Bolivia: Staff Report for the 2015 Article IV Consultation—Informational Annex
Author:
International Monetary Fund. Western Hemisphere Dept.
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Publication Date:
18 Dec 2015
eISBN:
9781513588278
Language:
English
Keywords:
ISCR; CR; price; Bolivia; U.S. dollar; IDB lending; IMF-WB MDRI initiative; financial asset; SDR equivalent; lending operation; SDR equivalent in million; External sector statistics; Debt relief; Climate change; Government finance statistics; budgetary funds
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This 2015 Article IV Consultation highlights that Bolivia has achieved strong economic performance and poverty reduction over the past decade. Real GDP growth has averaged about 5 percent since 2006, and the poverty ratio has declined by 16 percentage points. Real GDP growth is projected to stay relatively strong at 4.1 percent in 2015, despite the sharp decline in oil prices that is starting to have an impact. A sizable public investment budget, strong credit growth to the private sector, and robust private consumption are expected to support activity. Growth is expected to decelerate to 3.5 percent over the medium term, as the full impact of the new commodity price normal is felt.

Abstract

This 2015 Article IV Consultation highlights that Bolivia has achieved strong economic performance and poverty reduction over the past decade. Real GDP growth has averaged about 5 percent since 2006, and the poverty ratio has declined by 16 percentage points. Real GDP growth is projected to stay relatively strong at 4.1 percent in 2015, despite the sharp decline in oil prices that is starting to have an impact. A sizable public investment budget, strong credit growth to the private sector, and robust private consumption are expected to support activity. Growth is expected to decelerate to 3.5 percent over the medium term, as the full impact of the new commodity price normal is felt.

Fund Relations

(As of September 30, 2015)

Membership Status: Joined December 27, 1945; accepted its obligations under Article VIII, sections 2, 3, and 4 on June 5, 1967. The exchange system is free of restrictions on current international payments and transfers.

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Outstanding Purchases and Loans: None

Latest Financial Arrangements

(In SDR Millions)

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Formerly PRGF.

Projected Payments to the Fund2/

(SDR Million; Based on existing use of resources and present holdings of SDRs)

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When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

Safeguards Assessment: Under the Fund’s safeguards assessment policy, the Central Bank of Bolivia (CBB) was subject to an assessment with respect to the April 2, 2003 Stand-by Arrangement (SBA). A safeguards assessment was completed on June 27, 2003, and while no systemic risks with the CBB’s safeguards were identified, uncertainties were expressed about the de facto lack of operational independence and program monetary data. An update assessment was completed on September 27, 2004 in conjunction with an augmentation of the SBA. This assessment confirmed that measures had been implemented to address all previously identified vulnerabilities, except for those requiring a change in the central bank law. Currently, CBB is not subject to the policy.

Exchange Arrangement: The Bolivian currency is the Boliviano and the de jure exchange rate regime is crawling peg to the U.S. dollar. Within the scope of the official crawling peg exchange rate regime, in an external environment characterized by market exchange rate volatility and decreasing external inflation, the sliding rate was set to zero to anchor the public expectations. Consequently, the boliviano stabilized against the U.S. dollar since November 2011. Accordingly, the de facto exchange rate arrangement has been retroactively reclassified to a stabilized arrangement from a crawling peg, effective November 2, 2011. The exchange regime is free of restrictions and multiple currency practices.

Article IV Consultation. The last Article IV consultation was completed by the Executive Board on January 27, 2014 (Country Report No. 14/36). Bolivia is on a standard 12-month consultation cycle.

Implementation of HIPC Initiative

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Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts cannot be added.

Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

The Multilateral Debt Relief Initiative (MDRI) provides 100 percent debt relief to eligible member countries that are qualified for the assistance. Grant assistance from the MDRI Trust and HIPC resources provide debt relief to cover the full stock of debt owed to the Fund as of end-2004 that remains outstanding at the time the member qualifies for such debt relief.

Implementation of Post-Catastrophe Debt Relief (PCDR): Not Applicable

Technical Assistance, 2010–15

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Relations With the World Bank and Bank-Fund Collaboration Under the Jmap

A. Relations with the World Bank

The upcoming Country Partnership Framework (CPF) for the fiscal period 2016–2020 will provide the umbrella for World Bank Group (WBG) support to Bolivia. The CPF will be discussed by the Board of Executive Directors in December 2015. The program under the CPF is aimed at maximizing the impact of WBG interventions on poverty reduction and the promotion of shared prosperity, the WBG Twin Goals. Three selectivity filters were used to frame the program: (a) broad consistency with the priority constraints identified in the WBG Systematic Country Diagnostic (SCD); (b) alignment with the Government’s development plans and demands; and (c) the WBG comparative advantage in sustaining Bolivia’s progress in moving toward the Twin Goals. Despite the filters, the WBG engagement in Bolivia will remain flexible with respect to the evolution of the country’s growth trajectory and new demands that may arise from the authorities.

The WBG program under the CPF is comprised of two pillars and five objectives that will provide general direction to the WBG’s engagement. The CPF has the following two pillars: (1) promote broad-based and inclusive growth; and (2) support environmental and fiscal sustainability, and resilience to climate change and economic shocks. Within each pillar, the following inter-linked objectives will guide the WBG’s engagement: (i) reduce transport costs and increase connectivity of isolated and vulnerable communities to the national road network; (ii) increase access to selected quality basic services for the poorest rural and urban communities; (iii) improve opportunities for income generation, market access and sustainable intensification (Pillar 1); (iv) strengthen capacity to manage climate change and reduce vulnerability to natural disasters; and (v) strengthen institutional capacity to improve public resource management and the business environment (Pillar 2). The formulation of the pillars and objectives aims at both reflecting the current portfolio but also allowing space for nascent government demands.

The WBG program during the CPF period will see the transition to International Bank for Reconstruction and Development (IBRD)-only country. The existing trend of a steady state number of projects (about 11–13) is expected to continue. In addition, the policy dialogue is expected to increase in response to financing demands from Government, underpinned by a solid unfolding policy agenda in the areas of climate change and possibly investment climate and fiscal management. During FY2015, the WBG delivered the first Development Policy Financing (DPF) for Bolivia on Disaster Risk Management that included also the first IBRD loan for the country in recent years.. The Program will encompass an indicative allocation from the International Development Association (IDA) for FY2015–2017 of Special Drawing Rights (SDR) 148.0 million (US$208 million equivalent) and a transition to IBRD-only financing by the end of the current IDA17 cycle at the end of FY2017.

The WBG’s engagement is defined for the first year of the CPF, but less so for subsequent years to allow for flexibility in responding to emerging priorities. The World Bank’s portfolio of operations for FY2016 is based on the sustained dialogue with the Bolivian authorities. New lending operations in FY2016 include an additional financing for a rural community-driven development project, two operations in the transport sector, and a potential DPF on climate change. For FY2017 and beyond, the pipeline is open, with the exception of possible additional financings in some successful projects, to allow the WBG to meet emerging needs in Bolivia and reflect the findings of a Performance and Learning Review (PLR) that is planned for early FY2018. The PLR will offer a critical stocktaking exercise and allow the WBG to adjust course as necessary.

The CPF takes into account the existing portfolio as much of the impact on the CPF objectives will be derived from these legacy portfolio. This will also ensure a degree of continuity between the previous FY2012–2015 Country Partnership Strategy (CPS) and the current CPF. The current portfolio is focused on disaster risk management and climate change, rural development and agriculture, transport, strengthening of statistical capacity, energy, urban development and employment. The World Bank’s portfolio comprises 11 lending operations totaling US$752 million, of which US$353 million remain undisbursed (Table 1). Looking forward, the priorities will be to: (i) consolidate the portfolio in traditional areas, and expand it to capture emerging demands from Government, including greater attention to human capital; and (ii) address the main challenges in implementation, especially those related to institutional capacity and governance and fiduciary standards. New operations in FY2016 worth US$605 million.

Table 1.

World Bank Investment Portfolio in Bolivia (as of October 2015)

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Undisbursed balances differ from the difference between committed and disbursed amounts due to variations in the exchange rates between SDRs and U.S. dollars.

The International Finance Corporation (IFC) will continue supporting opportunities for private sector development under the CPF. As part of IFC’s commitment to reengage in Bolivia, it has recently approved the first long-term financing operation in the Bolivia’s banking sector in over a decade. This credit facility will exclusively finance local Small and Medium Enterprises (SMEs). In addition, two other operations were approved in the agribusiness and hospitality sectors. As for Advisory Services (AS), the IFC is implementing projects in strategic sectors to maximize employment, simplify business creation and income generation in low-income populations, as well as minimize impacts on the environment. In addition, dialogue with partners in new sectors is underway. As for the Multilateral Investment Guarantee Agency (MIGA), in the absence of any immediate pipeline projects in the country, it remains open to supporting foreign direct investments via its political risk insurance products.

In addition, the World Bank will continue providing Advisory Services and Analytics (ASA).

In the next years ASAs will focus on those areas where the World Bank can provide value added, respond to Government needs and in alignment with the knowledge gaps identified in the SCD. Table 2 presents the list of ongoing Non-Lending Technical Assistance. The program is kept open to respond to emerging requirements.

Table 2.

Ongoing ASA FY2016

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Trust funds (TF) continue to be used to support policy dialogue and to pilot innovative ideas. The current TF portfolio (Table 3) includes four grants in areas such as quality of statistical systems, early childhood care and development, community-driven development in remote areas and institutional strengthening.

Table 3.

World Bank Trust Fund Portfolio in Bolivia (as of October 2015)

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B. IMF Relations with the World Bank under JMAP

The following priorities were identified for the coordinated work-plan on Bolivia:

  • Strengthening of the fiscal framework, multi-annual budgeting and the link with the planning process remains a challenge. The public sector has to strengthen capacity in public sector management, procurement and public investment, including at the subnational level.

  • Improving the business climate to bolster investment. Bolivia’s private investment rate remains significantly below the levels observed in the past decade and well below the regional average.

  • Reducing poverty. Significant challenges remain in poverty reduction and inequality. Also, access to basic services, particularly in rural areas, remains a challenge. Social services, including access to quality basic education, health, water and sanitation and employability of low income youth and social protection network is in the agenda.

It was agreed that the teams continue with the following division of labor:

  • Multi-annual budget and planning framework. The Bank is supporting the Ministry of Development Planning in setting up the basis for multiannual planning and the link with the budget process. The Bank is also supporting the strengthening of capacities for public investment, including at the sub-national level.

  • Debt management. The Bank continues open to a Government requirement to develop an action plan based on the last DeMPA report.

  • Poverty and social protection. The Bank has been providing technical assistance on poverty measurement, including monetary poverty and multidimensional well-being indicators. This complements the support provided to generate high quality statistical information through a STATCAP project. These tools would help both diagnosis and targeting of population that fails to reach minimum standards of multidimensional welfare, and on building capacity on the measurement of poverty including on gender issues. Also, the Bank will continue assisting the Government in the areas of youth employment, health and early child development.

  • Private sector development. The IFC is providing credit lines to financial institutions to lend to SMEs. The Bank will continue advancing the preparation of a DPL focused on investment climate enhancement.

Relations With The Inter-American Development Bank

As of September 30, 2015, the Inter-American Development Bank (IDB) had approved loans to Bolivia amounting to US$6.05 billion, with disbursements totaling US$4.63 billion. Bolivia’s outstanding debt to the IDB was approximately US$1,666.7 million with undisbursed approved funds for US$1,067.25 million. During the year net cash flows to the country were positive for a seventh year in a row, a trend expected to continue in the base scenario to 2016. At the end of 2007, the IDB unilaterally joined the IMF-WB MDRI initiative, by writing off a total of US$741.1 million in principal payments and US$307.3 million of future interest payments, generating an estimated annual fiscal space of more than US$18.0 million on average.

After the last round of debt relief, the IDB has implemented new criteria of allocation of concessional lending which is consistent with the application of the Debt Sustainability Framework. The IDB lending to Bolivia follows the operational guidelines for concessional funds under the Fund of Special Operations (FSO) performance-based allocation system. Parallel lending operations, modality that blends ordinary and concessional funding, will be the preferred lending instrument up to 2020.

The IDB and Bolivia have a country strategy covering the period 2011–2015. Under the country strategy, the IDB has decided to increase financial flows to Bolivia. While in 2011, the approval of new loans was US$252 million, it will reach US$475.1 million in 2015 and US$633.4 million in 2016.

Under the Bank’s country strategy with Bolivia, the government and the IDB have agreed on making sustainable growth and poverty-inequality reduction as main objectives of their strategic engagement. In pursuit of this objective, the Bank aligned its actions with those on Bolivia’s National Development Plan. The country strategy targets its interventions in the following sectors: (i) Transport; (ii) Water and sanitation; (iii) Energy; (iv) Early Childhood Development (ECD); (v) Health; (vi) Education; and (vii) Institutional and Sustainability Strengthening. As overarching sectors, the IDB focuses on climate change and indigenous population/diversity issues. A new Country Strategy is currently being developed.

As of September 30, 2015 the portfolio of executing sovereign guaranteed operations in Bolivia consists of 31 operations, totaling US$1.77 billion, of which 37.2 percent has already been disbursed. The current executing portfolio supports mostly transport, water and sanitation and energy infrastructure interventions. The non-sovereign guaranteed executing portfolio consists of 16 loans ascending to US$40.9 million.

Statistical Issues

(As of October 15, 2015)

A. Assessment of Data Adequacy for Surveillance

General: Data provision has some shortcomings, but is broadly adequate for surveillance. Staff welcomes the progress made by the authorities to further strengthen the quality and timeliness of statistics, which includes updating the base of the national accounts, implementing the agricultural and economic census, a plan to reinstate the employment survey, and working towards full subscription of the Special Data Dissemination Standard (SDDS).

National Accounts: The National Institute of Statistics (INE) is working on updating of the base year of the national accounts (from 1990 to 2007) which includes the implementation of the System of National Accounts 1993 (SNA 1993) and some of the most relevant recommendations of the SNA 2008. INE’s plans to release preliminary results (year 2007–2012) and definitive series in 2014 have been delayed.

Labor market: The quality of the household and employment surveys has declined in the last few years, due mainly to financial constraints. The quarterly employment survey was discontinued in 2003, leading to a lack of quarterly information on unemployment, employment and wages. Yearly information on wages is still compiled by INE.

Prices statistics: Industrial producer price indices (PPI) and external trade unit values are compiled by INE, but are in need of revision as regards concepts and definitions consistent with SNA 1993, as well as treatment of seasonal products, missing items, quality changes, and introduction of new products. A PPI TA is planned for November 2015.

Government finance statistics: Annual data on the operations of the consolidated central government do not cover all operations of decentralized agencies and operations channeled through special funds. The ongoing implementation of a comprehensive financial management system, with funding from the IADB/WB, will help ensure proper monitoring of public sector financial operations including subnational fiscal operations, debt and social spending. It will also be important to improve on the reporting of the operations and debt of public enterprises.

Balance of payments: Sources of information for both balance of payments and international investment position (IIP) are considered sound, but the classification of units by institutional sector and the classification of external assets and liabilities by functional categories and instruments need to be enhanced. Some institutions that shall be considered Other Deposit-Taking Corporations and a fund that should be considered part of the General Government sector and held sizable amounts of external assets and are currently included under the Other Sectors; the assets of several sizable funds are classified under Portfolio Investment or Other Investment regardless of the real nature of the assets; valuation changes of relevant Bolivian external assets are not identified and they are included in transactions. Securities issued internationally by the Bolivian government held by resident investors are identified in the data sources but they are treated as external liabilities in the external sector statistics (ESS). Investigations with reporters in order to delimitate services (mainly construction or other business services) and direct investment are needed, and the method to estimate the amounts of goods for processing services related to the exports by Bolivia shall be updated. Consistency within ESS needs also to be enhanced. During a September 2015 TA mission on ESS, an implementation plan for the compilation of ESS on a BMP6 basis was agreed. SDDS requirements regarding ESS are currently met.

B. Data Standards and Quality

Bolivia has participated in the General Data Dissemination System (GDDS) since November 2002. Data ROSC published on August 13, 2007.

Bolivia: Indicators Required for Surveillance

(As of October 15, 2015)

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Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I); Not Available (NA).

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Bolivia does not compile central government fiscal data.

Guaranteed non-financial public sector debt. Including currency and maturity composition.

Monthly frequencies for goods only.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Reflects the assessment provided in the data ROSC (published on August 13, 2007, and based on the findings of the mission that took place during January 24–February 7, 2007) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); not observed (NO); and not available (NA).

Same as footnote 10, except referring to international standards concerning (respectively) source data, assessment of source data, statistical techniques, assessment and validation of intermediate data and statistical outputs, and revision studies.

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Cover IMF Staff Country Reports
Bolivia: 2015 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Bolivia
Author:
International Monetary Fund. Western Hemisphere Dept.
Volume/Issue:
Volume 2015: Issue 334
Publisher:
International Monetary Fund
ISBN:
9781513588278
ISSN:
1934-7685
Pages:
85
DOI:
https://doi.org/10.5089/9781513588278.002