## IMF Executive Board Concludes 2016 Article IV Consultation with Bolivia _IMF News, December 22, 2016_ ## Source details **Canonical URL:** [IMF Executive Board Concludes 2016 Article IV Consultation with Bolivia](https://www.imf.org/en/news/articles/2016/12/22/pr16577-bolivia-imf-executive-board-concludes-2016-article-iv-consultation) ## Other formats - [Markdown version](/en/news/articles/2016/12/22/pr16577-bolivia-imf-executive-board-concludes-2016-article-iv-consultation/index.md) - [Structured JSON version](/en/news/articles/2016/12/22/pr16577-bolivia-imf-executive-board-concludes-2016-article-iv-consultation/index.json) - [Bundle manifest](/en/news/articles/2016/12/22/pr16577-bolivia-imf-executive-board-concludes-2016-article-iv-consultation/bundle-manifest.json) ## Bibliographic details - Published: December 22, 2016 --- ### Main findings and outlook - 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: - potential additional weakness in key emerging markets, - further dollar strength, - a larger-than-expected impact of the drought, - 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. ### Executive Board assessment and policy recommendations - 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: - Directors underscored risks from large and widening fiscal deficits. - They encouraged improving the non-hydrocarbons primary balance through streamlining expenditures while increasing efficiency. - 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. - Advised ensuring the financial health of state-owned enterprises (SOEs), exercising greater oversight of their activities, and strengthening evaluation and transparency of their investments. - Central bank and exchange rate policy: - Directors stressed merits of enhancing the independence of the central bank. - Advised phasing out the central bank’s exposures to SOEs to avoid potential conflicts with the commitment to price stability. - 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. - Financial sector and financial inclusion: - Directors welcomed overall soundness of the financial sector but encouraged addressing growing vulnerabilities. - 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. - Suggested modifying key provisions of the regulations to reduce distortions and avoid unnecessary buildup of risk. - Saw scope to utilize more market-oriented mechanisms to achieve greater financial inclusion. - Structural reforms and social policy: - Directors agreed that accelerating structural reforms and improving the business climate are central to improving medium-term growth prospects. - Encouraged improving incentives for hydrocarbons exploration, bringing wages back in line with productivity, and addressing the severe water shortage. - Praised significant declines in inequality and poverty over the last decade and recommended preserving these gains. - Considered that better targeting and improved efficiency of social spending could mitigate negative impacts of lower commodity prices on inequality and poverty. ### Key statistics (selected) - Social and demographic indicators (2015 unless otherwise noted): - GDP per capita (U.S. dollars, 2015): 2,900 - Poverty headcount ratio (percent of population, 2015): 38.6 - Population (millions, 2015): 11.5 - Gini index (2015): 47.0 - Life expectancy at birth (years, 2014): 68 - Adult literacy rate (percent, 2015): 95.1 - Infant mortality rate (per thousand, 2015): 30.6 - Net primary education enrollment rate (2011): 82.2 - Selected economic indicators and baseline projections: - Real GDP: 2015: 4.8; 2016: 3.7; 2017: 3.9; 2018: 3.5 - Real GDP excluding hydrocarbons: 2015: 3.8; 2016: 3.6 - GDP deflator: 2015: -4.6; 2016: -2.0; 2017: 4.2; 2018: 4.7 - CPI inflation (period average): 2015: 2.0 - 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 - Public sector investment: 2015: 12.2; 2016: 11.0; 2017: 10.3; 2018: 9.8 - Private sector investment: 2015: 8.4 - Gross domestic savings: 2015: 13.2; 2016: 11.9; 2017: 14.0; 2018: 14.4; 2019: 14.8; 2020: 14.3 - Gross national savings: 2015: 12.8; 2016: 14.1; 2017: 13.9; 2018: 13.8 - 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 - Combined public sector revenues and grants (percent of GDP): 2015: 37.7; 2016: 35.0; 2017: 35.2; 2018: 34.5 - 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 - Expenditure (percent of GDP): 2015: 44.6; 2016: 43.0; 2017: 41.9; 2018: 40.7; 2019: 40.1; 2020: 39.2 - Current expenditure (percent of GDP): 2015: 29.1; 2016: 27.8; 2017: 27.5; 2018: 27.4; 2019: 27.3 - Capital expenditure (percent of GDP): 2015: 12.6 - 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 - 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 - NFPS deposits (percent of GDP): 2015: 15.1; 2016: 8.5; 2017: 7.9; 2018: 7.3 - External sector and reserves: - 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 - Merchandise exports (percent of GDP): 2010: 32.4; 2011: 41.3; 2012: 37.9; 2013: 21.8; 2014: 19.3; 2015: 18.5 - Of which natural gas (percent of GDP): 2010: 16.1; 2011: 20.1; 2012: 18.1; 2013: 7.0; 2014: 7.6 - Merchandise imports (percent of GDP): 2010: 28.3; 2011: 32.8; 2012: 31.4; 2013: 31.6; 2014: 25.4; 2015: 23.4 - Capital and financial account (percent of GDP, selected years): -0.9; 1.2; -0.4; -0.1 - 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 - 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 - Money and credit: - 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 - 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 - Broad money (annual growth): 2010: 12.5; 2011: 20.2; 2012: 16.2; 2013: 15.6; 2014: 9.3; 2015: 9.2 - Interest rates (percent, end-of-period): Deposits (effective rate): 10.8; Lending (effective rate): 10.6 - U.S. dollar and dollar-indexed deposits (in percent of total deposits): 43.8; 26.3 - U.S. dollar and dollar-indexed credit (in percent of total credit): 30.7; 21.3 - Memorandum items: - Nominal GDP (in billions of U.S. dollars, selected years): 24.1; 30.9; 33.8; 37.6; 44.4; 47.9 - 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 ### Observations on vulnerabilities and policy trade-offs - 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. *IMF Communications Department — Press Release No. 16/577 (Executive Board conclusion, December 9, 2016).* --- ## References - [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) _Source: https://www.imf.org/en/news/articles/2016/12/22/pr16577-bolivia-imf-executive-board-concludes-2016-article-iv-consultation_