IMF Executive Board Concludes 2024 Article IV Consultation with Bolivia
IMF News, January 28, 2025
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- Published: January 28, 2025
Overview and recent developments
- On March 22, 2024, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation for Bolivia. This included a discussion of the findings of the Financial Sector Assessment Program (FSAP) exercise for Bolivia.
- Bolivia's growth momentum moderated in 2023 to 2.5 percent, driven by declining natural gas production, less public investment, and financial market turmoil.
- Inflation was held below 2 percent at year-end 2023 due to price controls, food and fuel subsidies, export restrictions, and strong agricultural production.
- The combination of lower natural gas exports, high fuel imports, a large fiscal deficit increasingly financed by the central bank, and an overvalued exchange rate contributed to:
- a wider current account deficit (estimated at 5 percent of GDP for 2023),
- near-depletion of international reserves,
- public debt increasing to nearly 84 percent of GDP by end-2023,
- sharply rising sovereign spreads in early 2023,
- failure of Banco Fassil and resulting restrictions on withdrawal of FX deposits by banks, heightening financial sector stability risks.
- Extreme weather events (2023 droughts and recent floods) pose risks to agriculture and critical infrastructure.
- Potential upside from Bolivia’s vast lithium resources exists, but developing the lithium sector and scaling up domestic production capacity will likely take time.
Outlook and risks
- Growth projections:
- Growth is anticipated to decelerate to 1.6 percent in 2024.
- Growth is projected to hold around 2.2-2.3 percent in the medium term under continuation of current policies.
- Inflation projections:
- Inflation is forecast to reach 4.5 percent in 2024, stabilizing around 4 percent thereafter.
- CPI inflation (period average): 1.7 (2022), 2.6 (2023), 4.5 (2024), 4.2 (2025), 3.9 (2026).
- CPI inflation (end of period): 3.1 (2022), 2.1 (2023), 4.8 (2024), 4.0 (2025).
- Outlook is predicated on significantly improved access to external financing; without it, the risk of disorderly fiscal and/or exchange rate adjustment is elevated.
- External and domestic downside risks listed:
- reduced external demand,
- intensified global conflicts disrupting trade routes,
- commodity price volatility,
- renewed tightening of financial conditions,
- faster decline in hydrocarbon production,
- higher inflation due to FX scarcity,
- confidence shocks,
- social unrest stemming from inequality and security concerns (evidenced by prolonged road blockages of early 2024).
Executive Board assessment and policy recommendations
- Executive Directors:
- agreed with the thrust of the staff appraisal,
- welcomed Bolivia's socioeconomic progress over the past several years,
- expressed concerns about low reserves, uncertain fiscal financing, and pressures in parallel exchange markets.
- Directors stressed urgency of shifting from unsustainable policies to avoid disorderly adjustment and significant social and economic hardship.
- Recommended policy elements:
- a sustainable policy mix likely requiring both fiscal adjustment phased in over the next few years and an up front step devaluation to more quickly address the external imbalance and allow for a build up of reserves,
- improving the social safety net to shield poorer households from inflation pressures following a realignment of the exchange rate,
- strengthening fiscal institutions to underpin credibility of the planned adjustment,
- improving central bank governance in support of a shift to a crawling peg and, eventually, to inflation targeting,
- strengthening the central bank’s capacity to conduct sterilization operations and lifting lending rate caps to improve allocation of capital and enhance monetary policy transmission,
- improving crisis preparedness and contingency planning in line with FSAP recommendations to safeguard financial stability.
- Recommended structural and regulatory reforms:
- phasing out export ceilings and price controls,
- better prioritizing public investment projects,
- a stronger regulatory framework for hydrocarbon and lithium exploration to increase investment in those sectors,
- enhancing AML/CFT framework,
- ensuring the timely publication of key macroeconomic data.
Financial Sector Assessment Program (FSAP)
- The Article IV consultation included discussion of the FSAP exercise for Bolivia.
- Directors underscored the need to improve crisis preparedness and contingency planning in line with FSAP recommendations to safeguard financial stability.
Key statistics and selected indicators (as reported)
- Population (millions, 2021): 11.8
- Poverty rate (percent, 2021): 36.3
- Population growth rate (percent, 2021): 1.4
- Adult literacy rate (percent, 2021): 94.8
- Life expectancy at birth (years, 2021): 72
- GDP per capita (US$, 2021): 3,437
- Total unemployment rate (2021): 7.0
- IMF Quota (SDR, millions): 240.1
- Income and prices (Est./projections):
- Real GDP: 3.6 (2022), 2.5 (2023), 1.6 (2024), 2.2 (2025)
- Nominal GDP: 8.9 (2022), 4.9 (2023), 6.2 (2024), 6.5 (2025)
- CPI inflation (period average): 1.7 (2022), 2.6 (2023), 4.5 (2024), 4.2 (2025), 3.9 (2026)
- CPI inflation (end of period): 3.1 (2022), 2.1 (2023), 4.8 (2024), 4.0 (2025)
- Investment and savings:
- Total investment: 15.1 (2022), 15.9 (2023), 16.6 (2024), 16.3 (2025), 16.0 (2026)
- Of which: Public sector: 5.7 (2022), 5.0 (2023), 6.0 (2024)
- Gross national savings: 12.5 (2022), 8.6 (2023), 10.5 (2024), 10.3 (2025)
- Combined public sector revenues and grants: 28.9 (2022), 28.3 (2023), 27.6 (2024), 27.4 (2025), 27.1 (2026)
- Of which: Hydrocarbon related revenue: 5.4 (2022), 4.3 (2023), 3.5 (2024)
- Expenditure: 36.0 (2022), 35.3 (2023), 35.5 (2024), 34.8 (2025), 34.3 (2026)
- Net lending/borrowing (overall balance): -7.1 (2022), -7.0 (2023), -7.9 (2024), -7.5 (2025), -7.2 (2026)
- Of which: Non-hydrocarbon balance: -12.8 (2022), -12.2 (2023), -12.0 (2024), -11.2 (2025), -10.5 (2026)
- Total gross NFPS debt: 80.4 (2022), 83.6 (2023), 86.7 (2024), 88.9 (2025), 90.9 (2026)
- External sector:
- Current account 1/: -0.4 (2022), -5.0 (2023), -5.7 (2024), -5.8 (2025), -5.6 (2026)
- Exports of goods and services: 32.6 (2022), 28.5 (2023), 27.0 (2024), 26.9 (2025), 26.5 (2026)
- Of which: Natural gas: 6.7 (2022), 3.8 (2023), 3.4 (2024), 3.0 (2025), 2.7 (2026)
- Imports of goods and services: 32.9 (2022), 34.4 (2023), 33.6 (2024), 32.7 (2025)
- Financial account (-= net inflow): -0.5 (2022), -5.3 (2023)
- Of which: Direct investment net: -0.8 (2022), -0.6 (2023), -0.9 (2024)
- Of which: Other investment, net: -0.3 (2022), -4.6 (2023), -4.7 (2024), -5.1 (2025)
- Net errors and omissions: -3.0 (2022)
- Terms of trade index (percent change): -1.6 (2022), 1.2 (2023), 0.2 (2024)
- Central Bank gross foreign reserves:
- In millions of U.S. dollars: 3,796 (2022), 1,808 (2023), 1,653 (2024), 1,555 (2025), 1,556 (2026)
- In months of imports of goods and services: 2.8 (2022), 1.3 (2023), 1.1 (2024), 1.0 (2025)
- In percent of GDP / In percent of ARA: 44.5 (2022), 20.8 (2023), 18.2 (2024), 16.2 (2025), 15.5 (2026)
- Includes a repurchase line of US$99.2 million maturing in 2025.
- Excludes reserves from the Latin American Reserve Fund (FLAR) and Offshore Liquidity Requirements (RAL).
- Money and credit:
- Credit to the private sector (percent change): 6.3 (2022), 5.1 (2023)
- Credit to the private sector (percent of GDP): 74.2 (2022), 70.5 (2023), 68.4 (2024), 67.0 (2025), 66.3 (2026)
- Broad money (percent of GDP): 85.2 (2022), 82.8 (2023), 81.2 (2024), 80.0 (2025), 78.9 (2026)
- Memorandum items:
- Nominal GDP (in billions of U.S. dollars): 44.3 (2022), 46.5 (2023), 49.3 (2024), 52.5 (2025), 55.8 (2026)
- Bolivianos/U.S. dollar (end-of-period): 6.9 (2022)
- Oil prices (in U.S. dollars per barrel): 96.4 (2022), 80.6 (2023), 77.7 (2024), 73.8 (2025), 70.9 (2026)
- Energy-related subsidies to SOEs (percent of GDP): 4.4 (2022), 2.4 (2023)
Press Release No. 25/018, IMF Communications Department, January 28, 2025.