IMF Executive Board Concludes 2024 Article IV Consultation with Bolivia

January 28, 2025

Washington, DC – March 22, 2024: On March 22nd, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] for Bolivia. This also included a discussion of the findings of the Financial Sector Assessment Program (FSAP) exercise for Bolivia. [2]

Bolivia's growth momentum moderated in 2023, to 2.5 percent, from declining natural gas production, less public investment, and financial market turmoil. Price controls, food and fuel subsidies, export restrictions, and strong agricultural production held inflation below 2 percent at year-end. However, the combination of lower natural gas exports, high fuel imports, a large fiscal deficit―increasingly financed by the central bank―and an overvalued exchange rate contributed to a wider current account deficit (estimated at 5 percent of GDP for 2023) and near-depletion of international reserves. Public debt increased to nearly 84 percent of GDP by end-2023. Sovereign spreads rose sharply in early 2023 as the foreign exchange (FX) shortage became apparent and a mid-sized bank (Banco Fassil) failed. Consequently, banks were forced to restrict the withdrawal of FX deposits, heightening financial sector stability risks.

Growth is anticipated to decelerate to 1.6 percent in 2024, holding at around 2.2-2.3 percent in the medium term under the continuation of the current policies. Inflation is forecast to reach 4.5 percent in 2024, stabilizing around 4 percent thereafter. The outlook is however predicated on significantly improved access to external financing, without which the risk of disorderly fiscal and/or exchange rate adjustment is elevated. External factors such as reduced demand, intensified global conflicts disrupting trade routes, commodity price volatility, or a renewed tightening of financial conditions could worsen fiscal and external imbalances, impede growth, and destabilize the domestic financial sector.

Additionally, extreme weather events, like the 2023 droughts and recent floods, pose a risk to Bolivia's agricultural sector and critical infrastructure. Domestically, a faster decline in hydrocarbon production, higher inflation due to FX scarcity, or confidence shocks could further impact growth, hurt real incomes and exacerbate financial stability risks. Social unrest stemming from inequality and security concerns remains a concern, as evidenced by the prolonged road blockages of early 2024. On the upside, Bolivia could potentially benefit from the global shift towards green energy due to its vast lithium resources, although developing the lithium sector and scaling up domestic production capacity will likely take time.

Executive Board Assessment[3]

Executive Directors agreed with the thrust of the staff appraisal. They welcomed Bolivia's socioeconomic progress over the past several years but expressed concerns about the difficult financial situation Bolivia currently finds itself in, with low reserves, uncertain fiscal financing, and pressures in parallel exchange markets. Directors stressed the urgency of a shift from current unsustainable policies to avoid a disorderly adjustment that would exert significant social and economic hardship.

Directors called for continued constructive engagement on a sustainable policy mix that is likely to require both fiscal adjustment phased in over the next few years and an up front step devaluation to more quickly address the external imbalance and allow for a build up of reserves. They emphasized the importance of improving the social safety net to shield poorer households from inflation pressures following a realignment of the exchange rate. Directors also emphasized the importance of strengthening fiscal institutions to underpin the credibility of the planned adjustment and to improve central bank governance in support of a shift to a crawling peg and, eventually, to inflation targeting.

Directors recommended a strengthening of the central banks’ capacity to conduct sterilization operations and to lift lending rate caps to improve the allocation of capital and enhance monetary policy transmission. They also underscored the need to improve crisis preparedness and contingency planning in line with FSAP recommendations to safeguard financial stability.

Directors recommended a range of supply side reforms to unlock private investment, boost productivity and enhance competitiveness. These should include phasing out export ceilings and price controls and better prioritizing public investment projects. A stronger regulatory framework for hydrocarbon and lithium exploration could be instrumental in increasing investment in those sectors. Directors also called for enhancing AML/CFT framework and ensuring the timely publication of key macroeconomic data.




1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[1] The Financial Sector Assessment Program (FSAP), established in 1999, is a comprehensive and in-depth assessment of a country’s financial sector. FSAPs provide input for Article IV consultations and thus enhance Fund surveillance. FSAPs are mandatory for the 47 jurisdictions with systemically important financial sectors and otherwise conducted upon request from member countries. The key findings of an FSAP are summarized in a Financial System Stability Assessment (FSSA).

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .


Table 1. Bolivia: Selected Economic and Social Indicators, 2022–2026

Population (millions, 2021)

11.8

Poverty rate (percent, 2021)

36.3

Population growth rate (percent, 2021)

1.4

Adult literacy rate (percent, 2021)

94.8

Life expectancy at birth (years, 2021)

72

GDP per capita (US$, 2021)

3,437

Total unemployment rate (2021)

7.0

IMF Quota (SDR, millions)

240.1

Est.

2022

2023

2024

2025

2026

Income and prices

Real GDP

3.6

2.5

1.6

2.2

2.2

Nominal GDP

8.9

4.9

6.2

6.5

6.2

CPI inflation (period average)

1.7

2.6

4.5

4.2

3.9

CPI inflation (end of period)

3.1

2.1

4.8

4.0

3.9

Investment and savings 1/

Total investment

15.1

15.9

16.6

16.3

16.0

Of which: Public sector

5.7

5.0

6.0

6.0

6.0

Gross national savings

12.5

8.6

10.5

10.3

10.5

Of which: Public sector

-1.4

-2.0

-1.9

-1.5

-1.2

Combined public sector

Revenues and grants

28.9

28.3

27.6

27.4

27.1

Of which: Hydrocarbon related revenue

6.0

5.4

4.3

3.9

3.5

Expenditure

36.0

35.3

35.5

34.8

34.3

Current

30.3

30.3

29.5

28.8

28.3

Capital 2/

5.7

5.0

6.0

6.0

6.0

Net lending/borrowing (overall balance)

-7.1

-7.0

-7.9

-7.5

-7.2

Of which: Non-hydrocarbon balance

-12.8

-12.2

-12.0

-11.2

-10.5

Total gross NFPS debt 3/

80.4

83.6

86.7

88.9

90.9

External sector

Current account 1/

-0.4

-5.0

-5.7

-5.8

-5.6

Exports of goods and services

32.6

28.5

27.0

26.9

26.5

Of which: Natural gas

6.7

3.8

3.4

3.0

2.7

Imports of goods and services

32.9

34.4

33.6

33.6

32.7

Capital account

0.0

0.0

0.0

0.0

0.0

Financial account (-= net inflow)

-1.5

-0.5

-5.3

-5.8

-5.6

Of which: Direct investment net

-0.8

-0.6

-0.6

-0.9

-0.9

Of which: Other investment, net

-0.3

-0.3

-4.6

-4.7

-5.1

Net errors and omissions

-3.0

0.0

0.0

0.0

0.0

Terms of trade index (percent change)

-1.6

1.2

-0.6

0.0

0.2

Central Bank gross foreign reserves 4/ 5/ 6/

In millions of U.S. dollars

3,796

1,808

1,653

1,555

1,556

In months of imports of goods and services

2.8

1.3

1.1

1.0

1.0

In percent of GDP

8.6

3.9

3.4

3.0

2.8

In percent of ARA

44.5

20.8

18.2

16.2

15.5

Money and credit

Credit to the private sector (percent change)

6.3

-0.4

3.0

4.3

5.1

Credit to the private sector (percent of GDP)

74.2

70.5

68.4

67.0

66.3

Broad money (percent of GDP)

85.2

82.8

81.2

80.0

78.9

Memorandum items:

Nominal GDP (in billions of U.S. dollars)

44.3

46.5

49.3

52.5

55.8

Bolivianos/U.S. dollar (end-of-period) 7/

6.9

6.9

REER, period average (percent change) 8/

-0.9

-1.9

Oil prices (in U.S. dollars per barrel)

96.4

80.6

77.7

73.8

70.9

Energy-related subsidies to SOEs (percent of GDP) 9/

4.4

4.0

3.5

2.7

2.4

Sources: Bolivian authorities (MEFP, Ministry of Planning, BCB, INE, UDAPE); IMF; Fund staff calculations.
1/ The discrepancy between the current account and the savings-investment balance reflects methodological differences. For the projection years, the discrepancy is assumed to remain constant in dollar value.
2/ Includes nationalization costs and net lending.
3/ Public debt includes SOE's borrowing from the BCB (but not from other domestic institutions) and BCB loans to FINPRO and FNDR.
4/ Excludes reserves from the Latin American Reserve Fund (FLAR) and Offshore Liquidity Requirements (RAL).
5/ All foreign assets valued at market prices.
6/ Includes a repurchase line of US$99.2 million maturing in 2025.
7/ Official (buy) exchange rate.
8/ The REER based on authorities' methodology is different from that of the IMF (see 2018 and 2017 Staff Reports).
9/ Includes the cost of subsidy borne by public enterprises and incentives for hydrocarbon exploration investments in the projection period.

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