IMF Executive Board Concludes 2021 Article IV Consultation with Bolivia
IMF News, June 16, 2021
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- Published: June 16, 2021
Overview
- Press Release No. 21/180; June 16, 2021.
- The Executive Board concluded the Article IV consultation with Bolivia on June 14, 2021.
- The Covid-19 pandemic caused "devastating effects" with "over 15,000 deaths and 400,000 cases reported so far."
Pandemic impact and macroeconomic performance
- GDP contracted by 8.8 percent in 2020 due to quarantine restrictions that "restricted mobility and access to work," with output declining in all sectors except agriculture.
- CPI inflation compressed to 0.9 percent in 2020 amid the slowdown in growth and falling food prices.
- The current account tightened by 3 percentage points to ½ percent of GDP in 2020, attributed to dampened import demand.
- To combat the pandemic, authorities increased public health outlays and provided support to households, businesses, and the financial sector, including one-off expenditures such as the Bono Contra el Hambre.
Fiscal developments and external buffers
- The public sector deficit increased to 12.7 percent of GDP in 2020 due to cyclical downturn and fiscal support measures.
- International reserves fell from US$6.5 billion at end-2019 to US$4.7 billion at end-March 2021.
- Fiscal expansion in 2020 contributed to a rise in total gross NFPS debt to 78.8 percent of GDP in 2020, with projections of 83.4 percent in 2021 and 85.7 percent in 2022.
Outlook and risks
- Growth is projected to rebound by 5.0 percent in 2021, supported by the authorities’ vaccination program for the full adult population and higher international commodity prices boosting mining and hydrocarbons; agricultural growth is expected to remain strong.
- Modest fiscal deficit improvements projected for 2021 based on recovering revenues, progressive withdrawal of COVID-19-related one-off expenditures, 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 domestically and in trading partners.
- Uncertainty over the projected rise in global commodity prices.
- Reliance on financing from international markets exposing Bolivia to changes in external financing conditions.
- Covid-19-related loan payment deferrals that may increase financial stability risks.
Executive Board assessment and policy recommendations
- Directors commended the authorities for proactive pandemic response: fiscal support to households and businesses, enhanced health-sector support, and strong vaccination efforts.
- Near-term policy guidance:
- Continue supporting recovery with targeted financial support for affected households while the health crisis endures.
- Sustain macroeconomic support in the near term while safeguarding medium-term fiscal and external sustainability.
- Medium-term fiscal strategy:
- Place near‑term policy efforts within a clear medium-term plan to bring the fiscal deficit to a sustainable level and stabilize the debt-to-GDP ratio.
- Fiscal consolidation should include measures to mobilize revenue and to rationalize and refocus expenditure to continue improving social welfare and reducing poverty.
- External and exchange-rate policy:
- Directors noted preference for maintaining the current exchange rate regime (linked to low and stable inflation) but encouraged exploring benefits and preconditions for carefully allowing greater exchange rate flexibility over the medium term to increase resilience, forestall reserve losses, and increase competitiveness of non-hydrocarbon industries.
- Financial sector:
- Welcomed loan-deferral program support; encouraged supervisory authority to strengthen monitoring of bank profitability, liquidity, and capital while moratoria are in effect.
- Structural reforms to boost private and foreign direct investment:
- Recommended phasing out price and export restrictions, relaxing credit quotas and interest rate caps, reducing subsidies to state-owned enterprises in the hydrocarbon sector, and addressing social equity concerns through targeted fiscal support.
- Noted that addressing governance issues and regulatory uncertainty is crucial to support job creation and boost long‑term growth.
- Social and green priorities:
- Commended impressive poverty reduction since the mid‑2000s; continued progress depends on increasing support to education and public health systems.
- Welcomed authorities’ investment in greener energy sources to diversify domestic energy consumption away from fossil fuels, provide new revenue sources, and bolster the recovery.
Key statistical highlights (selected figures preserved exactly)
- Deaths and cases: "over 15,000 deaths and 400,000 cases reported so far."
- Real GDP growth: 2016: 4.3; 2017: 4.2; 2018: 2.2; 2019: (missing in table for 2019 but 2019 noted elsewhere); 2020: -8.8; 2021 (proj): 5.0; 2022 (proj): 4.0.
- Nominal GDP growth: 2016: 2.9; 2017: 10.5; 2018: 7.4; 2019: 1.5; 2020: -10.6; 2021 (proj): 4.6; 2022 (proj): 5.9.
- CPI inflation (period average): 2016: 3.6; 2017: 2.8; 2018: 2.3; 2019: 1.8; 2020: 0.9; 2021 (proj): 1.7; 2022 (proj): 2.5.
- Total investment (percent of GDP): 2016: 21.1; 2017: 22.2; 2018: 20.6; 2019: 19.9; 2020: 15.8; 2021 (proj): 18.8; 2022 (proj): 19.8.
- Gross national savings (percent of GDP): 2016: 15.4; 2017: 16.1; 2018: 14.1; 2019: 12.4; 2020: 11.4; 2021 (proj): 11.9.
- Combined public sector revenues and grants (percent of GDP): 2016: 32.7; 2017: 30.8; 2018: 29.0; 2019: 28.8; 2020: 25.3; 2021 (proj): 26.3; 2022 (proj): 27.7.
- Combined public sector expenditure (percent of GDP): 2016: 39.9; 2017: 38.6; 2018: 37.1; 2019: 36.1; 2020: 38.0; 2021 (proj): 36.0.
- Combined public sector net lending/borrowing (overall balance, percent of GDP): 2016: -7.2; 2017: -8.1; 2018: -12.7; 2019: -9.7; 2020: -8.4; 2021 (proj): -9.7; 2022 (proj): -8.4.
- Total gross NFPS debt (percent of GDP): 2016: 46.5; 2017: 51.3; 2018: 53.8; 2019: 59.1; 2020: 78.8; 2021 (proj): 83.4; 2022 (proj): 85.7.
- Current account (percent of GDP): 2016: -5.6; 2017: -5.0; 2018: -4.5; 2019: -3.4; 2020: -0.5; 2021 (proj): -3.8; 2022 (proj): -4.1.
- Exports of goods and services (percent of GDP): 2016: 24.2; 2017: 25.4; 2018: 25.5; 2019: 24.9; 2020: 20.5; 2021 (proj): 23.3; 2022 (proj): (missing).
- Imports of goods and services (percent of GDP): 2016: 31.6; 2017: 31.1; 2018: 30.7; 2019: 22.4; 2020: 28.4; 2021 (proj): 28.9.
- Central Bank gross foreign reserves (in millions of U.S. dollars): 2016: 10,081; 2017: 10,261; 2018: 8,946; 2019: 6,468; 2020: 5,276; 2021 (end-March): 4,700 (noted in narrative as US$4.7 billion at end-March 2021). Table projections: 2021 (proj): 6,451; 2022 (proj): 5,710.
- Central Bank gross foreign reserves (in percent of GDP): 2016: 29.5; 2017: 27.2; 2018: 22.0; 2019: 15.7; 2020: 14.3; 2021 (proj): 16.7; 2022 (proj): 14.0.
- Broad money (percent of GDP): 2016: 81.5; 2017: 81.2; 2018: 79.8; 2019: 78.4; 2020: 96.8; 2021 (proj): 100.6; 2022 (proj): 103.3.
- Nominal GDP (in billions of U.S. dollars): 2016: 34.2; 2017: 37.8; 2018: 40.6; 2019: 41.2; 2020: 36.8; 2021 (proj): 38.5; 2022 (proj): 40.8.
- Bolivianos/U.S. dollar (end-of-period): 6.9 (2016); other years: …
- Oil prices (U.S. dollars per barrel): 2016: 42.8; 2017: 52.8; 2018: 68.3; 2019: 61.4; 2020: 41.3; 2021 (proj): 58.5; 2022 (proj): 54.8.
IMF Press Release No. 21/180 — June 16, 2021
