{
  "title": "Reinvigorating Growth in Bolivia, Remarks by Anoop Singh, Director, Western Hemisphere Department, IMF",
  "publication": "IMF News, July 17, 2003",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/sp071703",
  "canonical": "https://www.imf.org/en/news/articles/2015/09/28/04/53/sp071703",
  "overlayPath": "/en/news/articles/2015/09/28/04/53/sp071703/index.md",
  "summary": "At the CAINCO Economic Forum 2003, Santa Cruz de la Sierra",
  "publishDate": "2003-07-17",
  "sections": [
    {
      "heading": "Introduction and context",
      "content": "- Delivered at the CAINCO Economic Forum 2003, Santa Cruz de la Sierra, July 17, 2003.\n- IMF engagement:\n  - IMF Board completed the first review of Bolivia's stand-by arrangement ten days prior to the speech.\n  - IMF working with international community on a longer-term program possibly supported by the Poverty Reduction and Growth Facility.\n- Central objective: reinvigorate growth with improved equity, reduce vulnerabilities, and build domestic consensus for reform."
    },
    {
      "heading": "Bolivia's early macroeconomic stabilization (historical achievements)",
      "content": "- Inflation and macro stability:\n  - Rate of inflation reduced from its peak of over 23,000 in September 1985 to 18 percent in 1990.\n  - Inflation maintained in single digits since 1995.\n- Growth and external sector:\n  - Growth averaged well over 4 percent a year from 1990 to 1997.\n  - Economy had contracted by a cumulative 10 percent in the first half of the 1980s.\n  - External debt lowered from about 100 percent of GDP to under 50 percent.\n  - Current account deficits financed largely by foreign direct investment in export-earning projects and infrastructure; gross reserves rebuilt from very low 1985 levels.\n- Fiscal correction and structural reforms:\n  - Public sector deficit reduced from almost 30 percent of GDP in 1984 to around 4 percent in 1986.\n  - Key reforms: unification of exchange rates; passage of mining, hydrocarbons and investment laws; privatization of six large public enterprises; lifting price controls; trade liberalization; establishment of an independent central bank; privatization of state-owned banks.\n- Social progress and political stability:\n  - Major social advances including halving child mortality and improved primary education and pension reform.\n  - Return to democracy since 1985 with greater policy continuity; successful coca control campaign reduced corruption risks."
    },
    {
      "heading": "Recent economic performance (weaknesses and vulnerabilities)",
      "content": "- Overall deterioration (past five years prior to 2003):\n  - Per capita real income falls; Bolivia's real GDP per capita now stands at about US$900.\n  - Open unemployment risen to 8½ percent by end-2002.\n  - About half of the labor force is underemployed.\n- Savings, investment, and external performance:\n  - Domestic investment and savings have fallen by as much as a third since 1998.\n  - Public savings turned negative in the year prior to the speech.\n  - Weakened capital account; Bolivia's export share not rising commensurately with trade openness; growing dependence on regional markets, especially Brazil.\n- Poverty and social indicators:\n  - Two-thirds of Bolivia's population estimated to be below the poverty line.\n  - More than a third in extreme poverty, with disproportionate effects on indigenous people and rural women.\n- Macro vulnerabilities that reemerged:\n  - Fiscal deterioration: fiscal deficit allowed to rise, reaching 9 percent of GDP in 2002.\n  - Nonfinancial public sector debt increased to over 60 percent of GDP, despite enhanced HIPC debt relief.\n  - Overreliance on crawling peg exchange rate regime reduced room for maneuver against external shocks.\n  - Financial sector stresses: nonperforming loans risen to at least 20 percent; banks' loan portfolios declining; deposit base instability; concentration of banks' balance sheets on a small client base.\n- Structural and institutional gaps:\n  - One of the most inflexible labor market regimes in Latin America.\n  - Insufficient alternative income sources for farmers affected by coca eradication.\n  - Fiscal decentralization advanced without uniformly strengthening local institutional capacity.\n  - Declining efficiency of health care and education spending; reversals in key primary school enrollment indicators.\n  - Poor governance and competitiveness: low rankings in the 2002 Global Competitiveness Report and Transparency International; high costs and complexities of new business start-ups."
    },
    {
      "heading": "Key tasks and policy recommendations to reinvigorate growth",
      "content": "- Growth target and rationale:\n  - Minimum objective: raise growth back to 4 percent per year.\n  - Given high population increase, an even more ambitious objective is desirable to rapidly reduce poverty.\n- Core components of the growth strategy:\n  - Restore macroeconomic stability through fiscal consolidation.\n  - Reduce macroeconomic vulnerabilities by strengthening the banking and corporate sectors.\n  - Press ahead with market reforms within an improved institutional environment.\n  - Increase and make social spending more efficient, protecting education and healthcare.\n  - Effectively use Bolivia's natural resources, notably gas and oil.\n- Fiscal consolidation specifics:\n  - 2003 budget begins a phased reduction in the fiscal deficit.\n  - Program elements: balanced package of measures, introduction of a new tax procedures code, collection of tax arrears, control of low-priority public spending.\n  - Longer-term needs: equitable and efficient tax reform to increase revenue buoyancy; improved prioritization and tracking of public spending including at local government level; protect and increase social spending; better control of pension costs.\n- Financial and corporate sector strategy:\n  - Tackle corporate and financial balance sheet problems while minimizing moral hazard and avoiding unaffordable public bailouts.\n  - Recommended instruments: modernized legal framework for bankruptcy and out-of-court workouts; limit government involvement; maintain high standards of accountability and transparency.\n  - Government actions already taken: appointment of a high level management committee; developing legislation for voluntary, out-of-court corporate restructurings; strengthening regulatory framework for the banking sector.\n- Addressing dollarization:\n  - Develop a gradual and voluntary process to promote use of the domestic currency to allow more flexible exchange rate management and reduce balance sheet vulnerabilities.\n  - Success depends on sustained prudent macroeconomic management and a regulatory framework that recognizes higher risks of dollar-based intermediation.\n- Structural reforms to enhance inclusive growth:\n  - Enhanced rural development schemes to absorb social costs of coca eradication.\n  - Secure land access and property rights to attract investment in rural areas.\n  - Ensure poorer regions benefit from international trade.\n  - Implement labor market reforms to encourage job creation.\n  - Strengthen institutional capacity at local government level to improve efficiency of social spending.\n- Natural resource strategy:\n  - Leverage abundant natural gas resources: existing pipeline to Brazil has been important.\n  - Pursue potential exports of liquefied natural gas to the US market as a major transformative project.\n- Political economy and consensus-building:\n  - National Dialogue to develop medium-term structural reforms as the basis for a new poverty reduction strategy.\n  - Participatory approach to include women and indigenous people and build broad popular support.\n  - Urgent need to address social equity and governance to underpin popular support for reform."
    },
    {
      "heading": "Outlook and concluding guidance",
      "content": "- Optimism tempered by caution:\n  - Structural reforms typically take several years before sustained growth sets in.\n  - Stabilization under the stand-by arrangement is a good start but must be sustained and strengthened.\n  - Priority: place public finances on a solid footing and address social equity and governance to sustain reform momentum.\n\nReinvigorating Growth in Bolivia — Remarks by Anoop Singh, Director, Western Hemisphere Department, International Monetary Fund, July 17, 2003.\n\n---\n\n\n References\n\n- Bolivia and the IMF\n- Brazil and the IMF\n- Speeches\n- Anoop Singh\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/sp071703"
    }
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    "Published: July 17, 2003",
    "Delivered at the CAINCO Economic Forum 2003, Santa Cruz de la Sierra, July 17, 2003.",
    "IMF engagement:",
    "Central objective: reinvigorate growth with improved equity, reduce vulnerabilities, and build domestic consensus for reform.",
    "Inflation and macro stability:",
    "Growth and external sector:",
    "Fiscal correction and structural reforms:",
    "Social progress and political stability:",
    "Overall deterioration (past five years prior to 2003):",
    "Savings, investment, and external performance:",
    "Poverty and social indicators:",
    "Macro vulnerabilities that reemerged:",
    "Structural and institutional gaps:",
    "Growth target and rationale:",
    "Core components of the growth strategy:",
    "Fiscal consolidation specifics:",
    "Financial and corporate sector strategy:",
    "Addressing dollarization:",
    "Structural reforms to enhance inclusive growth:",
    "Natural resource strategy:",
    "Political economy and consensus-building:",
    "Optimism tempered by caution:",
    "[Bolivia and the IMF](http://www.imf.org/external/country/BOL/index.htm)",
    "[Brazil and the IMF](http://www.imf.org/external/country/BRA/index.htm)",
    "[Speeches](https://www.imf.org/en/news/searchnews)",
    "[Anoop Singh](https://www.imf.org/external/np/bio/eng/as.htm)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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