{
  "title": "IMF Executive Board Concludes 2016 Article IV Consultation with Bolivia",
  "publication": "IMF News, December 22, 2016",
  "sourceUrl": "https://www.imf.org/en/news/articles/2016/12/22/pr16577-bolivia-imf-executive-board-concludes-2016-article-iv-consultation",
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  "summary": "On December 9, 2016, the Executive Board of the IMF concluded the Article IV consultation with Bolivia.",
  "publishDate": "2016-12-22",
  "sections": [
    {
      "heading": "Main findings and outlook",
      "content": "- On December 9, 2016, the Executive Board of the IMF concluded the Article IV consultation with Bolivia.\n- Growth has been strong, averaging around 5 percent since 2006, and poverty has fallen by a third during the commodity boom.\n- Real GDP growth is projected at 3.7 percent in 2016.\n- In the medium term, growth is expected to converge towards 3.5 percent, consistent with the new commodity price normal.\n- A continued supportive fiscal policy and rapid credit growth linked to the Financial Services Law are buttressing activity and offsetting a major drought and temporary supply shocks in gas production.\n- The sizable fiscal and external surpluses that prevailed over the past decade are turning into large twin deficits. Fiscal and external current account deficits will remain wide.\n- Risks to the outlook are tilted to the downside, including:\n  - potential additional weakness in key emerging markets,\n  - further dollar strength,\n  - a larger-than-expected impact of the drought,\n  - longer-term uncertainties about future oil prices, the extent of natural gas discoveries and export contract renewals, and the possibility of excessive credit growth volatility."
    },
    {
      "heading": "Executive Board assessment and policy recommendations",
      "content": "- Directors commended the authorities for sound macroeconomic management and poverty reduction during the past commodity boom.\n- Given still sizable buffers, Directors encouraged a carefully measured approach to adjusting to a less favorable external environment.\n- Fiscal policy:\n  - Directors underscored risks from large and widening fiscal deficits.\n  - They encouraged improving the non-hydrocarbons primary balance through streamlining expenditures while increasing efficiency.\n  - Recommended an early transition to a credible medium-term fiscal framework to assure debt sustainability, account for the state of the business cycle, and build cushions to absorb volatility in hydrocarbon prices.\n  - Advised ensuring the financial health of state-owned enterprises (SOEs), exercising greater oversight of their activities, and strengthening evaluation and transparency of their investments.\n- Central bank and exchange rate policy:\n  - Directors stressed merits of enhancing the independence of the central bank.\n  - Advised phasing out the central bank’s exposures to SOEs to avoid potential conflicts with the commitment to price stability.\n  - Most Directors encouraged considering gradually permitting greater exchange rate flexibility to improve competitiveness, facilitate adjustment to lower commodity prices, and protect against future external shocks.\n- Financial sector and financial inclusion:\n  - Directors welcomed overall soundness of the financial sector but encouraged addressing growing vulnerabilities.\n  - Noted that quotas and interest caps under the Financial Services Law appear to induce banks to expand credit rapidly, potentially increasing risks and undermining financial inclusion.\n  - Suggested modifying key provisions of the regulations to reduce distortions and avoid unnecessary buildup of risk.\n  - Saw scope to utilize more market-oriented mechanisms to achieve greater financial inclusion.\n- Structural reforms and social policy:\n  - Directors agreed that accelerating structural reforms and improving the business climate are central to improving medium-term growth prospects.\n  - Encouraged improving incentives for hydrocarbons exploration, bringing wages back in line with productivity, and addressing the severe water shortage.\n  - Praised significant declines in inequality and poverty over the last decade and recommended preserving these gains.\n  - Considered that better targeting and improved efficiency of social spending could mitigate negative impacts of lower commodity prices on inequality and poverty."
    },
    {
      "heading": "Key statistics (selected)",
      "content": "- Social and demographic indicators (2015 unless otherwise noted):\n  - GDP per capita (U.S. dollars, 2015): 2,900\n  - Poverty headcount ratio (percent of population, 2015): 38.6\n  - Population (millions, 2015): 11.5\n  - Gini index (2015): 47.0\n  - Life expectancy at birth (years, 2014): 68\n  - Adult literacy rate (percent, 2015): 95.1\n  - Infant mortality rate (per thousand, 2015): 30.6\n  - Net primary education enrollment rate (2011): 82.2\n- Selected economic indicators and baseline projections:\n  - Real GDP: 2015: 4.8; 2016: 3.7; 2017: 3.9; 2018: 3.5\n  - Real GDP excluding hydrocarbons: 2015: 3.8; 2016: 3.6\n  - GDP deflator: 2015: -4.6; 2016: -2.0; 2017: 4.2; 2018: 4.7\n  - CPI inflation (period average): 2015: 2.0\n  - Total investment (percent of GDP): 2015: 19.2; 2016: 20.9; 2017: 19.1; 2018: 18.0; 2019: 17.3; 2020: 16.5; 2021: 15.8\n  - Public sector investment: 2015: 12.2; 2016: 11.0; 2017: 10.3; 2018: 9.8\n  - Private sector investment: 2015: 8.4\n  - Gross domestic savings: 2015: 13.2; 2016: 11.9; 2017: 14.0; 2018: 14.4; 2019: 14.8; 2020: 14.3\n  - Gross national savings: 2015: 12.8; 2016: 14.1; 2017: 13.9; 2018: 13.8\n  - Saving/investment balances (various years shown): 8.0; 8.1; -0.6; -6.1; -8.1; -5.0; -4.0; -2.9; -2.6; 1.7; 1.8; 0.7; -2.3; -6.9; -6.7; -6.2; -5.4; -5.3; 6.7; -1.3; 2.3; 2.7; 2.9\n  - Combined public sector revenues and grants (percent of GDP): 2015: 37.7; 2016: 35.0; 2017: 35.2; 2018: 34.5\n  - Of which: Hydrocarbon related revenue (percent of GDP): 2015: 10.2; 2016: 13.0; 2017: 12.7; 2018: 9.1; 2019: 6.4; 2020: 6.4\n  - Expenditure (percent of GDP): 2015: 44.6; 2016: 43.0; 2017: 41.9; 2018: 40.7; 2019: 40.1; 2020: 39.2\n  - Current expenditure (percent of GDP): 2015: 29.1; 2016: 27.8; 2017: 27.5; 2018: 27.4; 2019: 27.3\n  - Capital expenditure (percent of GDP): 2015: 12.6\n  - Non-hydrocarbon balance, before nationalization costs (various years shown): -9.6; -9.7; -11.1; -13.2; -14.1; -12.2; -11.4; -10.2; -9.0; -8.6\n  - Total gross NFPS debt (percent of GDP): 2015: 46.7; 2016: 47.6; 2017: 48.8; 2018: 49.4; 2019: 51.2; 2020: 52.0\n  - NFPS deposits (percent of GDP): 2015: 15.1; 2016: 8.5; 2017: 7.9; 2018: 7.3\n- External sector and reserves:\n  - Current account (percent of GDP, selected years): 2010: 0.3; 2011: 2.4; 2012: -5.8; 2013: -7.6; 2014: -4.7; 2015: -3.8\n  - Merchandise exports (percent of GDP): 2010: 32.4; 2011: 41.3; 2012: 37.9; 2013: 21.8; 2014: 19.3; 2015: 18.5\n  - Of which natural gas (percent of GDP): 2010: 16.1; 2011: 20.1; 2012: 18.1; 2013: 7.0; 2014: 7.6\n  - Merchandise imports (percent of GDP): 2010: 28.3; 2011: 32.8; 2012: 31.4; 2013: 31.6; 2014: 25.4; 2015: 23.4\n  - Capital and financial account (percent of GDP, selected years): -0.9; 1.2; -0.4; -0.1\n  - Net Central Bank foreign reserves (in millions of U.S. dollars): 2010: 9,730; 2011: 12,019; 2012: 13,927; 2013: 14,430; 2014: 15,123; 2015: 13,056; 2016: 10,344; 2017: 8,330; 2018: 6,721; 2019: 5,570; 2020: 4,442; 2021: 3,945\n  - Reserves in percent of broad money: 2010: 80.0; 2011: 83.0; 2012: 71.4; 2013: 64.7; 2014: 48.1; 2015: 36.5; 2016: 26.4; 2017: 19.5; 2018: 10.9\n- Money and credit:\n  - Credit to the private sector (annual growth): 2010: 19.9; 2011: 23.0; 2012: 19.4; 2013: 18.9; 2014: 17.6; 2015: 17.5; 2016: 10.0\n  - Credit to the private sector (percent of GDP): 2010: 36.8; 2011: 39.0; 2012: 40.9; 2013: 43.7; 2014: 51.5; 2015: 59.5; 2016: 61.6; 2017: 62.8; 2018: 63.9; 2019: 64.9; 2020: 65.7\n  - Broad money (annual growth): 2010: 12.5; 2011: 20.2; 2012: 16.2; 2013: 15.6; 2014: 9.3; 2015: 9.2\n  - Interest rates (percent, end-of-period): Deposits (effective rate): 10.8; Lending (effective rate): 10.6\n  - U.S. dollar and dollar-indexed deposits (in percent of total deposits): 43.8; 26.3\n  - U.S. dollar and dollar-indexed credit (in percent of total credit): 30.7; 21.3\n- Memorandum items:\n  - Nominal GDP (in billions of U.S. dollars, selected years): 24.1; 30.9; 33.8; 37.6; 44.4; 47.9\n  - Oil prices (in U.S. dollars per barrel): 2010: 79.0; 2011: 104.0; 2012: 105.0; 2013: 104.1; 2014: 96.2; 2015: 50.8; 2016: 50.6; 2017: 53.1; 2018: 54.4; 2019: 56.3"
    },
    {
      "heading": "Observations on vulnerabilities and policy trade-offs",
      "content": "- Authorities are using policy buffers to advance development objectives in their Patriotic Agenda 2025, which contributes to the shift from surpluses to twin deficits.\n- Rapid credit growth linked to regulatory features of the Financial Services Law poses risks to financial stability and may undermine financial inclusion if not adjusted.\n- Phasing out central bank exposures to SOEs and enhancing central bank independence are recommended to protect price stability.\n- Greater exchange rate flexibility, coupled with structural reforms, could help competitiveness and external adjustment.\n\nIMF Communications Department — Press Release No. 16/577 (Executive Board conclusion, December 9, 2016).\n\n---\n\n\n References\n\n- Bolivia and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2016/12/22/pr16577-bolivia-imf-executive-board-concludes-2016-article-iv-consultation"
    }
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    "Published: December 22, 2016",
    "On December 9, 2016, the Executive Board of the IMF concluded the Article IV consultation with Bolivia.",
    "Growth has been strong, averaging around 5 percent since 2006, and poverty has fallen by a third during the commodity boom.",
    "Real GDP growth is projected at 3.7 percent in 2016.",
    "In the medium term, growth is expected to converge towards 3.5 percent, consistent with the new commodity price normal.",
    "A continued supportive fiscal policy and rapid credit growth linked to the Financial Services Law are buttressing activity and offsetting a major drought and temporary supply shocks in gas production.",
    "The sizable fiscal and external surpluses that prevailed over the past decade are turning into large twin deficits. Fiscal and external current account deficits will remain wide.",
    "Risks to the outlook are tilted to the downside, including:",
    "Directors commended the authorities for sound macroeconomic management and poverty reduction during the past commodity boom.",
    "Given still sizable buffers, Directors encouraged a carefully measured approach to adjusting to a less favorable external environment.",
    "Fiscal policy:",
    "Central bank and exchange rate policy:",
    "Financial sector and financial inclusion:",
    "Structural reforms and social policy:",
    "Social and demographic indicators (2015 unless otherwise noted):",
    "Selected economic indicators and baseline projections:",
    "External sector and reserves:",
    "Money and credit:",
    "Memorandum items:",
    "Authorities are using policy buffers to advance development objectives in their Patriotic Agenda 2025, which contributes to the shift from surpluses to twin deficits.",
    "Rapid credit growth linked to regulatory features of the Financial Services Law poses risks to financial stability and may undermine financial inclusion if not adjusted.",
    "Phasing out central bank exposures to SOEs and enhancing central bank independence are recommended to protect price stability.",
    "Greater exchange rate flexibility, coupled with structural reforms, could help competitiveness and external adjustment.",
    "[Bolivia and the IMF](http://www.imf.org/external/country/BOL/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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