## 1bolea2021001 — 2020. The fiscal expansion contributed to a fall in international reserves, which declined from ## Source details **Canonical URL:** [1bolea2021001 — 2020. The fiscal expansion contributed to a fall in international reserves, which declined from](https://www.imf.org/-/media/files/publications/cr/2021/english/1bolea2021001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2021/english/1bolea2021001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2021/english/1bolea2021001.pdf.json) --- ### Recent developments - Central Bank gross foreign reserves: 10,081 (2016); 10,261 (2017); 8,946 (2018); 6,468 (2019); 5,276 (2020); 6,451 (2021, projection); 5,710 (2022, projection). - Central Bank reserves: current level represents 5.2 months of goods and services imports or 61 percent of the Fund’s reserve adequacy metric. - International reserves declined from US$6.5 billion at end-2019 to US$4.7 billion at end-March 2021. - Real GDP: 4.3 (2016), 4.2 (2017), 4.2 (2018), 2.2 (2019), -8.8 (2020), 5.0 (2021, projection), 4.0 (2022, projection). - Nominal GDP growth: 2.9 (2016), 10.5 (2017), 7.4 (2018), 1.5 (2019), -10.6 (2020), 4.6 (2021), 5.9 (2022). - CPI inflation (period average): 3.6 (2016), 2.8 (2017), 2.3 (2018), 1.8 (2019), 0.9 (2020), 1.7 (2021), 2.5 (2022). - Nonfinancial public sector deficit (overall balance): -7.2 (2016), -7.8 (2017), -8.1 (2018), -7.2 (2019), -12.7 (2020), -9.7 (2021), -8.4 (2022). - Total gross NFPS debt: 46.5 (2016), 51.3 (2017), 53.8 (2018), 59.1 (2019), 78.8 (2020), 83.4 (2021), 85.7 (2022). - Private domestic demand fell 10.3 percent in 2020; output contracted 24.6 percent year-on-year in Q2 2020; output in Q4 2020 exceeded year-before levels by 1.7 percent. - Public health outlays and direct relief increased current expenditure; one-off expenditures included 1.6 percent of GDP on the Bono Contra el Hambre. - Central bank actions in 2020 included loosened collateral requirements for repo operations, reduced reserve requirements, purchases of central government debt from pension funds (estimated liquidity injection of about 6 percent of GDP), and monetary financing to the central government (outstanding credit from the BCB to the government increased by 5 percent of GDP). ### Outlook and risks - Growth and inflation: - Real GDP growth: expected to rebound to 5.0 percent in 2021. - Inflation: expected to return gradually to around 3 percent by end-2022 (staff expectation: around 2½ percent by end-2021 in staff appraisal). - External and commodity outlook: - Higher international commodity prices expected to boost mining and hydrocarbons; agricultural sector growth should remain strong. - Current account deficit: expected to return to about 4 percent of GDP (staff projection). - Key risks: - Uncertainties over the course of the pandemic and pace of vaccinations domestically and in key trading partners. - Uncertainty over projected rise in global commodity prices. - Reliance on financing from international markets could expose Bolivia to changes in external financing conditions. - Covid-19-related loan payment deferrals may increase financial stability risks. - Large fiscal deficit poses a challenge to medium-term debt sustainability. - External risks include deterioration in terms of trade and/or tightening of external financing conditions. ### Executive Board / Directors' assessment and policy recommendations - Commendations and near-term macro guidance: - Directors commended authorities for proactive pandemic response, fiscal support to households and businesses, enhanced health-sector support, and efforts to increase vaccination. - Near-term macroeconomic policy: continue supporting recovery while safeguarding medium-term fiscal and external sustainability and fostering a more inclusive, greener economy. - Fiscal policy guidance: - Sustain necessary targeted financial support for affected households while the health crisis endures. - Place near-term efforts within a clear medium-term plan that brings the fiscal deficit to a sustainable level and stabilizes the debt-to-GDP ratio. - Fiscal consolidation should include measures to mobilize revenue and rationalize and refocus expenditure to continue improving social welfare and reducing poverty. - In unwinding COVID-19-related spending increases, prioritize protection of the vulnerable and building resilience to climate change. - Exchange rate and monetary policy: - Authorities’ preference for maintaining the current exchange rate regime noted; this has resulted in low and stable inflation. - Directors encouraged exploring potential benefits and preconditions for carefully allowing greater exchange rate flexibility over the medium term; a transition could increase resilience to exogenous shocks, forestall further reserve loss, and increase competitiveness of non-hydrocarbon industries. - A careful transition to a more flexible exchange rate, embedded within an inflation targeting monetary framework, would increase welfare and resilience to external shocks. - Financial sector: - Directors welcomed loan-deferral support and encouraged supervisors to strengthen monitoring of bank profitability, liquidity, and capital while moratoria are in effect. - Structural reforms and social/green priorities: - Phase out price and export restrictions; relax credit quotas and interest rate caps; reduce subsidies to state-owned enterprises in the hydrocarbon sector; phase out preferential allocation of bank credit to state-run enterprises. - Improve business environment, strengthen governance of core economic and regulatory institutions, and address social equity concerns through targeted fiscal support. - Increase support to education and public health systems and invest in greener energy sources. ### Debt outlook and debt sustainability (Annex II & DSA highlights) - Public debt trajectory: - Public debt projected to exceed the 70-percent-of-GDP mark by 2026. - Public debt-to-GDP: 79 percent in 2020 (staff projection), rising to 88 percent by 2025. - NFPS debt end-2019: 59 percent of GDP, or 167 billion bolivianos (US$24 billion). - Domestic debt, including lending by BCB: 90 billion bolivianos (US$13 billion), about 54 percent of total NFPS debt. - Foreign debt, including domestic debt issued in FX: US$11½ billion (77 billion bolivianos), 46 percent of total NFPS debt. - Gross financing needs: - Gross financing needs projected to exceed 15 percent of GDP in 2021 and abate thereafter. - Sustainability metrics and staff estimates: - Staff estimate a primary fiscal deficit of about 2 percent of GDP would be sustainable over the long term, depending on the exchange rate. - Staff modeling indicates that adoption of an inflation targeting regime would create an additional 0.5 percent of GDP in fiscal space. - Stress tests: - Debt remains above the 70 percent of GDP vulnerability benchmark under all stress tests. - Under combined macro-fiscal shock, debt-to-GDP projected above 100 percent by end-2025. - Under primary balance and GDP shocks, debt-to-GDP trajectory expected to be 5 percentage points higher than baseline by end-2025. ### Announced policy responses to COVID-19 (selected figures) - Total announced measures: 5,236.4 (US$ million) / 13.8 percent of 2020 GDP / 19.5 million beneficiaries. - Total above the line: 1,693.0 (US$ million) / 4.6 percent of 2020 GDP / 19.5 million beneficiaries. - Targeted cash transfers total: 1,125.0 (US$ million) / 3.1 percent of 2020 GDP / 11.7 million beneficiaries. - Family Bonus (Bono Familia): 212.0 (US$ million) / 0.6 percent of 2020 GDP / 2.9 million beneficiaries. - Family Basket (Canasta Familiar): 61.0 (US$ million) / 0.2 percent of 2020 GDP / 1.1 million beneficiaries. - Universal Bonus (Bono Universal): 267.0 (US$ million) / 0.7 percent of 2020 GDP / 3.7 million beneficiaries. - Bonus Against Hunger (Bono Contra el Hambre): 585.0 (US$ million) / 1.6 percent of 2020 GDP / 4.0 million beneficiaries. - Targeted subsidies: 71.0 (US$ million) / 0.2 percent of 2020 GDP / 7.8 million beneficiaries. - Health spending: 497.0 (US$ million) / 1.3 percent of 2020 GDP. - Import of respiratory equipment: 200.0 (US$ million) / 0.5 percent of 2020 GDP. - Increasing of ICU capacity: 297.0 (US$ million) / 0.8 percent of 2020 GDP. - Total below the line: 682.4 (US$ million) / 1.9 percent of 2020 GDP. - Liquidity injections: 463.4 (US$ million) / 1.3 percent of 2020 GDP. - CAPROSEN funding and measures: 463.4 (US$ million) / 1.3 percent of 2020 GDP. - Loans: 219.0 (US$ million) / 0.6 percent of 2020 GDP. - Loans to private companies of Bs. 8488 per worker financed from a fund of Bs. 1500 million (USD 219 million). - National Reactivation Employment Plan: 2,661.0 (US$ million) / 6.8 percent of 2020 GDP; Programa Intensivo de Empleo objective: create 50,000 new jobs per month. - Fondo de reactivación (FORE): 1,740.0 (US$ million) / 4.5 percent of 2020 GDP. - Fondo de garantía sectorial (FOGASEC): 160.0 (US$ million) / 0.4 percent of 2020 GDP. - Fondo de garantía de vivienda social y solidaria (FOGAVISS): 729.0 (US$ million) / 1.9 percent of 2020 GDP. - Subnational governments support: 200.0 (US$ million) / 0.5 percent of 2020 GDP (release of 12 percent of the IDH tax). ### Fiscal 2019–2020 summary (selected percent changes and percentage point changes of 2020 GDP) - Total Revenues: Percent Change -21.6; Percentage Points Change of 2020 GDP -7.0. - Tax Revenues: Percent Change -21.9; Percentage Points Change of 2020 GDP -5.5. - IDH and royalties: Percent Change -10.6; Percentage Points Change of 2020 GDP -0.4. - Indirect Taxes: Percent Change -21.0; Percentage Points Change of 2020 GDP -3.4. - VAT: Percent Change -25.7; Percentage Points Change of 2020 GDP -2.1. - Total Expenditures: Percent Change -5.7; Percentage Points Change of 2020 GDP -2.3. - Current Expenditure: Percent Change 12.6; Percentage Points Change of 2020 GDP 3.7. - Purchases of goods and services: Percent Change -11.0; Percentage Points Change of 2020 GDP -0.5. - Social benefits: Percent Change 53.9; Percentage Points Change of 2020 GDP 3.7. - Net acquisition of nonfinancial assets: Percent Change -54.6; Percentage Points Change of 2020 GDP -6.0. - Primary Balance: Percent Change 71.9; Percentage Points Change of 2020 GDP -4.7. - Net lending/borrowing (Fiscal Balance): Percent Change 57.7; Percentage Points Change of 2020 GDP -4.7. - Nominal GDP: Percent Change -10.6; Percentage Points Change of 2020 GDP -11.8. ### Banking sector and financial stability - Liquidity injections increased deposits, bringing the loan-to-deposit ratio to 100 percent. - At end-October 2020 the average capital adequacy ratio was 13 percent, above the 10 percent minimum requirement. - Profitability declines by end-2020: - Return on assets: 0.4 percent. - Return on equity: 4.5 percent. - Asset quality and forbearance: - Nonperforming loans: 1.5 percent. - Restructured loans: 4 percent of the loan portfolio. - Stock of deferred loan repayments reached 10 percent of GDP by the end of 2020. - Policy change: required share of bank lending to qualifying sectors increased from 50 to 60 percent. ### IMF support and recent operations - On April 17, 2020, Board approved an SDR 240.1 million purchase under the Rapid Financing Instrument (RFI), amounting to 100 percent of quota. - On February 12, 2021, the government made an early repurchase of the full amount of the RFI. ### Exchange rate regime, reserves, and external position (Annex III highlights) - Exchange regime: boliviano pegged at a rate of 6.9 to the U.S. dollar; de facto arrangement classified as a ‘stabilized arrangement’ effective November 2, 2011. - International reserves fell from US$15.1 billion in 2014 to US$5.3 billion by end-2020; net international reserves fell by 47 percent from 8.9 billion at end-2018 to 4.7 billion in March 2021. - Real effective exchange rate has appreciated by 32 percent since 2014 and by 55 percent since the peg in 2011 (as of end-2020). - External position assessment: - External position in 2020 was moderately weaker than level implied by fundamentals and desirable policies. - Real exchange rate judged overvalued by around 10-15 percent (staff/ESA assessments). - NIIP weakened from a net surplus of US$4.5 billion (13.6 percent of GDP) in 2014 to a net deficit of US$-7.6 billion (-20.7 percent of GDP) at end-2020. - Policy implications: - Preserving the peg will require tighter fiscal policy over the medium term and higher reserves to make defense credible. - Staff recommend exploring a careful transition to greater exchange rate flexibility embedded in an inflation-targeting framework, with preparatory work and social protections to shield lower-income households. ### Costs, benefits, and modeling of exchange rate flexibility (Box 1 summary) - Model findings: - Maintaining a fixed regime is feasible but requires up-front fiscal adjustment and a smaller fiscal deficit than under a floating rate. - Inflation targeting would allow the primary balance to be ½ to 1 percent of GDP looser over the medium term and would improve household welfare relative to the pegged regime. - Under a flexible regime the nominal exchange rate would immediately depreciate by 6 percent and continue depreciating toward equilibrium (estimated around 11 percent weaker than current levels), temporarily pushing inflation above target. - Welfare gains from adopting a flexible exchange rate estimated equivalent to around 3 percent of total consumption. - In a “shock” scenario, GDP would fall by around 2 ½ percentage points less under inflation targeting relative to the pegged regime. ### Structural reforms, investment, and competitiveness - Binding constraints on investment: - Difficult regulatory environment, low Doing Business ranking: 150 of 190 countries. - Price and export controls, credit quotas, frequent regulatory changes. - Recommended reforms to raise long-run growth and attract investment: - Develop a one-stop shop for foreign investors; strengthen legal investor protection. - Provide fiscal incentives for green investments; scale back state-subsidized credit for SOEs; eliminate export limits on soy and other agricultural products; relax domestic price controls. - Address governance in SOEs, procurement transparency, and regulatory uncertainty. - Promote private investment and export diversification (reduce reliance on hydrocarbons; support agriculture and lithium). ### Climate, carbon tax, and green transition - Emissions and carbon tax impact: - GHG projected to increase from about 60 mtCO2e in 2019 to 80 mtCO2e in 2035 (increase by a third). - With a carbon tax of US$75 per tCO2e, that increase would become a reduction of 25 percent from 2019 levels. - Co-benefits and revenue recycling: - Lower emissions reduce environmental damage, morbidity from air pollution, congestion and road accidents, and have positive productivity implications. - Revenue can be recycled via higher transfers, lower personal income taxes, or higher public investment to offset negative growth effects. - Electricity consumption by source (20202021Q1 Total 100.0100.0): - Hydro 31.943.4; Wind 0.70.3; Solar 2.63.1; Thermal 64.753.2. - Staff recommendations: - Gradual removal of hydrocarbon consumption subsidies; direct fiscal gains to health, education, and transfers to low income groups. - Invest in resilient infrastructure and consider disaster-linked debt instruments with natural disaster clauses. ### Social policy, poverty, and human capital - Long-run achievements: - per capita GDP more than tripled since early 2000s; - poverty rate reduced from 66 to 37 percent; - life expectancy rose from 61 to 73 years; - primary school completion rate increased from 84 to 99 percent. - Pandemic effects and social priorities: - Pandemic increased poverty by 1.9 percent in 2020 (INE estimate). - Maintain targeted fiscal support for vulnerable groups until the health crisis is over. - Enhance expenditure on education and health and expand the social registry by connecting program databases. - Authorities’ social programs maintained: Bono Juancito Pinto, Bono Juana Azurduy, and Renta Dignidad. ### Key statistics and selected indicators (concise) - Real GDP growth: -8.8 percent (2020); projection 5.0 percent (2021). - Nonfinancial public sector deficit (overall balance): -12.7 percent of GDP (2020); projection -9.7 percent of GDP (2021). - Total gross NFPS debt: 78.8 percent of GDP (2020); projection 83.4 percent of GDP (2021). - Central Bank gross foreign reserves: US$4.7 billion at end-March 2021 (decline from US$6.5 billion at end-2019). - Reserves adequacy: 5.2 months of goods and services imports; 61 percent of the Fund’s reserve adequacy metric. - Liquidity injection to banking sector from central bank operations: about 6 percent of GDP (2020). - Outstanding credit from the BCB to the government increased by 5 percent of GDP in 2020. - Private domestic demand: fell 10.3 percent in 2020. - Output contraction: 24.6 percent year-on-year in Q2 2020. - Bono Contra el Hambre: 1.6 percent of GDP (one-off expenditure in 2020). - IMF support: SDR 240.1 million RFI purchase on April 17, 2020 (100 percent of quota); early repurchase on February 12, 2021. _International Monetary Fund — Bolivia: Selected excerpts on debt sustainability, fiscal measures, banking sector, external assessment, carbon tax, and policy recommendations (IMF staff text provided in the content unit)._ ### 2020. The fiscal expansion contributed to a fall in international reserves, which declined from ### 1bolea2021001 - 2020. The fiscal expansion contributed to a fall in international reserves, which declined from ### Recent developments - International reserves declined from US$6.5 billion at end-2019 to US$4.7 billion at end-March 2021. - Real GDP: 4.3 (2016), 4.2 (2017), 4.2 (2018), 2.2 (2019), -8.8 (2020), 5.0 (2021, projection), 4.0 (2022, projection). - Nominal GDP growth: 2.9 (2016), 10.5 (2017), 7.4 (2018), 1.5 (2019), -10.6 (2020), 4.6 (2021), 5.9 (2022). - CPI inflation (period average): 3.6 (2016), 2.8 (2017), 2.3 (2018), 1.8 (2019), 0.9 (2020), 1.7 (2021), 2.5 (2022). - Nonfinancial public sector deficit (overall balance): -7.2 (2016), -7.8 (2017), -8.1 (2018), -7.2 (2019), -12.7 (2020), -9.7 (2021), -8.4 (2022). - Total gross NFPS debt: 46.5 (2016), 51.3 (2017), 53.8 (2018), 59.1 (2019), 78.8 (2020), 83.4 (2021), 85.7 (2022). - Central Bank gross foreign reserves (in millions of U.S. dollars): 10,081 (2016), 10,261 (2017), 8,946 (2018), 6,468 (2019), 5,276 (2020), 6,451 (2021, projection), 5,710 (2022, projection). - Central Bank reserves: current level represents 5.2 months of goods and services imports or 61 percent of the Fund’s reserve adequacy metric. - Private domestic demand fell 10.3 percent in 2020; output contracted 24.6 percent year-on-year in Q2 2020; output in Q4 2020 exceeded year-before levels by 1.7 percent. - Public health outlays and direct relief increased current expenditure; one-off expenditures included 1.6 percent of GDP on the Bono Contra el Hambre. - Central bank actions in 2020 included loosened collateral requirements for repo operations, reduced reserve requirements, purchases of central government debt from pension funds (estimated liquidity injection of about 6 percent of GDP), and monetary financing to the central government (outstanding credit from the BCB to the government increased by 5 percent of GDP). ### Outlook and risks - The economy is expected to rebound in 2021, growing by 5.0 percent, supported by the authorities’ program to vaccinate the full adult population as quickly as possible. - Higher international commodity prices are expected to boost recovery in the mining and hydrocarbons sectors; agricultural sector growth should remain strong. - Modest improvements in the fiscal deficit in 2021 are projected, supported by recovering revenues, progressive withdrawal of COVID-19-related one-off expenditure items, and a slowdown in wage growth and spending on goods and services. - Key risks: - Uncertainties over the course of the pandemic and the pace of vaccinations in Bolivia and its main trading partners. - Uncertainty over the projected rise in global commodity prices. - Reliance on financing from international markets could expose Bolivia to changes in external financing conditions. - Covid-19-related loan payment deferrals may increase financial stability risks. - Large fiscal deficit poses a challenge to medium-term debt sustainability. - External risks include a deterioration in the terms of trade and/or a tightening of external financing conditions. ### Executive Board / Directors' assessment and policy recommendations - Directors commended Bolivian authorities for proactive pandemic response, fiscal support to households and businesses, enhanced health-sector support, and efforts to increase vaccination. - Near-term macroeconomic policy: continue supporting recovery while safeguarding medium-term fiscal and external sustainability and fostering a more inclusive, greener economy. - Fiscal policy guidance: - Sustain necessary targeted financial support for affected households while the health crisis endures. - Place near-term efforts within a clear medium-term plan that brings the fiscal deficit to a sustainable level and stabilizes the debt-to-GDP ratio. - Fiscal consolidation should include measures to mobilize revenue and rationalize and refocus expenditure to continue improving social welfare and reducing poverty. - In unwinding COVID-19-related spending increases, prioritize protection of the vulnerable and building resilience to climate change. - Exchange rate and monetary policy: - Authorities’ preference for maintaining the current exchange rate regime noted; this has resulted in low and stable inflation. - Directors encouraged exploring potential benefits and preconditions for carefully allowing greater exchange rate flexibility over the medium term, noting preparatory work required; a transition could increase resilience to exogenous shocks, forestall further reserve loss, and increase competitiveness of non-hydrocarbon industries. - A careful transition to a more flexible exchange rate, embedded within an inflation targeting monetary framework, would increase welfare and resilience to external shocks. - Financial sector: - Directors welcomed loan-deferral support and encouraged supervisors to strengthen monitoring of bank profitability, liquidity, and capital while moratoria are in effect. - Structural reforms to raise long-run growth: - Phase out price and export restrictions. - Relax credit quotas and interest rate caps. - Reduce subsidies to state-owned enterprises in the hydrocarbon sector. - Phase out preferential allocation of bank credit to state-run enterprises. - Improve the business environment to incentivize private investment in the non-hydrocarbon economy. - Strengthen governance of core economic and regulatory institutions. - Address social equity concerns through targeted fiscal support. - Social and green priorities: - Increase support to education and public health systems to continue poverty reduction. - Invest in greener energy sources to diversify domestic energy consumption, provide new sources of revenue, and bolster the economic recovery. ### Key statistics and indicators (selected) - Real GDP growth: -8.8 percent (2020); projection 5.0 percent (2021). - Nonfinancial public sector deficit (overall balance): -12.7 percent of GDP (2020); projection -9.7 percent of GDP (2021). - Total gross NFPS debt: 78.8 percent of GDP (2020); projection 83.4 percent of GDP (2021). - Central Bank gross foreign reserves: US$4.7 billion at end-March 2021 (decline from US$6.5 billion at end-2019). - Reserves adequacy: 5.2 months of goods and services imports; 61 percent of the Fund’s reserve adequacy metric. - Liquidity injection to banking sector from central bank operations: about 6 percent of GDP (2020). - Outstanding credit from the BCB to the government increased by 5 percent of GDP in 2020. - Private domestic demand: fell 10.3 percent in 2020. - Output contraction: 24.6 percent year-on-year in Q2 2020. - Bono Contra el Hambre: 1.6 percent of GDP (one-off expenditure in 2020). *BOLIVIA — STAFF REPORT FOR THE 2021 ARTICLE IV CONSULTATION (selected excerpts).* ### 10. Risks to debt sustainability have risen. (Annex II). The trajectory of public debt has ### 10. Risks to debt sustainability have risen. ### Debt outlook and public debt trajectory - Public debt is now projected to exceed the 70-percent-of-GDP mark by 2026. - The trajectory of public debt has deteriorated over the past year as a consequence of the COVID-19 induced fiscal expansion. - Gross financing needs are projected to exceed 15 percent of GDP in 2021 and abate thereafter. - Staff estimate a primary fiscal deficit of about 2 percent of GDP would be sustainable over the long term, depending on the exchange rate. - Staff modeling indicates that adoption of an inflation targeting regime would create an additional 0.5 percent of GDP in fiscal space. ### Announced policy responses to COVID-19 (selected figures) - Total announced measures: 5,236.4 (US$ million) / 13.8 percent of 2020 GDP / 19.5 million beneficiaries. - Total above the line: 1,693.0 (US$ million) / 4.6 percent of 2020 GDP / 19.5 million beneficiaries. - Targeted cash transfers total: 1,125.0 (US$ million) / 3.1 percent of 2020 GDP / 11.7 million beneficiaries. - Family Bonus (Bono Familia): 212.0 (US$ million) / 0.6 percent of 2020 GDP / 2.9 million beneficiaries. - Family Basket (Canasta Familiar): 61.0 (US$ million) / 0.2 percent of 2020 GDP / 1.1 million beneficiaries. - Universal Bonus (Bono Universal): 267.0 (US$ million) / 0.7 percent of 2020 GDP / 3.7 million beneficiaries. - Bonus Against Hunger (Bono Contra el Hambre): 585.0 (US$ million) / 1.6 percent of 2020 GDP / 4.0 million beneficiaries. - Targeted subsidies: 71.0 (US$ million) / 0.2 percent of 2020 GDP / 7.8 million beneficiaries. - Health spending: 497.0 (US$ million) / 1.3 percent of 2020 GDP. - Import of respiratory equipment: 200.0 (US$ million) / 0.5 percent of 2020 GDP. - Increasing of ICU capacity: 297.0 (US$ million) / 0.8 percent of 2020 GDP. - Total below the line: 682.4 (US$ million) / 1.9 percent of 2020 GDP. - Liquidity injections: 463.4 (US$ million) / 1.3 percent of 2020 GDP. - CAPROSEN funding and measures: 463.4 (US$ million) / 1.3 percent of 2020 GDP. - Loans: 219.0 (US$ million) / 0.6 percent of 2020 GDP. - Loans to private companies of Bs. 8488 per worker financed from a fund of Bs. 1500 million (USD 219 million). - National Reactivation Employment Plan: 2,661.0 (US$ million) / 6.8 percent of 2020 GDP. - Programa Intensivo de Empleo objective: create 50,000 new jobs per month. - Fondo de reactivación (FORE): 1,740.0 (US$ million) / 4.5 percent of 2020 GDP. - Fondo de garantía sectorial (FOGASEC): 160.0 (US$ million) / 0.4 percent of 2020 GDP. - Fondo de garantía de vivienda social y solidaria (FOGAVISS): 729.0 (US$ million) / 1.9 percent of 2020 GDP. - Subnational governments support: 200.0 (US$ million) / 0.5 percent of 2020 GDP (release of 12 percent of the IDH tax). ### Fiscal 2019–2020 summary operations (selected percent changes and percentage point changes of 2020 GDP) - Total Revenues: Percent Change -21.6; Percentage Points Change of 2020 GDP -7.0 - Tax Revenues: Percent Change -21.9; Percentage Points Change of 2020 GDP -5.5 - IDH and royalties: Percent Change -10.6; Percentage Points Change of 2020 GDP -0.4 - Indirect Taxes: Percent Change -21.0; Percentage Points Change of 2020 GDP -3.4 - VAT: Percent Change -25.7; Percentage Points Change of 2020 GDP -2.1 - Total Expenditures: Percent Change -5.7; Percentage Points Change of 2020 GDP -2.3 - Current Expenditure: Percent Change 12.6; Percentage Points Change of 2020 GDP 3.7 - Purchases of goods and services: Percent Change -11.0; Percentage Points Change of 2020 GDP -0.5 - Social benefits: Percent Change 53.9; Percentage Points Change of 2020 GDP 3.7 - Net acquisition of nonfinancial assets: Percent Change -54.6; Percentage Points Change of 2020 GDP -6.0 - Primary Balance: Percent Change 71.9; Percentage Points Change of 2020 GDP -4.7 - Net lending/borrowing (Fiscal Balance): Percent Change 57.7; Percentage Points Change of 2020 GDP -4.7 - Nominal GDP: Percent Change -10.6; Percentage Points Change of 2020 GDP -11.8 ### Banking sector and financial stability - Liquidity injections increased deposits, bringing the loan-to-deposit ratio to 100 percent. - At end-October 2020 the average capital adequacy ratio was 13 percent, above the 10 percent minimum requirement. - Profitability declines by end-2020: - Return on assets: 0.4 percent. - Return on equity: 4.5 percent. - Asset quality and forbearance: - Nonperforming loans: 1.5 percent. - Restructured loans: 4 percent of the loan portfolio. - Stock of deferred loan repayments reached 10 percent of GDP by the end of 2020. - Policy change: required share of bank lending to qualifying sectors increased from 50 to 60 percent. ### IMF support and recent operations - On April 17, 2020, Board approved an SDR 240.1 million purchase under the Rapid Financing Instrument (RFI), amounting to 100 percent of quota. - On February 12, 2021, the government made an early repurchase of the full amount of the RFI. ### Outlook and risks - Real GDP growth: expected to grow by 5.0 percent in 2021. - Inflation: expected to return gradually to around 3 percent by end-2022. - Current account deficit: expected to return to about 4 percent of GDP. - Unemployment rate: 8 percent at end-2020. - Risks skewed to the downside: - Two-sided risks linked to hydrocarbon prices and speed of vaccine rollout. - Fiscal deficit overruns in central government and SOEs could erode confidence. - Reliance on international market financing exposes Bolivia to shifts in external financing conditions. - COVID-19-related loan payment deferrals pose financial stability risks. - Substantial risks of negative intra-regional spillovers due to reliance on hydrocarbon exports to Brazil and Argentina. ### Short-term policy guidance - Continue to accommodate the COVID-19 shock largely through supportive fiscal policies, particularly spending on healthcare and support for lower income households, while couching this within a clear medium-term fiscal plan that outlines how future deficit reductions will be achieved. - Phased move toward greater exchange rate flexibility is recommended. - Safeguard reductions in poverty, catalyze private investment, reinforce climate resilience, incentivize adoption of green alternatives to hydrocarbons, and strengthen governance of core economic and regulatory institutions. ### Recovering from the crisis (vaccination and recovery dependencies) - Authorities set a target date of end-September for full vaccination of the adult population of 7.6 million. - By early May 2021, 700,000 first doses had been administered. - Recovery depends on pace of vaccinations domestically and in key trading partners (including Argentina and Brazil) and on higher global prices for primary commodities boosting mining, agriculture, and hydrocarbons receipts. - Authorities should maintain priority on public health and continue to seek agreement with vaccine producers, including the COVAX multinational agreement. - Financial support to vulnerable households should continue for as long as the health crisis persists. ### Charting a path back to fiscal sustainability and recommended measures - For 2021 the authorities budgeted a doubling of public investment. - Budgeted 2021 primary deficit: 7.9 percent of GDP (represents consolidation from 2020 of 3.3 percentage points of GDP). - Planned investments allocation: infrastructure 36 percent; social sectors (education, health, urban and housing) 25 percent; industries including mining, hydrocarbons, tourism and energy 25 percent. - Staff projections reflect the budgeted deficit level but assume lower public investment and a slower recovery in revenues than authorities. - Main contributors to fiscal adjustment from 2020 (cumulative percentage points of GDP): - Change in Revenues (2021–2026): 1.0, 2.4, 2.3, 2.2, 1.9, 2.0 - o/w VAT: 0.9, 1.7, 1.7, 1.7, 1.7, 1.7 - o/w Other: 0.1, 0.7, 0.6, 0.5, 0.2, 0.4 - Change in Expenditure (2021–2026): -2.3, -2.4, -3.4, -4.1, -5.0, -5.2 - o/w Compensation of employees: -0.7, -1.4, -2.1, -2.8, -3.4, -4.0 - o/w Purchases of goods and services: -0.3, -0.4, -0.4, -0.5, -0.6, -0.6 - o/w Social benefits: -3.4, -3.7, -3.8, -3.9, -3.9, -4.0 - o/w Net acquisition of nonfinancial assets: 2.0, 3.2, 3.3, 3.5, 3.4, 3.9 - Change in Primary Balance (2021–2026): 3.3, 4.8, 5.7, 6.3, 6.9, 7.2 - Staff view: a combination of revenue and expenditure measures will be needed to bring the primary deficit from the 2020 level of 11.2 percent of GDP to about 2 percent of GDP by 2026. - Potential revenue measures: - Introduce a progressive personal income tax (estimated yield about 1 ½ percent of GDP). - Strengthen “own-revenues” of local governments (largely through higher property taxes). - Improve effectiveness of tax and customs administration. - Customs reform, enlargement of wealth tax perimeter, and higher property taxes could yield a further 1 percent of GDP. - Potential expenditure measures: - Rationalize spending on goods and services. - Contain growth of the public sector wage bill (baseline includes a cap reducing the bill to 4.0 percent of GDP over the medium term). - Better prioritization of public investment projects. - Reduction of energy subsidies. - Improvements in efficiency, governance, and monitoring of SOEs. - Staff projections assume a fiscal multiplier of 0.4 for both tax and expenditure measures. - For 2021, the government approved an increase in the national minimum wage of 2 percent, but maintained civil servants’ wages unchanged from the previous year (except for those at the minimum wage). ### Authorities’ perspective - Authorities agree with the need for fiscal adjustment to reduce the deficit to single digits in 2021 but favor a more gradual pace of adjustment than advocated by staff. - Authorities expect cyclical revenue recovery, more efficient tax collection, and firm control of goods and services expenditure to create fiscal space for increased public investment without measures such as widening the wealth tax perimeter or introducing a personal income tax while the pandemic persists. - Authorities concur with staff recommendations to prioritize continuing support for vulnerable households. _Italic: Source: Bolivia: Selected excerpts on debt sustainability, fiscal measures, banking sector, and policy recommendations (IMF staff text provided in the content unit)._ ### 22. Bolivia has reaped substantial stability benefits from the fixed exchange rate regime. ### 22. Bolivia has reaped substantial stability benefits from the fixed exchange rate regime. ### Benefits of the fixed exchange rate - Since November 2011, the fixed exchange rate has resulted in low and stable inflation and a reduction in dollarization. - The exchange rate peg is widely recognized by the public as a strong policy anchor. ### External pressures, reserves, and valuation - International reserves fell from US$15.1 billion in 2014 to US$5.3 billion by end-2020. - The real effective exchange rate has appreciated by 32 percent since 2014. - Occurred while terms of trade weakened and the current account shifted from surplus to deficit. - The ESA and staff modeling indicate: - The external position is moderately weaker than the level implied by fundamentals and desirable policies. - The real exchange rate is overvalued by around 10-15 percent (see Annex III and Box 1). ### Costs and benefits of moving to greater exchange rate flexibility - Allowing greater exchange rate flexibility would: - Increase resilience to exogenous shocks. - Boost welfare. - Reduce balance of payments imbalances and forestall further loss of reserves. - Cushion the economy against negative shocks. - Maintaining the current peg will necessitate a tighter fiscal policy over the medium term than would be the case under inflation targeting, resulting in larger up-front costs to social welfare. - Transition requirements and mitigants: - A careful, well-planned transition would require significant preparatory work (Box 1). - Careful management of liquidity to mitigate potential depreciation pressures is needed. - As exchange rate flexibility increases, transfer schemes may be required to protect lower income households from exchange rate pass-through to food or transportation prices. ### Feasibility and tradeoffs of maintaining the peg - Staff modeling (Box 1) shows: - Continued adherence to the exchange rate peg would be a feasible policy over the medium term, with a moderate sacrifice in terms of expected welfare, but only if additional adjustments are made elsewhere in the policy framework. - Compared with inflation targeting, tighter fiscal policy will be required to preserve policy space under the peg. - If nominal exchange rate movements are ruled out, the real exchange rate must adjust through wages and prices, placing a premium on flexibility in labor and goods markets under a peg. - The peg is a strong policy anchor only if reserves are high enough to make a commitment to defend the peg credible. ### Authorities’ position - The authorities do not believe Bolivia would benefit from moving away from the peg, citing: - Substantial preparation and time required to adopt inflation targeting. - Concern that transition would introduce market uncertainties reversing the long-term decline in loan and deposit dollarization and unanchoring inflationary expectations. - A move away from the peg could lead to overshooting of the nominal exchange rate, hurting lower income households dependent on imported goods, including food. - Belief that potential benefits of a flexible currency and real depreciation are overstated given Bolivia’s status as a commodity exporter with relatively low trade elasticities. - Disagreement with the ESA assessment that Bolivia’s external position is weaker than implied by fundamentals and desirable policies. ### Box 1 summary — Evidence from transitions and model results - Historical evidence: - Countries that have managed smooth transitions include Chile (1984–99), Israel (1995–2005), Poland (1990–2000), and Russia (2005–2014). - Successful transitions were generally conducted before external imbalances built up and while reserve coverage was healthy. - Preparatory measures included: increasing central bank operational independence; deepening capacity to manage domestic and foreign currency liquidity; building analytical capacity for structured macro forecasts; developing markets for FX and interest-rate hedging instruments; adopting fiscal rules (with escape clauses); and reinforcing social safety nets. - Bolivia’s readiness: - Bolivia currently meets some conditions for a successful transition, such as absence of market turmoil, but would need to address its weak fiscal position and low level of reserves with strong fiscal reforms to make a transition credible. - DSGE model results (Box 1): - Maintaining a fixed regime is feasible but requires an up-front fiscal adjustment and maintenance of a smaller fiscal deficit than with a floating rate. - Nominal rigidities imply the real exchange rate would depreciate more slowly to its equilibrium level (estimated to be around 11 percent weaker than current levels). - Inflation targeting would allow the primary balance to be ½ to 1 percent of GDP looser over the medium term and would improve household welfare relative to the pegged regime. - Under a flexible exchange rate regime, the nominal exchange rate would immediately depreciate by 6 percent and continue depreciating until it reaches equilibrium, pushing inflation temporarily above target. - Welfare gains from adopting a flexible exchange rate are estimated to be equivalent to around 3 percent of total consumption, reflecting a lower average level of underemployment and a smoother path for consumption. - In a “shock” scenario—when market preferences shift suddenly against Bolivian assets—the advantage of inflation targeting is larger: GDP would fall by around 2 ½ percentage points less relative to the pegged regime. ### Financial sector implications linked to macro policy - Loan deferral program impacts: - Program reduced interest income to the banking sector by about 3 percent of GDP. - Delayed loan repayments of around 8 percent of GDP. - Banks increased loan loss provisions by about 155 percent (or 0.3 percent of GDP). - Supervisory recommendations: - Strengthen monitoring of bank profitability, liquidity and capital while moratoria are in effect. - Phase out lending quotas for designated productive sectors and loosen caps on interest rates to improve financial intermediation and profitability. - Introduce a standing facility at the central bank to provide emergency liquidity support against collateral. ### Structural policies to increase investment - Private domestic investment and foreign direct investment are both low; foreign direct investment averaged less than one percent of GDP since 2014. - Binding constraints cited: difficult regulatory environment, lack of incentives, low Doing Business ranking (150 of 190 countries), price and export controls, credit quotas, frequent regulatory changes. - Recommended reforms: - Develop a one-stop shop to assist potential foreign investors. - Strengthen legal protection for investors. - Provide specific fiscal incentives for green investments. - Scale back state-subsidized credit for SOE’s in hydrocarbon and other sectors. - Eliminate existing export limits on soy and other agricultural products and relax domestic price controls to encourage agricultural investment. - Greater exchange rate flexibility would benefit non-hydrocarbon exporters by aiding realignment of the real exchange rate with fundamentals and supporting competitiveness. - Address governance issues in SOE operations, procurement transparency, and regulatory uncertainty to boost private investment. ### Poverty, social policy, and human capital - COVID-19 interrupted a secular downward trend for poverty and inequality. - Gini coefficient of 0.42 in 2019 was one of the lowest in South America. - Pandemic increased the rate of poverty in Bolivia in 2020 by 1.9 percent according to INE estimates. - Policy recommendations: - Avoid premature withdrawal of fiscal support for vulnerable groups until the pandemic is over. - Enhance expenditure on education and health. - Expand the existing social registry by connecting databases of individual social programs. - Authorities’ stated strategy: - Restore economic growth through greater public investment, including increased healthcare and education expenditure. - Maintain social programs: Bono Juancito Pinto, Bono Juana Azurduy, and Renta Dignidad. - Challenges: high informality (eight out of ten workers are in the informal sector) and increased unemployment due to the pandemic. ### Climate resilience and energy policy - Exposure to climate-related challenges: - Number of natural disasters rose from 15 in 2000–2009 to 25 in 2010–19. - In 2019 wildfires destroyed more than 1.7 million hectares of mostly protected forest land. - Recommendations: - Invest in resilient infrastructure (roads, communications, water and sewage systems) to contain damage and speed recovery. - Consider issuing debt with natural disaster clauses linked to third party catastrophe insurance payouts (examples: Grenada, Barbados). ICMA has drafted a standardized clause allowing deferral of all principal and interest for three years. - Renewable energy and subsidy reform: - Solar plant in Ouro: production capacity of 100 megawatts (about 6 percent of domestic electricity consumption). - Hydro, wind, and solar together account for almost 50 percent of total energy consumption in 2021Q1. - Gradual removal of hydrocarbon consumption subsidies could improve domestic energy consumption; fiscal gains should be directed to health, education, and direct transfers to low income groups to mitigate distributional impacts. - Diversify export mix by reducing reliance on hydrocarbon exports and supporting private investment in agriculture and lithium. *International Monetary Fund.* ### 40. A carbon tax in Bolivia could ### 40. A carbon tax in Bolivia could ### Emissions projections and carbon tax impact - Bolivia’s greenhouse gas emissions (GHG) in metric tons of carbon dioxide equivalent (mtCO2e) are currently projected to increase by a third, from about 60 mtCO2e in 2019 to 80 mtCO2e in 2035. - With a carbon tax of US$75 per tCO2e, that increase would become a reduction of 25 percent from 2019 levels. - Footnote definitions preserved: GHG includes carbon dioxide, methane, nitrous oxide and fluorinated gases and excludes land use, land-use change and forestry. - Estimate based on projections using the Fund’s Carbon Pricing and Assessment Tool (CPAT). ### Co-benefits and revenue recycling - Lower carbon dioxide emissions would: - reduce environmental damage caused by climate change; - lower morbidity as air pollution dissipates; - reduce congestion and road traffic accidents; - have positive consequences for productivity and growth. - Revenue from the carbon tax can be recycled to offset negative growth effects through: - higher transfers; - lower personal income taxes; - higher public investment. ### Electricity consumption by source (as presented) - 20202021Q1 Total 100.0100.0 - Hydro 31.943.4 - Wind 0.70.3 - Solar 2.63.1 - Thermal 64.753.2 - Sources: Bolivia CNDC. ### Authorities’ stance on greener economy - Authorities agree on importance of building a greener, more resilient economy and continue to invest in greener sources of energy to diversify domestic energy consumption away from fossil fuels. - Authorities are disinclined to reduce subsidies or increase taxation on fossil fuel use in the near term, preferring to rely on large public investments to transform the energy grid. ### Staff appraisal — achievements and near-term policy - Long-run social and economic gains since early 2000’s: - per capita GDP has more than tripled in the past 20 years; - poverty rate reduced from 66 to 37 percent; - life expectancy rose from 61 to 73 years; - primary school completion rate increased from 84 to 99 percent. - Pandemic response: - government increased public health outlays and provided support resulting in a primary balance accommodation of 4.7 percent of 2020 GDP; - BCB maintained an accommodative stance providing liquidity to productive, banking and public sectors. - Short-term outlook: - economy expected to grow 5 percent in 2021; - current account deficit expected to rise to around 4 percent of GDP as economy recovers; - inflation expected to be subdued in the short term, reaching around 2½ percent by end-2021 and well anchored in the medium term by the fixed exchange rate. - Recommended near-term policies: - continue assistance to households and firms most affected by COVID, prioritize spending for poorest households (including well-targeted transfers) and resources for health and education; - place near-term policy efforts in the context of a medium-term fiscal framework. ### Financial sector and monitoring - Financial sector facing shock from recession with increased credit quality concerns. - Recommended actions: - strengthen risk-based supervision and monitoring of bank profitability, liquidity and capital until moratoria are fully withdrawn; - conduct a comprehensive stress testing exercise to understand potential bank scenarios. ### Medium-term policies and fiscal sustainability - Recommended shift to a more sustainable policy mix to address depletion of international reserves: - progressive reduction in the fiscal deficit, eventually by around 7 percent of GDP, to restore a downward path for the debt-to-GDP ratio; - introduce progressive taxes (e.g., a personal income tax with progressive rates and a personal exemption equivalent to the median wage); - a tax on assessed value of property to lessen local authorities’ dependence on hydrocarbon revenues; - reduce public expenditure on goods and services and the public sector wage bill as a share of GDP while preserving investments in public health and education; - tie bonuses to performance and productivity rather than GDP growth rate; - broader public financial management reforms to improve governance, transparency, and spending productivity. ### Exchange rate, external position, and protections for vulnerable households - External sector assessment: - Bolivia’s external position weaker than implied by fundamentals and desirable policies; - real exchange rate judged to be overvalued by 10 to 15 percent, undermining competitiveness. - Recommended transition: - move away from the current pegged exchange rate toward a more flexible exchange rate and inflation targeting as the nominal anchor; - preparatory work required: make the BCB operationally independent, improve monetary tools to manage domestic liquidity, deepen capacity for structured forecasts, develop markets to hedge foreign exchange and domestic interest rate exposures. - Protect lower-income households from any import price increases during transition, for example by building on existing direct transfer systems. ### Structural reforms, climate strategy, and diversification - Structural reforms needed to: - promote inclusive growth; - increase private investment and export diversification; - strengthen governance. - Specific policy recommendations: - dismantle existing export controls (particularly for potential leading exports such as soy); - phase out price controls and replace with targeted support if necessary; - reform regulatory and legal frameworks to stimulate domestic investment and attract private foreign direct investment; - reduce vulnerabilities to corruption. - Climate-related strategy: - public investment has important role (examples cited: large solar power installation at Oruro; development of a plant to produce biodiesel for domestic use); - further steps to reduce carbon intensity include gradual elimination of subsidies for petroleum-based fuels, greater investment in renewable energy sources, and eventual adoption of a carbon tax; - incentivize diversification of exports away from hydrocarbons toward greener alternatives such as sustainable agriculture and lithium for battery technologies. ### Poverty alleviation and human capital - Continue emphasis on poverty alleviation and reduction of income inequality by: - focusing investments in human capital (especially public health and education), particularly for vulnerable households; - reducing dependence of household incomes on the commodity cycle. *Source: International Monetary Fund.* ### 52. It is proposed that the next Article IV consultation with Bolivia be held on the standard ### It is proposed that the next Article IV consultation with Bolivia be held on the standard 12 month cycle. ### Real sector developments - Economic activity fell sharply in 2020, with a large contraction especially in the mining and manufacturing sectors. - Net exports increased as imports compressed, while public investment projects slowed. - Headline inflation dipped as food prices fell at end-2020. - Key indicators (selected from figures): - Real GDP: -8.8 (2020, from Table 2) - Projection: 5.0 (2021) and 4.0 (2022) - Domestic demand and investment showed large negative contributions to 2020 GDP growth; private consumption and public consumption also contracted in 2020 (figures). ### Fiscal sector developments - Bolivia accommodated the COVID-19 shock, on the back of a sharp downturn in revenues. - Capital expenditure was compressed while fiscal policy provided countercyclical support. - Rapid increase in debt financed mostly by the central bank. - Key fiscal aggregates (Table 2 and Tables 3a/3b): - Total revenues: 25.3 (2020, percent of GDP); 26.3 (2021, percent of GDP) - Total expenditures: 38.0 (2020, percent of GDP); 36.0 (2021, percent of GDP) - Net lending/borrowing (overall balance): -12.7 (2020, percent of GDP); -9.7 (2021, percent of GDP); projections: -8.4 (2022), -7.6 (2023), -7.2 (2024), -6.7 (2025), -6.3 (2026) - Primary Balance: -11.2 (2020, percent of GDP); -7.9 (2021, percent of GDP); projections to -4.0 (2026) - Total Revenues (Bs million): 63,942 (2020); 69,477 (2021); 77,479 (2022) - Total Expenditures (Bs million): 96,122 (2020); 95,227 (2021); 101,057 (2022) - Net lending/borrowing (Bs million): -32,181 (2020); -25,750 (2021); -23,579 (2022) - Nonfinancial public sector gross public debt: 78.8 (2020, percent of GDP); 83.4 (2021); projections: 85.7 (2022), 86.6 (2023), 87.6 (2024), 88.5 (2025), 89.1 (2026) - Nonfinancial public sector gross public debt (Bs million): 199,222 (2020); 220,272 (2021); 239,851 (2022) ### Monetary sector developments - Monetary policy remained appropriately accommodative, while inflation was subdued. - The BCB provided liquidity support by reducing open market operations and providing exceptional loans to the central government and SOEs. - FX market remained stable during the pandemic and the process of “bolivianization” continued. - Key monetary and reserves figures (Table 6 and figures): - Central Bank net international reserves: 31,538 (2020, Bs million); 39,596 (2021); 34,515 (2022) — corresponding US$: 5,276 (2020), 6,451 (2021), 5,710 (2022) - Base money (Bs million): 93,669 (2020); 97,951 (2021); 103,529 (2022) - Base money (percentage change): 24.6 (2020); 4.6 (2021); 5.7 (2022) - Broad money (Bs million): 244,748 (2020); 265,825 (2021); 289,256 (2022) - Net credit to the nonfinancial public sector (BCB, Bs million): 46,708 (2020); 49,645 (2021); 63,538 (2022) - Net credit to the public sector (Financial system, percent of GDP contributions): 11.7 (2020 change in percent of broad money at beginning of period, Table 6) ### Financial sector developments - Despite the recession, the NPL ratio remained broadly steady, but returns on equity and assets dropped. - To reduce the cost of funding, the BCB reduced reserve requirements; contraction in demand contributed to an increase in deposits. - BCB liquidity support resulted in only a minor dip in the lending rate during 2020. - Key financial sector indicators (Table 7 and figures): - Nonperforming loans to total gross loans: 2.2 (2019); 1.9 (Q3 2020) - Capital adequacy (regulatory capital to risk-weighted assets): 13.0 (2019); 13.4 (Q3 2020) - Return on Assets (ROA): 1.1 (2019); 1.0 (Q3 2020) - Return on Equity (ROE): 13.8 (2019); 13.1 (Q3 2020) - Bank lending rates by type (figures): consumer, commercial, mortgage, microcredit series displayed; overall lending rates moderated modestly in 2020. ### External sector developments - Value of commodity exports fell in the first half of 2020 owing to supply shocks and lower prices; imports were markedly compressed, especially for intermediate and capital goods, contributing to an improvement in the external position. - In 2020 the financial account registered a net outflow and pressure on reserves increased. - Key external figures (Table 5 and figures): - Current account (US$ million): -176 (2020); -1,451 (2021); projections: -1,682 (2022), -1,805 (2023), -1,875 (2024), -2,021 (2025), -2,151 (2026) - Current account (percent of GDP): -0.5 (2020); -3.8 (2021); -4.1 (2022) - Exports, c.i.f. (US$ million): 6,953 (2020); 8,243 (2021); 8,657 (2022) - o/w Natural gas: 1,989 (2020); 2,215 (2021); 2,292 (2022) - o/w Minerals: 3,038 (2020); 3,784 (2021); 3,923 (2022) - o/w Soy-related: 784 (2020); 1,040 (2021); 1,067 (2022) - Imports, c.i.f. (US$ million): 7,115 (2020); 9,520 (2021); 10,270 (2022) - Gross BCB international reserves (US$ million): 5,276 (2020); 6,451 (2021); 5,710 (2022) - Reserves in percent of GDP: 14.3 (2020); 16.7 (2021); 14.0 (2022) - Months of next year's imports of goods and services: 5.8 (2020); 6.6 (2021); 5.5 (2022) - Financial account (percent of GDP): -1.5 (2020); 6.8 (2021); 2.3 (2022) ### COVID-19 statistics and economic impact - Infections declined from the peak in January and February; total infection rates are among the lowest in the region, but testing rates are also on the low side. - Both daily fatality measures and total fatalities are low among peers. - Pandemic continued to have a negative impact in 2021 despite signs of recovery in 2020. - Key COVID-19 datapoints (figures): - New tests per thousand and new cases per million shown as smoothed series (figure annotations). - Total Cases per Million and Total Tests per Thousand (as of Mar 31, 2021) compared across peers (BRAMEXCHLCOLPERUSABOL etc. in figures). - Mobility Index (7-day MA; percent change from baseline) series for residential and grocery categories shown (baseline Jan 3–Feb 6, 2020). ### Selected economic indicators and projections (Table 2 summary) - Real GDP: 4.3 (2016); 4.2 (2017); 4.2 (2018); 2.2 (2019); -8.8 (2020); 5.0 (2021); 4.0 (2022) - Nominal GDP: 2.9 (2016); 10.5 (2017); 7.4 (2018); 1.5 (2019); -10.6 (2020); 4.6 (2021); 5.9 (2022) - CPI inflation (period average): 3.6 (2016); 2.8 (2017); 2.3 (2018); 1.8 (2019); 0.9 (2020); 1.7 (2021); 2.5 (2022) - CPI inflation (end of period): 4.0 (2016); 2.7 (2017); 1.5 (2018); 1.5 (2019); 0.7 (2020); 2.5 (2021); 2.8 (2022) - Total investment (percent of GDP): 21.1 (2016); 22.2 (2017); 20.6 (2018); 19.9 (2019); 15.8 (2020); 18.8 (2021); 19.8 (2022) - Gross national savings (percent of GDP): 15.4 (2016); 16.1 (2017); 16.1 (2018); 14.1 (2019); 12.4 (2020); 11.4 (2021); 11.9 (2022) - Combined public sector revenues and grants (percent of GDP): 32.7 (2016); 30.8 (2017); 29.0 (2018); 28.8 (2019); 25.3 (2020); 26.3 (2021); 27.7 (2022) - Expenditure (percent of GDP): 39.9 (2016); 38.6 (2017); 37.1 (2018); 36.1 (2019); 38.0 (2020); 36.0 (2021); 36.1 (2022) - Total gross NFPS debt (percent of GDP): 46.5 (2016); 51.3 (2017); 53.8 (2018); 59.1 (2019); 78.8 (2020); 83.4 (2021); 85.7 (2022) ### Public sector operations and financing (Tables 3a/3b highlights) - Total Revenues (Bs million): 63,942 (2020); 69,477 (2021); 77,479 (2022) - Total Expenditures (Bs million): 96,122 (2020); 95,227 (2021); 101,057 (2022) - Net incurrence of liabilities (Bs million): 32,181 (2020); 25,750 (2021); 23,579 (2022) - External net incurrence: 5,470 (2020); 20,369 (2021); 6,169 (2022) - Domestic net incurrence: 26,710 (2020); 5,381 (2021); 17,409 (2022) - Interest (Bs million): 3,782 (2020); 4,853 (2021); 5,592 (2022) - Domestic interest: 1,405 (2020); 2,169 (2021); 2,414 (2022) - Foreign interest: 2,378 (2020); 2,684 (2021); 3,179 (2022) - Net acquisition of nonfinancial assets (Bs million): 12,593 (2020); 18,521 (2021); 22,969 (2022) ### Non-financial public sector debt profile (Table 4) - Total NFPS debt (Bs million): 76,474 (2013); 85,736 (2015); 109,031 (2016); 132,859 (2017); 149,911 (2018); 167,110 (2019) - Total NFPS Debt (percent of GDP): 36.1 (2013); 37.6 (2014); 40.9 (2015); 46.5 (2016); 51.3 (2017); 53.8 (2018); 59.1 (2019) - Components include internal debt, foreign debt, BCB loans to SOEs, BCB loans to FINPRO and FNDR, and NFPS deposits at the BCB. ### Balance of payments and reserves dynamics (Table 5) - Current account (US$ million): -176 (2020); -1,451 (2021); -1,682 (2022) - Financial account (US$ million): -563 (2020); 2,613 (2021); 928 (2022) - Change in reserve assets (US$ million): 1,752 (2020); -1,175 (2021); 741 (2022) - Gross BCB international reserves (US$ million): 5,276 (2020); 6,451 (2021); 5,710 (2022) - Reserves in months of next year's imports: 5.8 (2020); 6.6 (2021); 5.5 (2022) - Nominal GDP (US$ million): 36,839.3 (2020); 38,520.6 (2021); 40,802.3 (2022) ### Monetary survey and financial aggregates (Table 6) - Central Bank net international reserves (Bs million): 31,538 (2020); 39,596 (2021); 34,515 (2022) - Base money (Bs million): 93,669 (2020); 97,951 (2021); 103,529 (2022) - Broad money (Bs million): 244,748 (2020); 265,825 (2021); 289,256 (2022) - Credit to the private sector (Bs million): 202,909 (2020); 212,170 (2021); 224,737 (2022) - Credit to the private sector (percentage change): 9.1 (2019); 4.6 (2020); 5.9 (2021); projections 7.4 (2022), 7.2 (2023), 7.1 (2024), 7.0 (2025) ### Financial stability indicators (Table 7) - Regulatory capital to risk-weighted assets: 13.0 (2019); 13.4 (Q3 2020) - Nonperforming loans to total gross loans: 2.2 (2019); 1.9 (Q3 2020) - Loan loss provisions to NPLs: 31.1 (2019); 7.4 (Q3 2020) - Return on Assets: 1.1 (2019); 1.0 (Q3 2020) - Return on Equity: 13.8 (2019); 13.1 (Q3 2020) - Liquid assets to short-term liabilities: 48.9 (2019); 45.6 (Q3 2020) _International Monetary Fund — Bolivia: figures, tables, and projections as presented in the source content._ ### Annex I. Global Risk Matrix ### Annex I. Global Risk Matrix ### Conjunctural shocks and scenarios - Unexpected shifts in the COVID-19 pandemic — likelihood: Medium. - Asynchronous progress: Limited access to, and longer-than-expected deployment of, vaccines in Bolivia—combined with dwindling policy space—prompt a reassessment of their growth prospects. - Prolonged pandemic: Disease proves harder to eradicate (e.g., due to new virus strains, short effectiveness of vaccines, or widespread unwillingness to take them), requiring costly containment efforts and prompting persistent behavioral changes rendering many activities unviable. As an EM country with limited fiscal space, Bolivia would likely encounter difficulties in providing sufficient policy support. Most effective mitigation: continue to strengthen efforts to obtain and distribute vaccines. - Faster containment: Pandemic contained faster than expected due to rapid production and distribution of vaccines, boosting confidence and economic activity. - Sharp rise in global risk premia exposes financial and fiscal vulnerabilities — likelihood: Medium. - A reassessment of market fundamentals triggers a widespread risk-off event; risk asset prices fall sharply and volatility spikes, leading to significant losses in major non-bank financial institutions. - Higher risk premia generate financing difficulties for leveraged firms and households, trigger bankruptcies that erode capital buffers, and can extend financing difficulties to sovereigns with excessive public debt, leading to cascading debt defaults. - Mitigation: obtain a larger share of financing from lower-cost multilateral sources. - Widespread social discontent and political instability — likelihood: Medium. - Social tensions from pandemic and inadequate policy response (unemployment, poverty, shortages, higher prices of essentials, unequal access to vaccines) can weaken policymaking and confidence. - Despite the global likelihood rating, with the recent landslide victory of the MAS party this is assessed as low probability in the case of Bolivia. - Oversupply and volatility in the oil market — likelihood: Medium. - Higher supply (e.g., OPEC+ disagreements) and lower demand (e.g., slower global recovery from COVID-19) lead to renewed weakness in energy prices. - In Bolivia, this would worsen the current account deficit, require larger BOP financing, and deepen the budget deficit; uncertainty about production cuts and demand recovery leads to bouts of volatility. ### Structural risks - Higher frequency and severity of natural disasters related to climate change — likelihood: Medium/Low. - Severe economic damage to Bolivia and acceleration of emigration or urbanization. - Sequence of severe events in large economies reduces global GDP and prompts recalculation of risk and growth prospects. - Disasters hitting key infrastructure or disrupting trade raise commodity price levels and volatility (low probability). ### Domestic risks - Declining natural gas production from existing fields and failure to discover new fields — likelihood: Medium. - Production from existing fields is declining and the success of ongoing exploration activities is uncertain. ### Debt Sustainability Analysis — key findings and assumptions - Overall assessment: Public debt is assessed as sustainable, but with high risks. - Recent evolution: - NFPS debt at end-2019: 59 percent of GDP, or 167 billion bolivianos (US$24 billion). - Domestic debt, including lending by BCB: 90 billion bolivianos (US$13 billion), about 54 percent of total NFPS debt. - Foreign debt, including domestic debt issued in FX: US$11½ billion (77 billion bolivianos), 46 percent of total NFPS debt. - Multilateral creditors hold 61 percent of foreign debt; bilateral creditors hold 11 percent; external public bond issuance accounts for 18 percent. - Historical changes (2012–2019): - NFPS debt to GDP increased by about 24 percentage points to 59 percent. - Domestic debt share rose from 20 to 31 percent of GDP; foreign debt rose from 15 to 27 percent of GDP. - Economic assumptions (selected): - Growth and Inflation: 2020 GDP projected contraction of 8.8 percent; average inflation projected to slow to about 1 percent. Medium term: growth recovers slowly; inflation returns to long-run average. Staff used conservative assumptions. - Primary Balance: 2020 primary balance projected at minus 12.7 percent of GDP. Assumed to gradually improve to minus 4 percent by 2025. - Fiscal multiplier used: 1. - Debt management strategy: limit expensive external capital market financing; rely mainly on BCB for domestic financing and multilateral and bilateral creditors for external financing. - Public debt projections: - Public debt-to-GDP ratio: projected to reach 79 percent of GDP in 2020, rising to 88 percent of GDP by 2025. - In 2020 the debt-to-GDP ratio is projected to increase by 19.7 percentage points; the primary balance during the pandemic contributes about 11 percentage points to the increase. - Local currency debt: projected increase by 14 percentage points of GDP to 46 percent of GDP by end of projection period; implicit interest rate on domestic debt projected to remain at an average 1½ percent. - Foreign currency debt: projected to increase by 6 percentage points of GDP in 2021 on the back of a US$2bn foreign bonds issuance assumption and to decrease to 37 percent of GDP by end of projection period. - Two-thirds of newly issued debt assumed financed by multilateral creditors, the rest by bilateral creditors. - Implicit interest rate on external debt assumed to increase in 2020 by 50bps due to external bond issuance and to remain constant at 3 percent. - Stress tests and risks: - Debt remains above the 70 percent of GDP vulnerability benchmark under all stress tests. - Under primary balance and GDP shocks, debt-to-GDP trajectory expected to be 5 percentage points higher than baseline by end-2025. - Under the combined macro-fiscal shock, debt-to-GDP trajectory projected above 100 percent by end-2025. - Gross financing needs climb above 15 percent of GDP in 2020 and moderate afterwards; short-term increase due to large primary deficit and BCB short-term financing in 2020. - Debt profile vulnerabilities are low: - Limited share of short-term debt (less than 4 percent of GDP by end of projection period). - EMBIG spread is below the benchmark of 600 basis points. - External debt held by non-residents and the share of FX debt are lower than respective risk-assessment benchmarks. - Public debt is projected above the 70 percent of GDP risk assessment benchmark under all stress scenarios while gross financing needs rise above the 15 percent of GDP benchmark in 2020. ### Select quantitative projections and indicators (from Figure 1 and text) - NFPS debt end-2019: 59 percent of GDP; 167 billion bolivianos (US$24 billion). - Domestic debt: 90 billion bolivianos (US$13 billion); 54 percent of total NFPS debt. - Foreign debt: US$11½ billion (77 billion bolivianos); 46 percent of total NFPS debt. - 2020 GDP contraction: -8.8 percent. - 2020 average inflation: about 1 percent. - 2020 primary balance (projection in text): minus 12.7 percent of GDP. - Primary balance contribution to 2020 debt increase: about 11 percentage points. - Public debt-to-GDP: 79 percent in 2020; 88 percent in 2025. - Increase in debt-to-GDP in 2020: 19.7 percentage points. - Local currency debt implicit interest rate: 1½ percent (average). - External debt implicit interest rate: increase by 50bps in 2020 then remain at 3 percent. - Assumed foreign bond issuance in 2021 for projection: US$2bn (text) [note: 2021 budget foresees a US$3 billion issuance per footnote]. - Gross financing needs benchmark breach: above 15 percent of GDP in 2020. - EMBIG spread benchmark: 600 basis points. *Source: IMF staff.* ### Annex III. External Sector Assessment ### Annex III. External Sector Assessment ### Overall Assessment - The external position in 2020 was moderately weaker than the level implied by medium-term fundamentals and desirable policies. - The EBA-lite CA model finds the external position was approximately in line with the level implied by fundamentals and desirable policies, but this result is driven by anomalous one-off factors associated with the pandemic, notably significant private sector import compression and constrained public sector demand. - With a de facto fixed exchange rate regime, Bolivia has run persistent current account deficits, with diminishing international reserves and substantial real exchange rate appreciation since 2015. - At end-March reserves fell to US$4.7billion, which is 5.2 months of imports or 61 percent of the Fund’s 2020 reserve adequacy metric. - The outlook for 2021 remains subject to considerable uncertainty around the protracted impact of the COVID-19 pandemic. ### Potential Policy Responses - Short-term priority: provide adequate economic and health measures to combat COVID-19. - Medium-term priorities: - Commit to implement pro-growth and inclusive fiscal reforms. - Reinvigorate structural reforms to improve competitiveness. - If opting to preserve the stabilized exchange rate, Bolivia will need to rely on internal adjustments to public and private demand. - Specific policy guidance: - Wages should grow in line with productivity. - The government should implement fiscal reforms to reduce the fiscal deficit, prioritize spending, and protect the most vulnerable. ### Foreign Assets and Liabilities: Position and Trajectory - Background: - Bolivia has been a net debtor since 2016Q4. - NIIP weakened from a net surplus of US$4.5 billion (13.6 percent of GDP) in 2014 to a net deficit of US$-7.6 billion (-20.7 percent of GDP) at end-2020. - Over half of foreign liabilities are loans and debt instruments; the remaining share is equity, primarily direct investment. - Bolivia received about $327 million from the IMF under the Rapid Financing Instrument to cover emergency financing needs arising from COVID-19; this was repaid in February 2021. - Assessment and projections: - Staff project the NIIP will continue to deteriorate by 2 to 3 percent of GDP per year in the medium term, owing to sustained current account deficits. - To maintain the NIIP at the 2020 level of -20.7 percent of GDP would require a current account balance of -1.0 percent of GDP in 2021, gradually deteriorating to -1.4 percent of GDP by 2025. - On the upside, short-term gross financing needs are limited as much of the external debt is long-term with favorable financing terms. - Key 2020 stock figures (percent of GDP): - NIIP: -20.7 - Gross Assets:44.4 - Debt Assets:14.3 - Gross Liab.: 65.1 - Debt Liab.: 40.1 ### Current Account - Background: - The current account follows commodity price swings and related fiscal policy. - After the collapse in commodity prices in 2015 and associated increase in the budget deficit, the current account swung sharply into deficit following a 10-year period of recurring surpluses. - Since 2015, the current account deficit has averaged 4.1 percent of GDP. - Real exports declined by 31.1 percent and real imports decreased by 25.9 percent from 2015 to 2020. - In 2019 the current account deficit narrowed to 3.4 percent of GDP with a significant decline in capital goods imports offsetting weakness in hydrocarbons and mining exports. - Depressed natural gas prices over 2019 and 2020, combined with a shortage of global demand from COVID-19, reduced Bolivian exports over 2020. - Strict quarantine measures in 2020 greatly depressed imports, causing the current account deficit to moderate to 0.5 percent of GDP. - Assessment: - The cyclically adjusted CA balance stood at -3.0 percent of GDP in 2020. - The EBA-lite CA regression estimates a norm of –3.6 percent of GDP, implying a CA gap of 0.6 percent. - Considering the CA model and inadequate reserves, staff judge the external position to be moderately weaker. - Staff expect the current account to return towards its norm in the medium term as the effects of COVID-19 dissipate. ### Real Exchange Rate - Background: - CPI-based real effective exchange rate (REER) has appreciated since end-2017. - As of end-2020, the REER has appreciated by 55 percent since the boliviano was pegged to the U.S. dollar in 2011. - The appreciation largely reflects depreciation of Bolivia’s major trading partners, including Brazil and Argentina, against the U.S. dollar. - Model estimates and gaps (2020): - CA-Actual: -0.5 - Cyclical contributions (from model): (-)1.4 - COVID-19 adjustor (+) 1/: -0.8 - Additional temporary/statistical factors (+): 0.0 - Natural disasters and conflicts (-): 0.3 - Adjusted CA: -3.0 - CA Norm (from model) 2/: -3.6 - Adjusted CA Norm: -3.6 - CA Gap: 0.6 - o/w Relative policy gap: -4.3 - Elasticity: -0.19 - REER Gap (in percent): -3.2, 38.0, 16.4 - Assessment: - The CA gap implies a REER undervaluation of -3.2 percent (applying an estimated elasticity of 0.19). - For 2020, the REER regression model indicates an overvaluation of 38.0 percent while the ES model indicates an overvaluation of 16.4 percent. - Policy focus to realign the exchange rate with fundamentals: fiscal consolidation, improving productivity, and improving competitiveness. ### Capital and Financial Accounts: Flows and Policy Measures - Background: - Bolivia issued external sovereign bonds of $1 billion (2.6 percent of GDP) in 2017 with a maturity of 10 years at an interest rate of 4.5 percent. - To help curtail the financing gap stemming from COVID-19, the IMF, World Bank, IDB and CAF provided funding totaling about $1.35 billion in 2020. - Due to uncertainty and depressed economic activity surrounding COVID-19, net FDI flow is projected at - (text truncated in source). *Source: Annex III. External Sector Assessment, 1bolea2021001.* ### 0.6 percent of GDP compared to a three -year average of 0.6 percent of GDP net inflow. According to the ### 1bolea2021001 - 0.6 percent of GDP compared to a three -year average of 0.6 percent of GDP net inflow. According to the ### Current account, capital flows, and assessment - Current account deficit has been mainly financed by running down international reserves. - Net inflows: "0.6 percent of GDP compared to a three -year average of 0.6 percent of GDP net inflow." - According to the Chinn-Ito index (using data for 2018), Bolivia’s capital account is less open than the LAC average. - Assessment: Declining reserves, and continued fiscal and current account deficits, expected to raise the cost of external funding, limiting prospects for further external sovereign bond issuances. - Policy priority: Authorities need policies to attract larger FDI inflows to bolster the non-hydrocarbon sector to support sustainable and durable growth. ### FX intervention, exchange arrangement, and international reserves - Exchange regime: boliviano pegged at a rate of 6.9 to the U.S. dollar; de facto arrangement classified as a ‘stabilized arrangement’ effective November 2, 2011. - Net international reserves fell by 47 percent from 8.9 billion at end-2018 to 4.7 billion in March 2021. - Reserves adequacy metrics: - Reserves remain adequate at 5.2 months of imports or 61 percent of the ARA metric according to standard Fund metrics. - Reserves have diminished from US$15 billion to US$4.7 billion in the last 6 years. - Reserves are projected to fall to about 50 percent of the Fund’s reserve adequacy metric due to persistent current account deficits. - Assessment: To preserve the stabilized exchange rate, correcting external imbalances will have to rely on internal adjustment, including fiscal consolidation supported by structural reforms. ### Fund relations, membership, and safeguards - Membership: Joined December 27, 1945; Article VIII. - Quota: 240.10 (SDR Million) — 100.00 percent of quota. - IMF holdings of currency (Holdings Rate): 214.08 — 89.16 percent. - Reserve Tranche Position: 26.02 — 10.84 percent. - SDR Department net cumulative allocation: 164.13 — 100.00 percent; holdings 167.20 — 101.87 percent. - Outstanding Purchases and Loans: None. - Safeguards: Previous assessments (2003, updated 2004) found no systemic safeguards risks but noted uncertainties about de facto operational independence and program monetary data; currently BCB is not subject to the policy. ### Statistical issues, data quality, and priority reforms - General assessment: Data provision broadly adequate for surveillance, but priority improvements urged: - (i) completing the rebasing of the GDP and CPI indices; - (ii) improving the coverage of the nonfinancial public sector. - National accounts: Current base year 1990 is outdated; INE started rebasing to 2010 and implementing the 2008 SNA; STA provided TA in 2018 and 2019. - Labor market: Quarterly employment survey discontinued in 2010; yearly wage information still compiled by INE. - Prices: CPI (2016=100) basket comprises 367 items and covers nine capital cities; no PPI currently disseminated. - Government finance statistics: Annual consolidated central government data do not cover all SOE operations and subsidiaries; conversion to GFSM 2014 format completed with STA assistance. - Monetary and Financial Statistics: Monthly reporting to STA using SRFs; need to improve coverage and timeliness for OFCs and align definitions with the MFSMCG; proposed TA mission (August 2020) not yet scheduled by BCB. - Financial sector indicators: - BCB reports several FAS indicators including commercial bank branches per 100,000 adults and ATMs per 100,000 adults. - BCB compiles almost all core FSIs for deposit takers; latest reported FSIs correspond to September 2020. - External sector statistics: BCB began publishing BPM6 BOP and IIP in November 2016; staff noted inconsistent recording of government-issued external bonds held by residents as external debt and urged adherence to BPM6. ### Recent economic performance and sectoral measures - Growth and activity: - Estimated growth in first four months of 2021: 5.3 percent (Global Economic Activity Index). - Same period 2020: 7.5 percent contraction. - Health sector and COVID-19 response: - Vaccines purchased: 2.7 million doses arriving in the country out of a total of 15 million. - Tests purchased: 2.2 million tests for early and massive detection. - Doses administered (first and second doses combined): 1,878,702 (through June 7, 2021). - Objective population to be vaccinated: 7,180,428 people. - Coverage: 20.4 percent received the first dose and 5.6 percent the second dose (through June 7, 2021). - Labor market and social: - Urban unemployment: 11.6 percent in July 2020; fell to 7.6 percent by April (year not specified but context implies April 2021). - Social programs continued: Bono Juancito Pinto, Bono Juana Azurduy, Renta Dignidad, and others. - Fiscal sector: - Fiscal-Financial Program target for 2021: fiscal deficit of approximately 9.7 percent of GDP. - Fiscal deficit recorded in 2020: 12.7 percent of GDP. - Public investment execution between November 2020 and April 2021: USD 1,304 million, which is 15.6 percent of the year programmed amount (USD 4,011 million) and an increase of around 60 percent with respect to the November 2019 - October 2020 period. - Authorities working on Social Economic Development Plan (PDES) 2021-2025 prioritizing productive public investment and short-term infrastructure projects. - External sector: - By April 2021, accumulative surplus trade balance: USD 453 million (compared to USD 28 million in the same period the previous year). - Flow of remittances in first four months of 2021: USD 450 million, 42.1 percent higher than same period 2020. - These outcomes contribute to strengthening Net International Reserves. - Monetary and financial sector measures and support: - Government measures: capitalization of 100 percent of bank profits; reestablishment of minimum portfolio quotas for prioritized sectors; reprogramming/refinancing of credits with six-month grace period. - FIREDIN (Fideicomisos para la Reactivación y Desarrollo de la Industria Nacional) with import substitution (SIBOLIVIA) for approximately USD 133 million. - Credit lines and refinancing measures created to support the productive sector, promote import substitution (SIBOLIVIA), and recover tourism. ### Economic outlook, assessment, and recommendations - Main challenge: economic recovery and consolidation of reconstruction given deterioration from poor management during the transitional government and the pandemic. - Recommended policy priorities and actions emphasized in the report: - Promote public investment and prioritize productive public investment and short-term infrastructure projects (PDES 2021-2025). - Advance industrialization, import substitution measures, and boost the productive sector. - Continue redistributive and social protection policies. - Pursue fiscal consolidation and structural reforms to correct external imbalances and preserve the stabilized exchange rate. - Attract larger FDI inflows to bolster the non-hydrocarbon sector and support sustainable growth. - Concluding assessment: After the IMF staff visit, Bolivian economic performance is described as encouraging owing to health and economic measures implemented by the current government. *Source: BOLIVIA — STAFF REPORT FOR THE 2021 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX (May 27, 2021).* --- _Source: https://www.imf.org/-/media/files/publications/cr/2021/english/1bolea2021001.pdf_