{
  "title": "IMF Executive Board Concludes 2022 Article IV Consultation with Bolivia",
  "publication": "IMF News, September 14, 2022",
  "sourceUrl": "https://www.imf.org/en/news/articles/2022/09/14/pr22305-imf-executive-board-concludes-2022-article-iv-consultation-with-bolivia",
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  "summary": "IMF 2022 Article IV Bolivia",
  "publishDate": "2022-09-14",
  "sections": [
    {
      "heading": "Summary of macroeconomic developments and outlook",
      "content": "- Economic contraction of 8.7 percent in 2020, followed by growth of 6.1 percent in 2021 led by mining, construction, and agriculture.\n- Current account surplus of 2 percent of GDP in 2021, supported by higher global commodity prices.\n- Inflation was 1.9 percent yoy in June 2022.\n- International reserves declined from US$5.28 billion at end-2020 to US$4.3 billion at end-July 2022.\n- Growth projections:\n  - 3.8 percent yoy in 2022, bringing GDP back to its pre-pandemic level by late in the year.\n- Inflation projection:\n  - 4.2 percent yoy by end-2022.\n- Fiscal outlook:\n  - Fiscal deficit reduced from 12.7 percent of GDP in 2020 to 9.3 percent of GDP in 2021.\n  - Fuel subsidies estimated at 3.7 percent of GDP and projected fiscal deficit of 8.5 percent of GDP in 2022.\n- Key risks:\n  - Spillovers from the war in Ukraine (higher energy prices raising subsidy costs and domestic inflation).\n  - Changes in external financial conditions from a global tightening cycle.\n  - Potential deterioration in credit quality after pandemic-era loan deferrals.\n  - Resurgence of the pandemic impacting public health and growth."
    },
    {
      "heading": "Executive Board assessment — achievements and vulnerabilities",
      "content": "- Social and development outcomes since 2000:\n  - Per capita GDP has more than tripled since 2005.\n  - Poverty rate fell from 66.4 to 36.3 percent (2000 to 2021).\n  - Extreme poverty declined from 45.3 to 11.1 percent (2000 to 2021).\n  - Life expectancy rose from 62 to 72 years.\n  - Primary school completion rate increased from 84 to 99 percent.\n- Vulnerabilities highlighted:\n  - Heavy monetary financing of the deficit (more than one-third financed by the central bank) pressuring reserves.\n  - External position moderately weaker than fundamentals and desirable policies imply.\n  - Growing interdependence of the pension system and the government.\n  - Bank sector vulnerabilities due to loan restructuring and continued credit quotas and interest rate caps."
    },
    {
      "heading": "Policy recommendations and sequencing",
      "content": "- Fiscal policy and debt sustainability\n  - Implement a meaningful fiscal adjustment to restore debt sustainability, eliminate monetary financing, and rebuild international reserves.\n  - If maintaining the exchange rate peg, reduce the primary deficit to around 1.5 percent of GDP through a credible medium-term plan.\n  - Restraints on expenditures including:\n    - Eliminating the second supplementary year-end bonus (\"doble aguinaldo\").\n    - Constraining growth in public sector wages.\n    - Limiting growth in public investment.\n    - Scaling back subsidies.\n  - Broaden the tax base by addressing informality, strengthening tax and customs administration (IT modernization and improved governance), and adjusting tax policy to increase personal income taxes on higher income households.\n- Fuel subsidy reform\n  - Combine reductions in fuel subsidies with compensation to the poorest deciles via cash transfer programs financed by a portion of budgetary savings.\n  - Deploy an effective communication strategy to highlight the regressive nature of energy subsidies and benefits of market-based pricing with targeted transfers.\n- Monetary and exchange rate policy\n  - Increase central bank independence and institutional capacity.\n  - Carefully sequence transition to greater exchange rate flexibility to preserve reserves, reduce overvaluation, and yield net welfare gains.\n  - Consider adopting a flexible exchange rate alongside an inflation targeting monetary framework; prepare and communicate the transition, coordinate with macro policies, and accompany with institutional independence for the central bank.\n- Reserve management\n  - Reduce dependence on currency swaps; build reserves from external sovereign borrowing and direct market purchases if fiscal reforms are implemented.\n  - Lengthen maturity of remaining swaps to lessen vulnerabilities; adopt other mechanisms if needed to maintain adequate domestic liquidity.\n- Pension system\n  - Monitor interdependence with the government and consider diversifying pension fund assets into a wider range of assets, potentially including foreign currency assets, preceded by transition to professional and independent management; proceed carefully to avoid exacerbating external imbalances.\n- Financial sector and regulation\n  - Closely monitor banks’ loan books post-pandemic restructuring to quickly identify credit quality deterioration.\n  - Gradually phase out credit quotas and interest rate caps that constrain bank profitability.\n  - Monitor capital adequacy and liquidity; advance anti-money laundering initiatives ahead of the FATF assessment expected later in the year.\n- Governance, informality, and smuggling\n  - Implement programs to reduce smuggling and informality to shift activity into the formal economy, broaden the tax base, and improve tracking of economic developments.\n  - Reform tax and customs administration to track goods and improve compliance with import procedures.\n- Supply-side and investment climate reforms\n  - Reform the hydrocarbons law to incentivize new investments and scale back requirements for producers to sell below cost domestically.\n  - Revise mining laws to incentivize private investment in lithium and other sectors.\n  - Loosen export limits and price controls, use international arbitration, develop a one-stop shop for foreign investors, and remove credit quotas and interest rate ceilings.\n- Climate and green investment\n  - Increase the share of electricity generation from renewable energy and facilitate green investments.\n  - Expand on recent NDC commitments by setting clear emissions targets, accelerating lithium resource development, and positioning Bolivia as a destination for green investment."
    },
    {
      "heading": "Key statistics and projections (selected from Table 1)",
      "content": "- Population (millions, 2020): 11.7\n- Poverty line (percent, 2020): 39.0\n- Population growth rate (percent, 2021): 1.4\n- Adult literacy rate (percent, 2015): 92.5\n- Life expectancy at birth (years, 2019): 71.5\n- GDP per capita (US$, 2021): 3,154\n- Total unemployment rate (2020): 7.9\n- IMF Quota (SDR, millions): 240.1\n\n- Real GDP growth:\n  - 2019: 2.2\n  - 2020: -8.7\n  - 2021: 6.1\n  - 2022 (Proj.): 3.8\n  - 2023 (Proj.): 3.2\n  - 2024 (Proj.): 3.0\n- Nominal GDP growth:\n  - 2019: 1.5\n  - 2020: -10.4\n  - 2021: 10.3\n  - 2022 (Proj.): 7.1\n  - 2023 (Proj.): 6.4\n  - 2024 (Proj.): 6.6\n- CPI inflation (period average):\n  - 2019: 1.8\n  - 2020: 0.9\n  - 2021: 0.7\n  - 2022 (Proj.): 3.6\n  - 2023 (Proj.): 3.5\n- CPI inflation (end of period):\n  - 2022 (Proj.): 4.2\n- Investment (total, percent of GDP):\n  - 2019: 19.9\n  - 2020: 15.8\n  - 2021: 16.8\n  - 2022 (Proj.): 17.9\n- Combined public sector net lending/borrowing (overall balance, percent of GDP):\n  - 2019: -2.6\n  - 2020: -7.7\n  - 2021: -3.1\n  - 2022 (Proj.): -1.6\n  - 2023 (Proj.): -1.0\n- Revenues and grants (percent of GDP):\n  - 2019: 28.8\n  - 2020: 25.3\n  - 2021: 25.1\n  - 2022 (Proj.): 26.6\n- Expenditure (percent of GDP):\n  - 2019: 36.1\n  - 2020: 38.0\n  - 2021: 34.4\n  - 2022 (Proj.): 35.0\n- Total gross NFPS debt (percent of GDP):\n  - 2019: 59.3\n  - 2020: 78.0\n  - 2021: 80.5\n  - 2022 (Proj.): 82.3\n  - 2023 (Proj.): 84.3\n  - 2024 (Proj.): 86.1\n- Current account (percent of GDP):\n  - 2019: -3.3\n  - 2020: -0.7\n  - 2021: 2.0\n  - 2022 (Proj.): -1.7\n  - 2023 (Proj.): -1.9\n- Exports of goods and services (percent of GDP):\n  - 2019: 24.9\n  - 2020: 20.0\n  - 2021: 28.1\n  - 2022 (Proj.): 30.7\n- Central Bank gross foreign reserves (in millions of U.S. dollars):\n  - 2019: 6,468\n  - 2020: 5,276\n  - 2021: 4,753\n  - 2022 (Proj.): 4,200\n  - 2023 (Proj.): 3,621\n  - 2024 (Proj.): 3,039\n- Central Bank gross foreign reserves (in percent of GDP):\n  - 2019: 15.7\n  - 2020: 14.3\n  - 2021: 9.6\n  - 2022 (Proj.): 7.8\n- Central Bank gross foreign reserves (in percent of ARA):\n  - 2019: 92.4\n  - 2020: 70.7\n  - 2021: 58.3\n  - 2022 (Proj.): 46.8\n  - 2023 (Proj.): 37.9\n  - 2024 (Proj.): 29.8\n- Credit to the private sector (growth rates):\n  - 2019: 6.7\n  - 2020: 9.1\n  - 2021: 4.6\n- Broad money (percent of GDP):\n  - 2019: 79.1\n  - 2020: 97.6\n  - 2021: 94.3\n  - 2022 (Proj.): 96.6\n  - 2023 (Proj.): 98.6\n  - 2024 (Proj.): 100.4\n- Memorandum: Nominal GDP (in billions of U.S. dollars)\n  - 2019: 41.2\n  - 2020: 36.9\n  - 2021: 40.7\n  - 2022 (Proj.): 43.6\n  - 2023 (Proj.): 46.4\n  - 2024 (Proj.): 49.4\n- Bolivianos/U.S. dollar (end-of-period) 6/:\n  - 2019: 6.9\n\nPress Release No. 22305 — IMF Executive Board Concludes 2022 Article IV Consultation with Bolivia (September 14, 2022).\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Bolivia and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/09/14/pr22305-imf-executive-board-concludes-2022-article-iv-consultation-with-bolivia"
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    "Published: September 14, 2022",
    "Economic contraction of 8.7 percent in 2020, followed by growth of 6.1 percent in 2021 led by mining, construction, and agriculture.",
    "Current account surplus of 2 percent of GDP in 2021, supported by higher global commodity prices.",
    "Inflation was 1.9 percent yoy in June 2022.",
    "International reserves declined from US$5.28 billion at end-2020 to US$4.3 billion at end-July 2022.",
    "Growth projections:",
    "Inflation projection:",
    "Fiscal outlook:",
    "Key risks:",
    "Social and development outcomes since 2000:",
    "Vulnerabilities highlighted:",
    "Fiscal policy and debt sustainability",
    "Fuel subsidy reform",
    "Monetary and exchange rate policy",
    "Reserve management",
    "Pension system",
    "Financial sector and regulation",
    "Governance, informality, and smuggling",
    "Supply-side and investment climate reforms",
    "Climate and green investment",
    "Population (millions, 2020): 11.7",
    "Poverty line (percent, 2020): 39.0",
    "Population growth rate (percent, 2021): 1.4",
    "Adult literacy rate (percent, 2015): 92.5",
    "Life expectancy at birth (years, 2019): 71.5",
    "GDP per capita (US$, 2021): 3,154",
    "Total unemployment rate (2020): 7.9",
    "IMF Quota (SDR, millions): 240.1",
    "Real GDP growth:",
    "Nominal GDP growth:",
    "CPI inflation (period average):",
    "CPI inflation (end of period):",
    "Investment (total, percent of GDP):",
    "Combined public sector net lending/borrowing (overall balance, percent of GDP):",
    "Revenues and grants (percent of GDP):",
    "Expenditure (percent of GDP):",
    "Total gross NFPS debt (percent of GDP):",
    "Current account (percent of GDP):",
    "Exports of goods and services (percent of GDP):",
    "Central Bank gross foreign reserves (in millions of U.S. dollars):",
    "Central Bank gross foreign reserves (in percent of GDP):",
    "Central Bank gross foreign reserves (in percent of ARA):",
    "Credit to the private sector (growth rates):",
    "Broad money (percent of GDP):",
    "Memorandum: Nominal GDP (in billions of U.S. dollars)",
    "Bolivianos/U.S. dollar (end-of-period) 6/:",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[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/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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