378.582.995.0
Target 10. halve by 2015 proportion of people without access to safe drinking water
Access to potable water (percent of population)57.5 (1992)72.371.773.178.5
Access to improved sanitation facilities (percent of population)28 (1992)41.643.555.764.0
Goal 8. Develop a global Partnership for Development
Target 18. Make available new technologies, especially information and communications
Mobile and fixed-line telephone subscribers (per 100 people)2.7 (1990)26.933.437.941.3
Internet users (per 100 people)0.1 (1995)4.45.26.210.5
Sources: Bolivian authorities; and World Bank Development Indicators.
Sources: Bolivian authorities; and World Bank Development Indicators.
Annex 1. Summary of Annexes

The full annexes to this report may be viewed in CyberDocs on the Fund’s intranet and on the secure extranet for Executive Directors and member country officials.

Fund relations

As of November 30, 2009, Bolivia did not have any outstanding purchases or loans. The latest SBA expired on March 31, 2006. The last Article IV consultation was completed by the Executive Board on January 14, 2009. The Bolivian exchange rate regime has been reclassified from a crawling peg to a stabilized arrangement against the U.S. dollar. Bolivia has received wide-ranging TA in recent years. Mr. Luis Breuer has been the IMF regional resident representative (based in Lima, Peru) since June 2009.

Relations with the World Bank Group

A new Interim Strategy Note (ISN) for FY10-11 was discussed and approved by the Board on June 2, 2009. The ISN has a total envelope of US$137 million of IDA resources. The lending program amounts to US$90 million in predefined operations while US$47 million has been left available for flexible use, to respond to the unforeseen needs, support the Government’s efforts to stem the impact of the global crisis, and to reduce extreme poverty. The World Bank’s portfolio in Bolivia comprises 11 investment projects for a total amount of US$302.8 million of which US$190.6 remain undisbursed.

Relations with the Inter-American Development Bank

As of November 30, 2009, Bolivia’s outstanding debt to the IDB was approximately US$562 millions with undisbursed approved funds for US$587.8 millions. Consistent with the application of the Debt Sustainability Framework and after the last round of debt relief, new IDB lending to Bolivia will be following newly adopted operational guidelines for concessional funds under the Fund of Special Operations performance-based allocation system. The Bank’s 2009 operative program contains a portfolio of sovereign guaranteed operations of 6 loans for a total amount of US$191 millions for the year, concentrated in water, housing and agricultural productivity sectors. An additional of 9 loans for US$200 millions has been identified and are already in the Bank’s lending pipeline for the 2010 cycle.

Statistical issues

Data provision to the Fund has some shortcomings, but is broadly adequate for surveillance. A data ROSC mission in early 2007 confirmed advances in recent years, and reiterated the existence of shortcomings that might hamper the formulation of appropriate policies. Bolivia has participated in the GDDS since November 2000.

In September 2009, Fitch upgraded Bolivia’s Foreign- and Local-Currency Issuer Default Ratings to “B” from “B-“. More recently, Moody’s also raised the nation’s long-term foreign currency debt rating to B2 from B3.

The SDR allocation to Bolivia was equivalent to about US$200 million. The authorities have indicated that they intend to maintain these resources as part of reserves.

See Precautionary Reserves: An Application to Bolivia, accompanying Selected Issues Paper (2009).

Bolivia’s exchange-rate regime does not contemplate a pre-announced rate of crawl; therefore, the central bank has ample flexibility in terms of the frequency, direction, and magnitude of adjustments.

The 2009 Budget law approved central bank financing to YPFB for up to US$1 billion (about 6 percent of GDP). Earlier this year, the central bank signed an agreement with YPFB envisaging disbursements up to this total over a 3-year period.

See Hydrocarbon Revenue Sharing Arrangements, accompanying Selected Issues Paper (2009).

For a longer term perspective, see the accompanying External and Public Debt Sustainability Analysis.

The authorities expect the results of an ongoing certification of gas reserves by mid-2010.

Other Resources Citing This Publication