Press Release: IMF Approves Second Annual Loan for Bolivia Under the ESAF

March 25, 1996

The International Monetary Fund (IMF) today approved the second annual loan for Bolivia in an amount equivalent to SDR 33.66 million (about $49 million) under the enhanced structural adjustment facility (ESAF)1 to support the Government's economic and reform program for 1996. The loan will be disbursed in two equal semiannual installments; the first, in an amount equivalent to SDR 16.83 million (about $25 million), will be available on April 15,1996; the second will become available in September 1996 after review of the program's implementation by the IMF's Executive Board.


Within the framework of the present ESAF arrangement, Bolivia has been implementing a comprehensive program to stabilize and restructure the economy. Under the program, Bolivia has maintained real GDP growth of about 4 percent, initiated major structural reforms, including the transfer of ownership and management of large public enterprises to the private sector, and achieved significant progress toward external viability, while maintaining moderate inflation. Notwithstanding these achievements, poverty remains widespread, and the growth rates achieved so far have resulted in only very gradual improvements in living standards.

The 1996 Program

The macroeconomic objectives of Bolivia's 1996 program, which the ESAF loan supports, are to reach a growth rate of 5 percent; an annual rate of inflation of 8 percent; and a current account deficit limited to less than 6 percent of GDP-excluding imports related to the program for capitalization of major public enterprises-while maintaining international gross reserves at the equivalent of 6 months of imports. To these ends, tight fiscal policy will be maintained, and monetary and credit policy will be geared to achieving the inflation and balance of payments targets of the program.

Structural Reforms

Under the program, the Government intends to further consolidate the structural reform effort by extending the capitalization process to the hydrocarbon sector in order to promote its development and expand natural gas exports. For this purpose, the monopoly position of the national oil company will be eliminated. In the education sector, the program seeks to improve the quality and provision of basic education, including the supply of educational materials, increased access to basic education in rural areas, and construction of schools. In the area of social security, the Government will establish a minimum pension for all Bolivians based on shares of the capitalized public enterprises, and employees will have personal contributory accounts.

Addressing Social Problems

The Government's strategy to alleviate poverty is based on raising the rate of economic growth, while expanding the coverage and quality of basic education and health. Safety net programs to help the poor include the Social Investment Fund, which channels external funding to meet basic needs in health, water supply, sanitation, and education in the poorest communities; the Mother-Child Health Care Program; the Food and Nutritional Vigilance Program; the Integrated Child Development Program; and the Program for the Development of the Indigenous People.

The Challenge Ahead

In addition to the increase in inflation in recent months, the economy remains vulnerable to adverse external developments. Consistent implementation of financial policies envisaged under the program will be crucial to avoiding a resurgence of inflation that could jeopardize the expected benefits from the authorities' ambitious structural reform efforts.

Bolivia joined the IMF on December 27, 1945; its quota2 is SDR 126.2 million (about $184 million). Bolivia's outstanding use of IMF credit currently totals SDR 178 million (about $260 million).

Bolivia: Selected Economic Indicators

  1994 1995 1996* 1997* 1998*

(percent change)
Real economic growth 4.2 3.8 5.0 5.8 5.8
Consumer prices 8.5 12.6 8.0 6.0 5.0
(percent of GDP)
External current
    account balance, (deficit –)
-8.7 -9.4 -11.4 -11.8 -10.7
External current acccount
     balance, (deficit –)
    (excluding official transfers)
-8.7 -9.4 -11.4 -11.8 -10.7
Public sector balance
    account (deficit –)
-3.2 -2.0 -2.6 -2.6 -2.4

Sources: Bolivian authorities and IMF staff estimates


1. The ESAF is a concessional IMF facility for assisting eligible members that are undertaking economic reform programs to strengthen their balance of payments and improve their growth prospects. ESAF loans carry an interest rate of 0.5 percent and are repayable over 10 years, with a 5 1/2-year grace period.

2. A member's quota in the IMF determines, in particular, the amount of its subscription, its voting weight, its access to IMF financing, and its allocation of SDRs.


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