Bolivia
Fiscal Transparency Assessment
Author: International Monetary Fund. Fiscal Affairs Dept.
Publication Date:
12 Mar 2014
eISBN:
9781475575637
Language:
English
Keywords:
ISCR; CR; financial system; fiscal year; central bank; public finance; executive branch; monetary policy; banking sector; cash flow; General government
Download PDF (3.9 MB)

This paper elaborates Bolivia’s fiscal transparency assessment report. The purpose of this IMF report is to facilitate countries in analyzing the fiscal situation through the appropriate basic, good, and advanced practices to identify which areas might benefit from reforms. These reforms intend to improve the coverage, opportunity, and quality of the macrofiscal information. The IMF report suggests that the issues merited improvements are related to the nonpreparation of audited annual consolidated financial statements of the central government and the absence of estimates and reports on tax expenditure.

Abstract

This paper elaborates Bolivia’s fiscal transparency assessment report. The purpose of this IMF report is to facilitate countries in analyzing the fiscal situation through the appropriate basic, good, and advanced practices to identify which areas might benefit from reforms. These reforms intend to improve the coverage, opportunity, and quality of the macrofiscal information. The IMF report suggests that the issues merited improvements are related to the nonpreparation of audited annual consolidated financial statements of the central government and the absence of estimates and reports on tax expenditure.

I. Presentation of fiscal reports

A. Introduction

1. One of the most important aspects of good fiscal management is the capacity of the government to formulate and communicate fiscal policies. Fundamental to this is the production and publication of fiscal reports that are timely and complete and written in an accessible language. The same applies to the preparation, approval, and execution of the budget. Likewise, the identification and management of fiscal risks has become increasingly important in view of the recent international crises which have demonstrated that part of the risks had fallen outside the traditional areas of attention.

2. The new Fiscal Transparency Code developed by the Fiscal Affairs Department (FAD) of the International Monetary Fund (IMF) is an instrument that seeks to reveal a country’s fiscal transparency situation and help prevent fiscal crises. The evaluation is divided into three pillars: (i) presentation of fiscal reports; (ii) development of fiscal projections and budgeting; and (iii) analysis and management of fiscal risks. Chapters I, II and III of the report follow the same sequence. Annex 2 presents an Action Plan setting out the priorities and the sequence for implementing the recommendations.

3. The Fiscal Transparency Code is divided into 38 dimensions. For each dimension, the practice-based situation is assessed as ‘BASIC’ (yellow), ‘GOOD’ (light green), or ‘ADVANCED’ (dark green). If the practice is not up to the ‘BASIC’ assessment, the rating ‘LESS THAN BASIC’ (red) is adopted.

Table 3.

List of Fiscal Reports

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Source: Ministry of Economy and Public Finance, Central Bank of Bolivia

1.1. Coverage

Coverage of institutions (1.1.1)

4. Budget approved and executed information of 566 out of the 577 entities of the Public Sector (98 percent) are consolidated in the budget reports—that covers more than 90 percent of the expenditure—and the reports are widely available to the public ADVANCED. Only a few of the public financial institutions and banking corporations operating in the commercial sector are not included in the budget. The main justification for their exclusion is to avoid the introduction of unnecessary rigidity in management practices. However, this situation is currently regulated under Law N° 466 governing Public Corporations as adopted on 26 December 2013, which obliges public corporations to submit their budgets to the MEFP through the Strategic Council for Public Corporations.

Table 4.

Public Sector: Total Financial Transactions—Revenues and Expenditure per Institutional Category—2011

(Amounts in BOB millions)

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Source: Ministry of Economy and Public Finance - Fiscal Dossier 2011 and annual financial statements of the non-budgetary corporations and public financial institutions.

Entel S.A. and its subsidiary DATACOM SRL, and 7 subsidiaries of the YPFB: Andina S.A.; Chaco S.A.; Petroandina S.A.; Refinación S.A.; Transportes; Logística S.A.; Aviación S.A.

Banco Unión S.A. and Banco de Desarrollo Productivo.

Figure 1.
Figure 1.

Coverage of Public Sector Expenditure in Fiscal Reports per Institutional Classification—2011

Citation: IMF Staff Country Reports 2014, 077; 10.5089/9781475575637.002.A001

Source: Ministry of Economy and Public Finance - Fiscal Dossier 2011 and annual financial statements of the non-budgetary entities.
Coverage of revenue, expenditure and other flows (1.1.2)

5. The monthly published fiscal reports cover the cash flows and all accrued revenues and expenditures of the nonfinancial public sector (GOOD). The Ministry of Economy and Public Finance publishes the Fiscal Dossier on a half-yearly basis, setting out the financial operations with respect to revenue and expenditure for the nonfinancial public sector. In addition, the Ministry of Economy and Public Finance website lists all of the budget outturn reports for each entity in the public sector on an individual basis. The Ministry of Economy and Public Finance website lists all of the budget execution reports for each entity in the public sector on an individual basis. The financial statements of the financial public corporations and of the nonfinancial public corporations not included in those reports represent some 9.6 percent of the total expenditure of the public sector. In 2012 the MEFP obtained ISO Certification 9001:2008 in respect of its fiscal data processes (see Box 1). The objective was to ensure that good quality standards and procedures governing the organization of information would be assured.

ISO Certification 9001:2008 Obtained by the Ministry of Economy and Public Finance on the Quality of the Procedures to Manage Fiscal Information

In August 2012, the Ministry of Economy and Public Finance (MEFP) was granted ISO Certification 9001:2008 in respect of the Quality Management System (QMS) it employs with its information processes for Debt Information on the Autonomous Territorial Entities and Public Universities and for the Production of Fiscal Figures for the Nonfinancial Public Sector as administered by the General Directorate of the Territorial Administration and Finances of the Vice-Ministry of Treasury and Public Credit.

The ISO 9001:2008 standard developed by the International Organization for Standardization (ISO) lists the requirements which must be met by organizations in order to hold the QMS certification, which is aimed at improving customer satisfaction. Compliance with the ISO 9001:2008 standard demonstrates a capacity to supply products (goods or services) that meet the requirements of the client and of the organization and which is in keeping with other requirements such as laid down by law. Following an external audit, the QMS certification was granted by the certification agencies of IRAM in Argentina which are internationally recognized through the IQNET and IBNORCA Certification of Bolivia. This certification is valid for a three-year period and is subject to external audits each year. ISO Certification provides assurance that the Ministry of Economy and Public Finance complies with the requirements listed in the ISO 9001:2008 standards, together with the requirements laid down under existing law by the Ministry of Economy and Public Finance and by the clients from whom the information was prepared.

The QMS calls for the production of a quality manual which sets out in document form the policies, objectives, guidelines, procedures, and the responsibilities that warrant compliance of the certified processes with the ISO 9001:2008 standard. Furthermore, it lays down documented procedures as well as instructions and guides which facilitate the administration and verification of the plans together with the various remedial and preventive actions and improvements that may be deemed necessary. One year after the accreditation, in September 2013, within the framework of the procedures adopted by the certified bodies, the MEFP was subjected to an external audit as a follow-up to the Quality Management System. The audit verified compliance with the requirements provided under ISO 9001:2008 and the MEFP decided to continue applying the relevant quality certification procedures.

Source: Ministry of Economy and Public Finance
Coverage of assets and liabilities (1.1.3)

6. The annual financial statements for virtually all of the entities of the Public Sector are published individually, reflecting the total financial assets and liabilities of each entity (GOOD). As required by the Comptroller General of the State (CGE), the annual financial statements of the Central Government and the audit opinions on the reliability of the Internal Audit Units (UAI) contain financial and non-financial information in regard to assets and liabilities. The non-financial assets records contain deficiencies in terms of coverage and evaluation.

7. In that respect, it is important to point out that the Integrated Accounting Standards applied in Bolivia indicate that the Financial Statements of the Central Administration should be regarded as for a single accounting entity. The financial reports for all budgetary entities within the public sector are available on the MEFP website.3 The net worth of 131 decentralized institutions and public enterprises are included as part of the long-term receivables in the financial statements of the Central Government. On the other hand, the financial statements do not include the values of the reserves from natural resources. These details are accounted for in the financial statements of the public corporations which control these natural reserves.

Table 5

Financial Statements of the Executive Branch - 2011 and 2010

(Amounts in BOB)

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Source: MEFP – Financial statements of the Executive Branch 2011

8. In its financial statements, specifically in the notes to the accounts, YPFB provides the reserve estimates for the liquid and gaseous hydrocarbons (Table 6). The reserve estimates proved by year-end 2012 stood at 8,162,589 MMpc of gas separation (12 years of production) and 169,154 Mbbls of condensed or un-condensed oil (11years of production).

Table 6.

Gas and Oil Reserves and Production—2012

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Source: Notes to the accounts, YPFB Financial Statements 2012Comment: Reserves quantified and certified by the firm of Ryder Scott CO. in 2009
Tax expenditure (1.1.4)

9. Tax exemptions are authorized by law; however, annual reports are not prepared in regard to tax expenditure (LESS THAN BASIC). Tax exemptions are authorized by law as approved by the Plurinational Legislative Assembly. No annual reports are produced or published on tax expenditure. However, studies are prepared on the procedures governing each legal proposal and the Vice-Ministry of Tax Policy (VPT) draws up the justification grounds and analyzes the dominant factor, tax base, exemptions, estimated amount for collection, plus the settlement and payment of tax, among other things, as was the case recently with the tax on gambling and on the import of vehicles; however these studies are not published.4 The preparation of an annual report with an evaluation of tax expenditure per type of tax would be very useful in complementing the budget documentation and in facilitating an analysis on the benefits generated by the exemptions.

Table 7.

Tax Exemption Laws

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Source: MEFP/VPT.

1.2 Frequency and Timeliness

Frequency of in-year fiscal reports (1.2.1)

10. Bolivia publishes many fiscal reports such as: the consolidated operations of the nonfinancial public sector (NFPS); information on effective cash disbursements; monthly budget execution reports; and the annual financial statements (ADVANCED). Comprehensive information is provided on the fiscal situation that are provided with a gap of up to 60 days between the reporting period and the release of the various reports. The fiscal information for the consolidated operations (government operations) and the actual cash operations of the nonfinancial public sector (NFPS) are prepared and published on a monthly basis. The same applies on an annual basis with regard to the consolidated operations of the State and of the NFPS, to the balance sheet of the Executive Branch, and to the Report on the Bolivian Economy and, half-yearly, to the Fiscal Dossier; in these last two publications, a compilation of the fiscal information is provided together with an analysis of the fiscal situation. The operations of the government and the financial statements are consolidated reports, with the elimination of reciprocate operations between the public entities particularly in relation to the transfers.

Table 8.

Frequency and Timeliness of the Fiscal Reports over Course of the Year

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Number of days allocated for dependencies to prepare the reports

Source: Half-Yearly Fiscal Dossier 2012 (first quarter); Report on the Bolivian Economy 2011; Web page of Ministry of Economy and Public Finances
Timeliness of the audited annual financial statements (1.2.2)

11. A large number of the annual financial statements of each entity is audited either by the internal audit units or by independent auditing companies and are published within six months (AVANZADA). The entities that produce fiscal information generally follow the deadlines established by law for the drawing up of fiscal statements. However, no uniform deadline applies for all of the agencies, with different periods applying in the preparation of the reports. Information from the budgetary sector and from part of the entities which make up the extrabudgetary sector is drawn up in accordance with the Bolivian Integrated Financial Management System (SIGMA). Their fiscal information is provided in real time and this enables the automatic production of statements. Some 95.9 percent of the entities with information in the system have been providing their financial statements since December 2011, with 54.1 percent of these being provided with an opinion from internal audit units or from independent auditing firms and published within a period of 6 months. The General Directorate of Fiscal Accounting of the MEFP prepares the financial statements (consolidated at the end of the fiscal year) for the Executive Branch during the first quarter of the following year. This information is forwarded for auditing to the Comptroller General of the State (CGE). However, to date this task has not been carried out by the CGE.

Table 9.

Number of entities with Financial Statements and Internal Audit Opinion in 2011 per sector

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Source: MEFP, Directorate General for the Management of Fiscal Information Systems - Information and Financial Analysis Unit.

B. Quality

Classification (1.3.1)

12. The fiscal reports include an institutional, functional, and economic classification, with separate detailing of budgetary revenues and expenditures. These classifications are partially consistent with international statistical standards. Also provided is a classification per program. The accounting classifiers are harmonized with the budgetary though not with the statistical classifiers. This prevents an adequate disclosure of the public finances statistics. Similarly, though not implementing IMF’s Government Finance Statistics Manual (GFSM) 2001, the authorities are moving in this direction (GOOD). The sectorization of the Public Sector in Bolivia differs to that defined in the GFSM2001 but a reorganization of the information using this methodology is feasible. Nationally, the classification diverges somewhat from the GFSM2001 in sectoral and conceptual terms, particularly when considered separately as entities: the General Treasury of the Nation (TGN) and the Vice-presidency of the Plurinational State; Executing Units such as the Land Tenure Unit [Unidad Ejecutora de Titulación]; and programs such as the Decentralized Infrastructure for Rural Transfers [Infraestructura Decentralizada para Transferencia Rural], among others.

13. The Budgetary classifiers are the same in all public sector institutions by virtue of Supreme Decree 225558 of 2005. Revenue classifiers are detailed per item and financing source, whereas expenditure is classified based on the purpose of expenditure, object and function, financing entities, programs, economic sectors, and geographic classification. The budgetary classifiers are broad; except they are grouped under transfers which should correspond to subsidies. These are concepts that have different connotations under the GFSM2001 and which, given the circumstances in Bolivia, would be more relevant if itemized in different accounts. Equally, the classifier does not allow for a distinction to be drawn between the grants received from foreign countries and those received from international organizations.

14. There is a General Chart of Accounts (GCOA) that is used fully and uniformly by the public entities, but not for those public corporations that have adopted their own charts of accounts that is in line with the official procedures for reporting the financial information. The accounting classifiers are harmonized with the budgetary classifiers but not with the statistical classifiers; this prevents an adequate disclosure of the state of public finances. There are also discrepancies with the GFSM2001, since they do not have accounts that allow the disclosure of natural resource assets such as the substantial hydrocarbon reserves, insurance technical reserves, and valuables, among others, as is evident in Table 10. The chart for converting the national classifiers to the GFSM2001 classifiers is included in the Annex1 and comprises a guide showing how to migrate to the new classification. Some accounting classifiers such as the net wealth of decentralized institutions and public corporations are inconsistent in using strict technical standards governing the accounting systems, thus distorting the revenue and expenditure results for the period in question.

Table 10.

Sectorization: GFSM2001 versus National Classification

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Source: Ministry of Economy and Public Finance.

Internal consistency (1.3.2)

15. Fiscal reports include a reconciliation of aggregate flows and stocks that are automatically generated by the Bolivian Integrated Financial Management Information System (SIGMA). This is in line with the budgetary operations and it simultaneously generates the accounting entries on the basis of accrual accounting (ADVANCED). The SIGMA system has been in use in Bolivia since the year 2000. It allows for the recording of Central Government transactions and the incorporation of information covering some 96.7 percent of the public enterprises. Since this is an online integrated system, it can draw on the budgetary records to automatically generate the accounting records on the basis of accrual accounting, thus providing financial information on a permanent basis. Another system that was developed and currently being implemented is the Integrated Public Management System (SIGEP), which replaces the SIGMA system. Nationally, some 98 percent of the territorial entities recorded their budgets for the 2012 period in this information system. The system also accounts for a budget outturn coverage rate of 42.2 percent and it is anticipated that by 2014 it will be up and running for the totality of the territorial entities. The SIGEP has been configured in a more modern way and in two years’ time it will replace the SIGMA in its entirety.

16. As a producer of fiscal figures, particularly with reference to debt, the Ministry of Economy and Public Finance conducts reconciliations on a periodic and systematic basis between the results for the financial account and the financing obtained from the Central Bank of Bolivia. In the past decade, the external debt of the public sector has been reduced from 64 percent of GDP in 2003 to 15 percent in November 2012, through repayments and substitution of the external debt by domestic debt. The national debt is being gradually restructured with greater emphasis on the national currency: 91 percent of the debt was in a foreign currency in 2005: this fell to 44 percent in November 2012. In October 2012, sovereign bonds were issued on the New York Stock Exchange in the amount of USD 500 million. The issue was well received by investors.

17. The government’s debt operations are adjusted periodically in line with the floating debt and flows of fiscal certificates. On the other hand, the accounting figures are adjusted at the end of the period, principally with the accrual of interest from the debt and the convertibility of the debt balances, denominated in foreign currency and based on a fixed rate of exchange. In realizing the consolidation, the reciprocal transfer operations are eliminated. The balances due from the General Treasury of the Nation (TGN) and flows from the debt servicing are reconciled half-yearly with the BCB through the Public Credit General Office of the Ministry of Economy and Public Finance, and the differences adjusted as necessary.

Historical consistency (1.3.3)

18. The fiscal information is reconciled and adjusted in a permanent manner both internally and at inter-institutional level. However, the series of historical figures including the debt and the deficit have not been subject to a methodological review, and in the case of atypical changes no reviews are prepared (BASIC). The procedures used in reviewing and reconciling the information above and below the line among the institutions from whom the figures originate allow for a level of coherence in the information that is published periodically from the various sources. If there are significant changes, however, such as new entities being incorporated into the public sector as a result of nationalization of companies, the previous series are not retained, thus preventing an assessment of the impact of such changes.

Comparability of fiscal reports (1.3.4)

19. The SIGMA allows for a comparison between the budget approved and executed by all of the public sector entities, though only of individual summary reports made available to the public on the Internet (BASIC)5. The fiscal reports are prepared within the mandatory periods; however, no standard criteria are in place with regard to periodicity or sectorization, which renders it difficult to realize the reconciliation and verification processes. Despite having the information in the SIGMA system, plus information on reports of public interest, a small number of entities fail to furnish the requisite information in a timely fashion for consolidation purposes. The sole and primary source for the budgetary reports is the information in SIGMA, which allows for a comparison between budgetary income and expenditure with revenues generated and drawn upon, whereas for the remainder of the NFPS, the information above the line is provided directly by the entities.

Table 11.

Fiscal Reports Published in relation to Institutional Coverage and Periodicity

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‘* February; ** JuneSource: D – Fiscal Dossier; S – Report on the Bolivian Economy

20. The information published on the same subject differs in relation to the disaggregated structure and presentation of some of the sub elements. This renders comprehension of the aggregate figures more difficult, as will be seen in Table 12.

Table 12.

Comparative Information regarding Fiscal Figures for the Nonfinancial Public Sector

(in BOB million)

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Source: Report on the Bolivian Economy. Ministry of the Economy and Finance. Analysis and Fiscal Studies Unit. General Directorate of Administration and Territorial Finances. website: http://medios.economiayfinanzas.gob.bo/VTCP/documentos/dgpf/diciembre2011/SPNF_2011.xlsx
Figure 2.
Figure 2.

Discrepancy in the Disaggregation of Information in Various Reports

Citation: IMF Staff Country Reports 2014, 077; 10.5089/9781475575637.002.A001

Source: Report on the Bolivian Economy. Ministry of the Economy and Finance. Analysis and Fiscal Studies Unit. General Directorate of Administration and Territorial Finances. website: http://medios.economiayfinanzas.gob.bo/VTCP/documentos/dgpf/diciembre2011/SPNF_2011.xlsx

C. Integrity

Statistical independence (1.4.1)

21. The preparation of the NFPS fiscal statistics in line with the IMF’s GFSM 1986 is the responsibility of the General Directorate of the Territorial Administration and Finances (GDTAF), an unit of the MEFP Vice Ministry of the Treasury and Public Credit (BASIC). The GDTAF is a third level agency of the Ministry of Economy and Public Finance which is tasked with generating the FSM of the NFPS for internal use as well as managing and monitoring the implementation of information systems and databases for the administration of the territorial finances. It also manages the production and dissemination of the financial and fiscal information of the territorial entities.

External audit (1.4.2)

22. The annual financial statements of the Central Government are not audited by the Comptroller General of the State (CGE), which is the external auditor and Bolivia’s supreme audit institution (LESS THAN BASIC). The General Directorate of Fiscal Accounting of the Ministry of Economy and Public Finance prepares and forwards the Financial Statements of the Executive Branch up to 31 March of the following year. However, these figures are not audited by the Comptroller General of the State (CGS). Under the Constitution, the CGS is an institution that is independent of government with functional, financial and administrative autonomy. In recent years, the CGS was charged with conducting special audits aimed at investigating complaints made within Bolivian society. The Ministry of Economy and Public Finance has tried in the past two years to assign an independent auditing firm to audit the Financial Statements of the Executive Branch. However, on both occasions it was unsuccessful in securing these services. In March 2013, an operational audit was carried out by the CGS, thus initiating the financial auditing process for the Financial Statements of the Executive Branch of the Plurinational State. This was accepted by the Ministry of Economy and Public Finance.

23. In Bolivia, all entities within the public sector are obliged by law to have an Internal Audit Unit (IAU). There are currently some 300 Internal Audit Units in operation. At the beginning of the following year, the IAUs prepare a reliability report in regard to the budget outturn data and to the robustness of the internal controls. These reports are published on the Ministry of Economy and Public Finance’s website.

24. The existing accounting and financial systems together with the information made available by the IAU would facilitate the preparation of an audit report by the CGS, having regard to the fact that coverage of this report for the Executive Branch is a little less than that for Central Government (90.95 percent of the expenditure accrued by the Central Government in 2011 – Box 13). The assignment of independent auditing firms remains a good alternative in connection with the preparation of independent audit opinions that attest to the reliability and reasonableness of financial statements prepared by the Executive Branch. The Ministry of Economy and Public Finance is extending the coverage of the Integrated Financial Management System (SIGAF) so as to gradually incorporate the financial statements of the Central Government and subsequently of the general government.

Table 13.

Expenditure accrued by the Central Government in 2011

(in BOB)

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Source: Ministry of Economy and Public Finance – Budget Statistics and outturn per Entity 2011

Reliability (1.4.3)

25. The CGE does not audit the financial statements of the public sector entities. Only annual reliability reports are prepared by the internal audit units with respect to the individual financial statements of some public sector entities (LESS THAN BASIC). The General Directorate of Fiscal Accounting (GDFA) receives financial statements of the public sector entities by the 28th of February, prepares the financial statements of the Executive Branch by the 31st of March, and forwards this to the Ministry of Economy and Public Finance to be subsequently sent to the CGS. The financial statements of the Executive Branch as at December 2011 were not audited by the CGE. It incorporates the net wealth position of the decentralized entities and in this context to be the financial statements of the central government, it would have to include the social security funds to be compliant with the GFSM2001.

26. The reliability of the financial statements of the Ministry of Economy and Public Finance—without including the General Treasury of the Nation (TGN)—as it was the case for various entities, was individually audited by the internal audit unit of the Ministry of Economy and Public Finance in observance of the budget and accounting standards. The internal audit units determined that the information in the budget execution reports is reliable, except in relation to the documentation of fixed assets, which in 44.97 percent of the total present value of the assets is not supported by documentation of its property.

27. Of the 124 institutions that submitted their financial statements to the GDFA, which coves approximately 25 percent of the public sector, 68 were subject to reliability tests by the internal audit units and 3 by independent auditors.

D. Recommendations

1.1.3 – Coverage of Assets and Liabilities - Include the value of the reserves of natural resources in the financial statements of the Central Government.

1.1.4 – Tax expenditure - Prepare an annual report on tax expenditure and identify the beneficiary sectors, the estimated value of the tax exemptions, and an evaluation of the results of the policy of exemptions.

1.3.1 – Budgetary, Statistical and Accounting Classification - Refine the institutional classification, to be in line with the classifiers of the GFSM2001. Revise and update the accounting classifiers in accordance with the GFSM2001 requirements and harmonize them with the budgetary and statistical classifiers. A number of recently nationalized companies has been classified as private companies.

1.3.3 - Historical consistency – In the event of significant changes, develop and maintain parallel historical series containing the original data and the items affected by the changes in a manner to understand the impact of such changes.

1.3.4 – Comparability of fiscal reports - Publish budget execution information following a standardized sectorization of the Central Government, General Government, Nonfinancial Public Sector, and the Public Sector.

1.4.2 and 1.4.3 – External Audit and Reliability - The financial statements of the Central Government should be subject to a financial audit prepared by an independent auditor on the reliability of the financial and budgetary information.

E. Conclusions

Table 14.

Summary Assessment of Fiscal Report Practices

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II. Fiscal Forecasting and Budgeting

A. Introduction

Table 15.

List of Budget Documents

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B. Comprehensiveness

Unity (2.1.1)

28. The General Budget of the State (GBS) includes all tax and non-tax revenues, domestic and external financing and revenues from donors, as well as expenditure appropriations for all entities of the public sector (ADVANCED). The policy objective of including the entire public sector in the budget, as adopted by virtue of Article 321 of the Constitution and applied for the first time in the budget for 2011, is to include all revenues, expenditures, and financing of all entities of the public sector. There are no extrabudgetary funds. The only exception to this policy is in relation to the public corporations which, though subject to allocation limits, can exceed the expenditure appropriations without any budgetary modifications in the event that effective revenue exceeds the estimated figures. This information on exceeding revenues and expenditures is available in the budget execution reports and in the financial statements. See Section 1.1.1 Institutional Coverage.

29. Article 340 of the 2009 Constitution authorizes the Executive Branch to establish standards governing the preparation and presentation of the budget for the Public Sector. The same budgetary classifiers are applied throughout the entire public sector, even though it is possible to aggregate more detailed codes under the standard classifiers, as they may be required by the entities. Public corporations comply with the budgetary classifier standards notwithstanding they may have internal complementary systems for their budgets, expenditure management, and accounting systems. The Executive Branch determines also the calendar for the preparation of the budget, that is consistent with the dates to present to the consolidated budget by the MEFP.

Gross budgeting (2.1.2)

30. The budget is presented in a consistent manner in gross terms (ADVANCED). Transfers from the budgetary allocations of the Central Government to other entities of the public sector and to the social security are shown in gross and net terms. The VAT refunds are allocated in the budget. Only revolving funds are shown in net terms. The main revolving fund is used to set up a financing project with external resources after an agreement has been signed with the donor, even though the funds are not yet in place. In this case, the revolving fund will be reimbursed by the external financing. The expenditure corresponding with the project financed with external resources is posted in gross terms, as is all expenditure.

Macroeconomic forecasts (2.1.3)

31. In June/July, the MEFP and the Central Bank of Bolivia prepare the macroeconomic projections together with the assumptions on which they are based (Fiscal Dossier). These figures are then used in the preparation of the budget: they are included and published in the budget outline submission from the MEFP and are published in the BCB report by the first quarter of the following year (GOOD). The variables used in the formulation of the budget are the real GDP growth rate and the Consumer Price Index (CPI) inflation projections for the budgetary year in question, as included in the Fiscal-Financial Program and approved by the MEFP and the BCB.

32. In the Monetary Policy Report (MPR), published in February and August, the BCB discusses and analyses the underlying assumptions for these projections in addition to the inflation projection risk. The MPR includes also the balance of payments projections. The MEFP General Directorate of Analysis and Fiscal Policy draws up also an internal analysis looking at different scenarios in relation to the price of oil (pessimistic, moderate and optimistic outlook) for consideration by the Macroeconomic Group for budget formulation purposes. Inclusion of more detailed components of key macroeconomic variables in the MPR and budget documents together with the inclusion of additional currently analyzed variables for internal discussion would elevate the practice to a higher level of transparency. The MEFP also prepares a report on the Bolivian Economy, reviewing the performance of the economy during the previous year together with the outlook for the following year in terms of GDP growth, inflation, fiscal surplus, and public investment.

33. Errors in the projections during the past three years were relatively few, notwithstanding some variations due to the increase in the price of food above the CPI projected rate of inflation for 2010 and 2011. The real GDP projections deviated moderately by 0.3 percentage points on average during the years 2010-12 and the projections tend to be larger than the actual result. During the same period, the CPI projected inflation figures recorded a more significant deviation of 1.3 percentage points, a relatively major deviation. To a lesser degree, this reflects the weather conditions associated with the pressure on agricultural supplies, a rise in international food prices, and the impact of a temporary increase in the fuel prices.

Figure 3.
Figure 3.

GDP and Inflation: Projections and Actual Data

(in percentage)

Citation: IMF Staff Country Reports 2014, 077; 10.5089/9781475575637.002.A001

Ministry of Economy and Public Finance; Central Bank of Bolivia and IMF WEO*For average projections of the position (4.5-5.5 percent for real growth of GDP; 3.5-5.5 percent for inflation)

Medium-term budget framework (2.1.4)

34. A medium-term budget framework is to be prepared for 2014: at the present time, the budget documents merely include projections for the current year (LESS THAN BASIC). The authorities are working on a medium-term budgetary framework. An information system is now in place to record the incoming data from the entities as well as the implementation methodology and the procedure forms for the multiannual program. To this end, the Ministry of Economy and Public Finance has a medium-term model financing program in place. What is lacking is an updating of the most relevant variables together with a debt sustainability analysis and consequently the Ministry has been compiling medium-term projections from the public enterprises for the past 2 years, covering a period of up to 5 years. This process needs to be exhaustive in order to cover the remainder of the nonfinancial public sector before being able to include the medium-term projections in the budget documents. As soon as the medium-term budgetary framework has been established, the authorities will consider publication of its projections in respect of revenue, expenditure and financing by economic category and by ministry or program in order to improve transparency.

C. Timeliness

Fiscal strategy report (2.2.1)

35. The MEFP prepares half-yearly reports (Fiscal Dossier), published within 90 days of their completion (BASIC); however, they do not update the macroeconomic and fiscal framework (LESS THAN BASIC). The Fiscal Dossier is published every six months on the MEFP’s website, with details on fiscal effect and developments in the public sector debt for each half of the year. The report includes detailed statistics on the budget execution data for the consolidated nonfinancial public sector, General Government, and public corporations. Information is also provided on large entities such as the YPFB, COMIBOL, and ABC, as well as internal and external debt. However, the report does not discuss any review of the macroeconomic projections nor their implications on key fiscal variables. Neither does it discuss the outlook for the rest of the fiscal year, including the impact of changes in the macroeconomic projections.

36. The Report on the Bolivian Economy includes an analysis of the global economy, of the development of the economy and sets out the economic prospects for Bolivia for the current financial year. The BCB updates the projections on inflation and GDP growth in its half-yearly Report (MPR), published in August. For its part, the MEFP provides the Macroeconomic Group with a budgetary framework for the short-term. These analyses are not published. Moreover, the supplemental budgets do include revised macroeconomic assumptions. During the Macrofiscal Program implementation process, the fiscal projections are updated periodically in respect of the current financial year. Similarly, when calculating the macroeconomic variables for the following year, which provide an input for the General Budget of the State, the projections for the macroeconomic and fiscal variables are updated by mid-year and presented to the Macroeconomic Group.

Budget submission (2.2.2)

37. The budget is submitted to the Plurinational Legislative Assembly two months prior to the beginning of the fiscal year (GOOD). Under Article 321 of the 2009 Constitution, the budget must be presented to the Plurinational Legislative Assembly at least two months prior to the beginning of the fiscal year. The budget is submitted to the Plurinational Legislative Assembly at the end of October each year.

Table 16.

Time elapsed between submission and approval of annual budget for 2013

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Source: Ministry of Economy and Public Finance.

Budget approval (2.2.3)

38. In general, the Plurinational Legislative Assembly approves and publishes the budget up to one month prior to the beginning of the fiscal year (GOOD). Both the draft budget and the approved budget are published.

Table 17.

Budget approval dates for 2011–13

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Source: Ministry of Economy and Public Finance

D. Policy stance

Fiscal policies objectives (2.3.1)

39. The government each year declares and sets out the specific numerical targets with respect to the principal fiscal aggregates for the fiscal year (GOOD). Around January of each year, the government and the BCB approve a Fiscal-Financial Program which sets out the fiscal numerical targets in respect of inflation, GDP growth, and the overall fiscal deficit. All of these targets have been met since 2009. The indicator which diverged most from the target is the overall fiscal deficit. The fiscal objectives reflect the definition of ceilings related to transfers to subnational governments on the basis of conservative projections on revenues from hydrocarbons. Moreover, given the limited spending capacity of the subnational governments and the elaborated procurement procedures, any increase in the hydrocarbon revenues has a budgetary impact on the expenditure through increase in transfers.

40. On the other hand, capital expenditure tends to be under-executed. As a result, the general fiscal balance of the nonfinancial public sector has recorded a surplus during the last seven years despite initial projections of a budget deficit. Notwithstanding the approval of significant supplementary budgets for the purpose of recording and permitting transfers of revenues to subnational governments, no review of fiscal aggregates targets was prepared. The government argues that it prefers to have a prudent projection of revenues and then make its corrections over the year, rather than restricting expenditure.

Table 18.

Fiscal Policy Objectives

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Source: Fiscal-Financial Programs 2006-2013, Fiscal Dossier; and BCB.
Figure 4.
Figure 4.

Projected and Executed Fiscal Balances

(in percentage)

Citation: IMF Staff Country Reports 2014, 077; 10.5089/9781475575637.002.A001

Source: MEFP, Vice Ministry of Treasury and Public Credit.
Table 19.

Projected and Actual Revenue and Expenditure of the Nonfinancial Public Sector

(in BOB millions)

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Source: MEFP, Vice Ministry of Budget and Fiscal Accounting, and IMF Staff calculations.

Operating income includes taxes on hydrocarbons.

‘Miscellaneous current expenditure’ includes hydrocarbon subsidies.

41. Bolivia does not calculate the non-hydrocarbon fiscal balance. Given the significance of the hydrocarbon sector (approximately 40 percent of the nonfinancial public sector revenue), it would be important to calculate and include this as a fiscal policy objective. In the last five years, the non-hydrocarbon fiscal balance has stood at between -7.5 and -10.3 percent. The non-hydrocarbon fiscal balance is an important indicator with respect to long-term fiscal stability as it shows the financing capacity of the government in respect of revenues that are non-dependent on natural resources.

Table 20.

General and Non-Hydrocarbon Fiscal Balances of NFPS

(in percentage of GDP)

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Source: IMF staff calculations, Article IV, 2012

The hydrocarbon balance includes IDH, royalties, and current balance of the public corporations, net of capital expenditure of the YPFB.

Separation of existing and new policies (2.3.2)

42. New policy measures are discussed in qualitative terms in the budget documents (BASIC). The General Budget of the State (GBS) which is submitted to the Plurinational Legislative Assembly in October points out qualitative guidelines for the budget and, in some cases, describes major changes including budget appropriations for investments in key sectors. For example, in the 2013 budget the government itemized authorizations for credit granted to YPFB and the National Electricity Company (ENDE) and for the construction of the Railway Transport System, in addition to the capital increase contribution committed in respect of the Latin American Reserve Fund. However, the budget documentation does not include information on the revenues or costs associated with new policies nor any prognosis of the fiscal impact of policy decisions.

Performance information (2.3.3)

43. The budget includes data on performance indicators at output level (GOOD). The nonfinancial information on outputs was included for the first time as part of the budgetary process in 2011 The output data entered in the SIGMA for each program includes a summary of the anticipated results and associated indicators, as well as the baseline data and the target result for the relevant budget year. The actual results are published in the annual Report on the Bolivian Economy. The MEFP defines on a standard programmatic classification to all municipalities and departments. All other budget entities determine their own programmatic classification in line with the government’s national targets. The Ministry of Development Planning carries out its own evaluations but this information does not form part of the budgetary process. For example, a Ministry of Hydrocarbons and Energy program presents the following information on performance in accordance with the SIGMA:

  • Strategic Objective: energy security guaranteed based on independence and equity.

  • Description of Objective: the energy security is guaranteed independence and fairness.

  • Social Economic Development Plan: 3.3.1.1 Development of the generation and transmission infrastructure for electricity to meet domestic and external demand.

Table 21.

Planned Results of Ministry of Hydrocarbons and Energy Program

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Source: Ministry of Development Planning.

Distributional analysis (2.3.4)

44. Comprehensive budget information is available and accessible to the public (ADVANCED). The Social Communication Unit of the MEFP and the Vice Ministry of Budget and Fiscal Accounting publish a range of documents (in Spanish) aimed at different segments of the public:

  • ECONOMIC ZOOM, a periodic bulletin which is frequently distributed as a supplement to a newspaper. In 2012, some 14 issues were published. ZOOM provides a variety of news and fiscal, economic and social information pertaining to a selection of economic and social groups and destined for the educated reader.

  • BOLIVIA IN FIGURES, a set of nine leaflets in one folder, containing numerical fiscal economic and social data for each department.

  • HOW IS THE PUBLIC BUDGET PREPARED?, a full-color résumé containing eight pages on the legal basis, the annual cycle, policies, and aggregate budget information.

  • GENERAL SUMMARY of the General Budget of the State. This document contains a more detailed outlook on the annual budget, with ample text and data. In 2012, this ran to 242 pages.

  • Cards, bifolds and trifolds with information on public finances, debt, municipal finances, and other economic issues.

Fiscal sustainability analysis (2.3.5)

45. The MEFP together with the BCB and the Ministry of Development Planning are responsible for forecasting the fiscal and macroeconomic variables for the current year and preparing a long-term debt sustainability analysis covering a 20-year period (BASIC); however, this analysis is not published (LESS THAN BASIC). The debt sustainability analysis of the public debt reviews the main macroeconomic and fiscal variables and provides an overview of the underlying macroeconomic and fiscal assumptions. This annual analysis also includes a projection of the investments by YPFB.6 The debt sustainability analysis forms the basis for guidelines and policies which are effectively disseminated and published on a permanent basis. Furthermore, a debt sustainability analysis of the public sector is prepared by the BCB7 and the MEFP which also covers a period of 20 years. This report is founded on a baseline scenario which incorporates all of the assumptions that are used for the projection. A program of indicators is then calculated in three scenarios (optimistic, moderate, and pessimistic) which show that the external debt follows a sustainable trajectory8 in the long term9.

Figure 5.
Figure 5.

External Debt (ED) and Debt Servicing (DS) as a percentage of Exports (Xbs)

Citation: IMF Staff Country Reports 2014, 077; 10.5089/9781475575637.002.A001

Source: BCB Report on External Public Debt.

46. The debt sustainability analysis of the external debt prepared by the International Monetary Fund (IMF) has found that the external debt of Bolivia is sustainable and had the capacity to recover after simulating exchange rate and international fuel prices shocks.10

Figure 6.
Figure 6.

Relationship between Debt Servicing and GDP (DS/GDP), Net International Reserves and the External Debt (NIR/ED), and between Gross International Reserves and Debt Servicing (GR/DS), in percentage

Citation: IMF Staff Country Reports 2014, 077; 10.5089/9781475575637.002.A001

Source: BCB, Public External Debt Report.

47. The fiscal authorities mitigated the public debt risks by implementing measures such as: lengthening the maturity, reducing rates of interest, and replacing external debt by domestic debt, thus reducing the risk of fluctuation of the exchange rate. Currently, domestic debt is significantly larger than external debt but it is more stable in the long-term, according to this analysis. However, no sensitivity analysis is conducted in regard to domestic debt which for example could assess the impact of interest rate fluctuation on issuing new domestic debt. This situation is minimized by the fact that the overall domestic debt of the Treasury is subject to fixed interest rates, which serves to reduce the risks and costs associated with variations in the domestic interest rate.

48. The interest rate should also be subject to a sensitivity analysis. One could examine whether public investment might eventually put pressure on domestic demand, thus provoking inflationary pressures, or cause the Central Bank of Bolivia to increase interest rates in an effort to avoid inflation. These potential risks tend to become more likely as the current product remains very close to the potential as is currently the case in Bolivia.11

Figure 7.
Figure 7.

Real Gross Domestic Product and its Tendency in the Long Term

Citation: IMF Staff Country Reports 2014, 077; 10.5089/9781475575637.002.A001

Source: National Statistics Institute

49. The debt sustainability analysis should also take into account the behavior of the active or passive interest rates. For example, the real (passive) interest rates were negative in 2010 and 2011, with inflation in the order of 7.2 percent and 6.9 percent respectively; in 2012, the rate of inflation stood at 4.54 percent and this kept interest rates in a similar position as in the previous two years. One might expect therefore to see a rise in the internal absorption in view of the minimal cost of financing for consumer durables and investment.12 This gives rise to conditions for accelerating economic growth and for price levels to rise. One aspect that conflicts with this tendency is the fact that active interest rates have generally remained higher compared with the rate of inflation (Table 22).

Figure 8.
Figure 8.

Composition of Public Debt, in percentages

Citation: IMF Staff Country Reports 2014, 077; 10.5089/9781475575637.002.A001

Source: Fiscal Dossier, 2011, page 22.
Figure 9.
Figure 9.

Real Passive Interest Rate in 2011 in percentage

Citation: IMF Staff Country Reports 2014, 077; 10.5089/9781475575637.002.A001

Source: BCB, http://www.bcb.gob.bo/?q=indicadores/tasas

50. In public debt administration terms, a variation in the types of domestic interest rates is quite discernible, given that in 2011, 73 percent of Bolivian debt originated in the country.13

Table 22.

Active and Passive Interest Rates

(in percentage)

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Source: Central Bank of Bolivia, www.bcb.gob.bo.

E. Credibility

Independent evaluation (2.4.1)

51. The macroeconomic and fiscal projections are prepared by the MEFP and the BCB; however, they are not subject to independent external assessment (LESS THAN BASIC). The MEFP is responsible for the macrofiscal projections (revenue, expenditure, and financing), whereas the macroeconomic variable forecasts are provided by the BCB, mainly in terms of the exchange rate, net credit, and inflation. A Financial Fiscal Program is prepared annually by the BCB and the MEFP to follow up on the projected performance of the macroeconomic variables14 and to guarantee consistency in the fiscal and monetary policies in accordance with the objectives pursued by the government.

Supplementary Budget15 (2.4.2)

52. Prior approval by the Plurinational Legislative Assembly is required before implementing any expenditure and transferring revenue to the subnational governments and autonomous entities (GOOD). Approval is also required from the Plurinational Legislative Assembly to increase wages and salaries (with the exception of negotiated salary increases—that can be approved solely by the Ministry of Economy and Public Finance), transfers of funds from capital expenditure to recurrent expenditure, and transfers of funds from road construction projects to other projects. The Executive has greater flexibility in reallocating funds within the limitations established by the Plurinational Legislative Assembly. The Ministry of Economy and Public Finance has the authority to approve changes in the financing among budgetary entities, including the ministries. In view of the prioritization of the ministries’ budgets in sectoral financing, the Ministry of Economy and Public Finance exercises a significant authority in executing the budget. In addition, each budgetary entity has the authority to transfer funds between the programs under their responsibility.

53. The Budget in Bolivia has been very conservative in recent years, given the volatility of revenues from natural resources. Historically, prices of natural resources, particularly petroleum and gas, have been on the high side so that aggregate budgets had to be revised upwards during the fiscal year. Actual revenues frequently superseded the revenue estimates in quite significant terms. For example, the budgets in 2011 and 2012 rose by 17.1 percent and 22.7 percent respectively (See Table 23).

Table 23.

Changes to Public Sector Budget Approved by the Legislative 2011 and 2012

(in BOB millions)

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Source: Ministry of Economy and Public Finance.