Press Release: IMF Approves Second Annual PRGF Loan for Bolivia
IMF News, February 7, 2000
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- Published: February 7, 2000
Overview
- The International Monetary Fund (IMF) approved the second-year program for Bolivia under the Poverty Reduction and Growth Facility (PRGF) in an amount equivalent to SDR 33.6 million (about US$46.1 million) to support the government's economic program.
- Bolivia's three-year program, originally under ESAF, was first approved on September 18, 1998 in an amount equivalent to SDR 100.96 million (about US$138.5 million), of which SDR 33.65 million (about US$46.2 million) has been disbursed.
- Today's decision provides Bolivia with another SDR 33.6 million to be disbursed in three equal tranches of SDR 11.2 million (about US$15.4 million), the first of which is available immediately.
Executive Board Commentary and Program Intentions
- Stanley Fischer, First Deputy Managing Director, highlighted:
- A solid policy track record since 1985 that lowered inflation to industrial country levels and strengthened the external sector.
- Economic growth averaged four percent a year during the 1990s despite external shocks.
- Modest improvements in poverty and social indicators.
- Successful maintenance of sound macroeconomic policies and progress in structural reforms despite the 1999 slowdown.
- The 2000 economic program, supported by the second annual PRGF arrangement, calls for:
- Continuation of good macroeconomic policies.
- Deepening of structural reforms.
- A strengthened commitment to step up the fight against poverty.
- Maintaining public sector finances on a sound basis and embedding fiscal costs of needed social outlays in the fiscal framework.
Program Financing and Disbursement
- PRGF loan amount approved: SDR 33.6 million (about US$46.1 million).
- Disbursement schedule: three equal tranches of SDR 11.2 million (about US$15.4 million), with the first tranche available immediately.
- Bolivia joined the IMF on December 27, 1945; its quota is SDR 171.5 million (about US$235.3 million).
- Bolivia's outstanding use of IMF credits totals SDR 180.0 million (about US$246.9 million).
- PRGF loan terms: interest rate of 0.5 percent a year; repayable over 10 years with a 5 ½-year grace period on principal payments.
Macroeconomic Performance and Projections
- 1999 outcomes and 2000 targets:
- Inflation declined to 3.1% in 1999.
- Program aims to contain inflation in 2000 within a range of 4-4.5%.
- Achieve a small increase in net official international reserves.
- Allow a modest widening of the external current account deficit to 6.8% of GDP.
- Output growth expected to pick up to about 4%.
- 1999 policy responses:
- Authorities cut outlays in response to a revenue shortfall.
- Maintained a prudent monetary policy stance.
- Resisted pressure to raise external protection and to introduce relief on tax and interest obligations.
Fiscal Framework and Policy Actions
- Overall deficit of the combined public sector (after grants) projected to narrow to 3.7% of GDP in 2000 from 4.2% in 1999.
- Noted equivalence: 3.7% would be equivalent to a small surplus excluding the cost of the pension reform.
- Fiscal program aims at a slight improvement in the revenue-to-GDP ratio of the general government.
- Required measures to achieve fiscal objectives for 2000 include:
- Reform of customs.
- Strengthening the legal base for tax enforcement through a new procedures code.
- A tight lid on current expenditures, including the wage bill.
- Close monitoring of developments in local and regional governments in relation to debt and debt-servicing limits.
Structural Reforms and Poverty Reduction Measures
- Structural reforms planned for 2000:
- Complete the privatization program.
- Improve transparency and modernize the tax system and labor regulations.
- Privatize remaining assets of the oil company YPFB (storage and distribution facilities and service stations) in 2000.
- Poverty reduction and social spending:
- Strengthen and refocus antipoverty efforts via a national dialogue with civil society during the first half of the year.
- Ensure an adequate budgetary reallocation mainly to the health and education sectors.
- Adopt policies for the Altiplano and other poverty-stricken regions (e.g., alternative crop development in areas previously dedicated to coca cultivation).
- Ensure better domestic and international transportation links to facilitate export growth.
- Authorities intend to request additional debt relief under the enhanced HIPC initiative.
Selected Economic and Financial Indicators (as presented)
- Growth and prices (annual percentage change and levels):
- Real GDP: Average 1990-95: 4.2; 1996: 4.4; 1997: 4.7; 1998: 5.0; 1999 (Prel.) 2-2.5; 2000 (Proj.) 4.0
- Real GDP per capita: Average 1990-95: 1.7; 1996: 2.0; 1997: 2.2; 1998: 2.6; 1999 (Prel.) 0.1; 2000 (Proj.) 1.6
- Real gross domestic demand: Average 1990-95: 3.9; 1996: 5.4; 1997: 9.0; 1998: 6.6; 1999 (Prel.) ...; 2000 (Proj.) 0.2
- GDP deflator: Average 1990-95: 12.2; 1996: 11.6; 1997: 6.8; 1998: 7.8; 1999 (Prel.) 5.7; 2000 (Proj.) 2.7; (another entry) 4.8
- CPI inflation (period average): Average 1990-95: 13.0; 1996: 12.4; 1997: 7.7
- CPI inflation (end-of-period): 1996: 8.0; 1997: 6.7; 1998: 5.5; 1999 (Prel.) 3.1; 2000 (Proj.) 4-4.5
- Investment and savings (percent of GDP):
- Gross domestic investment: Average 1990-95: 15.2; 1996: 16.2; 1997: 19.8; 1998: 20.0; 1999 (Prel.) 20.4; 2000 (Proj.) 18.4; 19.7
- Public investment: 1996: 8.6; 1997: 7.3; 1998: 6.5; 1999 (Prel.) 6.1; 2000 (Proj.) 6.3
- Private (including stocks): 1996: 13.2; 1997: 14.2; 1998: 14.0; 1999 (Prel.) 12.3; 2000 (Proj.) 13.4
- Gross national savings 1/: Average 1990-95: 9.8; 1996: 11.0; 1997: 12.9; 1998: 12.1; 1999 (Prel.) 3.0; 2000 (Proj.) 2.5; 1.8
- Private savings: 1996: 5.1; 1997: 4.9; 1998: 9.9; 1999 (Prel.) 10.4; 2000 (Proj.) 10.8; 10.3
- Combined public sector (percent of GDP):
- Nonpension balance: 1996: -3.7; 1997: -0.7; 1998: -0.8; 1999 (Prel.) -0.1; 2000 (Proj.) 0.3; -0.2
- Pension-related balance: 1996: -0.3; 1997: -1.2; 1998: -2.5; 1999 (Prel.) -3.9; 2000 (Proj.) -4.2
- Overall balance: 1996: -4.0; 1997: -1.9; 1998: -3.3
- Financing:
- Foreign financing: 1996: 3.7; 1997: 2.8; 1998: 2.9; 1999 (Prel.) 2.4
- Domestic financing: 1996: -0.6; 1997: 0.5; 1998: 1.2; 1999 (Prel.) 1.0; 2000 (Proj.) 1.3
- Money and credit (annual percentage change):
- M3 growth: Average 1990-95: 34.7; 1996: 25.0; 1997: 17.3; 1998: 13.7; 1999 (Prel.) 13.6; 2000 (Proj.) 10.6
- Credit to private sector: Average 1990-95: 35.1; 1996: 19.4; 1997: 23.8; 1998: 13.9; 1999 (Prel.) 4.6; 2000 (Proj.) 9.3
- Interest rates (percent, end-of-period):
- Yield on treasury bills in local currency: 1996: 22.7; 1997: 16.5; 1998: 11.2
- Yield on treasury bills in U.S. dollars: 1996: 7.6; 1997: 8.2
- External sector (US$ million and percent of GDP):
- Current account balance 1/2/ (US$ million): 1996: -308; 1997: -389; 1998: -554; 1999 (Prel.) -675; 2000 (Proj.) -645; -537; -591
- Current account (percent of GDP): 1996: -5.4; 1997: -5.3; 1998: -7.0; 1999 (Prel.) -7.9; 2000 (Proj.) -7.2; -6.3; -6.8
- Of which: trade balance (US$ million): 1996: -298; 1997: -450; 1998: -685; 1999 (Prel.) -878; 2000 (Proj.) -792; -639; -671
- Capital account balance (US$ million): 1996: 241; 1997: 731; 1998: 657; 1999 (Prel.) 777; 2000 (Proj.) 521; 522; Of which: foreign direct investment: 1996: 93; 1997: 426; 1998: 599; 1999 (Prel.) 870; 2000 (Proj.) 705; 915; 785
- Other external items: -67; 342; 103; 102; -124; 120; -69
- International trade:
- Merchandise export volume: -4.3; 7.2
- Merchandise import volume: 6.2; 16.6; 22.2; -5.7; -15.4; 6.4
- Terms of trade (deterioration -): -1.8; -3.8; -6.2; -2.7; 0.9
- Reserves, debt, and exchange rates:
- Gross official reserves (months of imports of goods and services) 3/: 7.5; 6.0; 6.9
- Public sector external debt (US$ billion) 4/5/: 4.3; 4.5
- Public sector external debt (percent of GDP) 4/5/: 75.3; 62.6; 56.4; 53.4; 52.8; 54.0; 55.0
- Debt-service ratio 4/6/: 44.1; 25.4; 26.5; 29.9; 21.9; 24.2; 23.6
- End-of-period exchange rates Bolivianos/U.S. dollar: 4.21; 5.19; 5.37; 5.65; 6.00
- NEER (percentage change) 7/: 25.8; -1.7; -2.8
- REER (percentage change) 7/: -3.4; -1.3
- Notes included in the original text:
- 1/ The recording of inward transfers in the external current account (and foreign savings) was improved starting in 1997. It is not possible to compare trends in these variables before and after 1997.
- 2/ Excludes grants to finance debt-reduction operations.
- 3/ In months of imports of goods and services in the following year.
- 4/ Debt and debt service reflect HIPC assistance, which became available beginning in 1998.
- 5/ Includes obligations to the Fund and debt with public guarantee.
- 6/ On public sector medium- and long-term external debt (including payments to the Fund) in percent of exports of goods and services.
- 7/ New weights based on average trade, excluding trade related to natural gas, in 1996-97.
Press Release: IMF Approves Second Annual PRGF Loan for Bolivia, February 7, 2000, IMF External Relations Department