Press Release: IMF Completes Fourth Review Under Bolivia's Stand-By Arrangement

IMF News, September 27, 2004

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Canonical URL: Press Release: IMF Completes Fourth Review Under Bolivia's Stand-By Arrangement

The Executive Board completed the fourth review of Bolivia's performance under a 21-month, SDR128.64 million (about US$189 million) Stand-By Arrangement originally approved on April 2, 2003.
The arrangement was later "augmented and extented" (see Press Release No. 04/113).
The completion of the review enables the release of SDR 26.8 million (about US$39 million) to Bolivia.
This disbursement would bring total disbursements under the arrangement to SDR 101.84 million (about US$149 million).
In completing the review, the Executive Board approved Bolivia's request for waivers for the nonobservance of performance criteria.

"Bolivia's economic performance is improving, and implementation of the authorities' economic program is broadly on track."
Economic growth has picked up.
The current account is in surplus.
Inflation remains in single digits.
The financial situation stabilized in the last two months after some deposit losses related to the introduction of the financial transactions tax.
The affirmative outcome in the gas referendum should give the Bolivian authorities some breathing space to develop their hydrocarbons strategy.
A national consensus on economic policies is identified as important to take the economic agenda forward.

The authorities remain committed to achieving their fiscal target for 2004.
They intend to continue to make progress in 2005 toward attaining fiscal sustainability while increasing infrastructure and social spending.
Recommended policy measures include:
- Appropriate tax reform, including a phase-out of the financial transactions tax.
- Measures to improve tax administration.
- Measures to curtail current spending.
- Measures to improve public expenditure management.
On debt sustainability: because Bolivia's debt burden is sizeable, attainment of debt sustainability will depend to a large extent on financing the budget deficit with grants and concessional financing and avoiding non-concessional borrowing.

Authorities are taking measures to protect and strengthen the financial system, including:
- Strengthening financial supervision and liquidity monitoring.
- Improving prudential norms and moving towards a risk-based supervisory framework.
- Continuing a proactive interest rate policy in response to changes in liquidity conditions.
- Increasing placements at longer maturities given the improved domestic bond market.

An appropriate hydrocarbons' strategy is necessary to attain medium-term sustainability.
The authorities recently submitted a hydrocarbons bill to Congress and will continue to work toward ensuring that conditions essential for development of the sector and medium-term sustainability are developed.
The authorities are committed to ensuring the efficient and transparent use of hydrocarbons-related revenues to benefit the Bolivian people.

The authorities expect to complete a Poverty Reduction Strategy Paper by the end of this year, which will form the basis for the development of a medium-term economic strategy to raise Bolivian living standards.
Broadening and consolidating the national consensus for policies to support growth and poverty reduction, including through the efficient development of Bolivia's hydrocarbon resources, will facilitate the development of such a strategy.
"The IMF stands ready to continue to assist Bolivia after the current arrangement ends in December," Mr. Carstens said.

Press Release: IMF Completes Fourth Review Under Bolivia's Stand-By Arrangement — September 27, 2004. International Monetary Fund.