Dear Mr. Camdessus:
2. We believe that the policies and measures set forth in this memorandum are adequate to
achieve the objectives of our program, but will take any other measures necessary for this
purpose. During the period of the arrangement, the government will consult with the Managing
Director, on its own initiative or at the request of the Managing Director, concerning the
adoption of appropriate measures. Bolivia will conduct with the Fund two reviews of the second
year of the program supported by the arrangement, to be completed no later than April 30, 2000
and October 30, 2000, respectively. The macroeconomic framework will be reviewed in the
context of the reviews of the program, to take into account the impact of additional debt relief
that may be granted under the enhanced HIPC Initiative. Moreover, while Bolivia has
outstanding financial obligations to the Fund arising from loans under the arrangement, Bolivia
will consult with the Fund from time to time, at the initiative of the government or whenever the
Managing Director requests consultations on Bolivia's economic and financial policies.
3. On this basis, we are requesting the second annual arrangement under the PRGF in an
amount equivalent to SDR 33.6 million, with three equal disbursements of SDR 11.2 million
each, of which the first one is to be made available after approval of this arrangement and the
subsequent ones upon observance of performance criteria at end-March 2000 and end-September
2000.
4. To facilitate a wider distribution of the Interim Poverty Reduction Strategy Paper within
the donor community, the Government of Bolivia authorizes its transmittal by the Fund staff to
any international organization that requests it for the exclusive use of the organization.
Bolivia: Memorandum of Economic and Financial
Policies
I. Introduction
1. This memorandum provides an update of our economic policy memorandum of
August 27, 1998 which set out Bolivia's economic program
for 1998-2001. This memorandum reviews economic developments so far
in 1999 and explains the government's economic program for the remainder
of 1999 and in 2000.
2. Since 1985, Bolivia has achieved a considerable degree of macroeconomic
stability, and the steadfast implementation of structural reforms has helped remove most of the
distortions that adversely affected the economy in the early 1980s. This strategy has
been anchored by a strong fiscal policy, designed to avoid central bank financing of the
combined public sector, and a comprehensive program of structural reforms aimed at dismantling
the extensive state intervention in economic activity that had been built prior to 1985. As
a result, foreign direct investment has surged, economic growth averaged 4.2 percent a
year over the past decade, and the 12-month rate of inflation fell from 18 percent
during 1990 to 4.4 percent during 1998. Gross official foreign reserves rose
from the equivalent of 3.7 months of imports of goods and services at end-1990 to 7½
months at end-1998, while Bolivia's public sector external debt declined substantially over the
same period, from the equivalent of 82 percent of GDP to
54 percent.
3. Bolivia's economic program for 1999-2001, supported by the current
three-year Poverty Reduction and Growth Facility, aims at promoting high and sustainable
growth and reducing poverty. Fiscal policy has been designed to stay on a medium-term
path designed to gradually offset the sharp rise in the cost of structural reforms since 1996
and to reduce the fiscal deficit to a level that can be financed entirely with external credit
by 2002, thus freeing up domestic resources to finance private sector activity and
stimulate economic growth. The Government of Bolivia attaches very high priority to
strengthening education and health reform and rural development programs, particularly with the
support of the Inter-American Development Bank (IDB) and the World Bank. Other key
structural reforms include making fiscal decentralization more effective, privatizing remaining
public enterprises, improving road construction and maintenance, strengthening the financial
sector, and reforming labor market legislation. The program also includes weeding out corruption
through ongoing judicial reform, a complete restructuring of customs, and greater transparency
of government operations.
II. Developments Under the 1999
Program
4. Despite a more difficult external environment than envisaged initially, significant
progress has been achieved under the 1999 program. The program
for 1999 initially aimed at achieving economic growth of
4½-5 percent, limiting inflation to 5.5 percent, and narrowing the external
current account deficit to 7.2 percent of GDP while allowing for a modest loss of reserves
(US$50 million). However, the regional slowdown arising from the international financial
crisis and the sharp drop in world mineral and agricultural prices have dampened economic
activity in Bolivia. For 1999 as a whole, the economy is estimated to grow by
2-2.5 percent, a rate higher than in most neighboring countries, but significantly lower
than envisaged in the program. So far this year, inflationary pressures have been lower than
anticipated, as the 12-month rate of increase in the consumer price index declined from
4.4 percent in December 1998 to 2.3 percent in October. During the first
three quarters of 1999, the net international reserves of the central bank declined
somewhat, but gross reserves remained at a comfortable level, at the equivalent of
6½ months of imports of goods and services at end-September. All the
end-September financial benchmarks of the program have been met.
5. The slowdown in economic activity has placed strong pressures on the consolidated
accounts of the combined public sector. Tax collections during the first three quarters
of 1999 have been lower than anticipated, reflecting a slowdown in domestic demand.
Under these circumstances, the government has been compensating part of the tax shortfall with
specific revenue actions, including the regularization of cars previously imported as contraband,
and strictly limiting expenditure growth. In the area of petroleum products, the government has
continued to adhere to the policy defined in 1997, and increases in world oil prices have
been reflected in matching increases at the consumer level. During the last quarter of this year,
the government will continue to keep a tight lid on expenditure, in order to ensure compliance
with the program limit on the 1999 overall deficit of the combined public sector.
However, net foreign disbursements to the combined public sector are expected to be lower than
initially envisaged, which will require a larger use of domestic financing. We are thus requesting
an increase of Bs. 274 million (0.6 percent of GDP) in the
end-December 1999 program ceiling on the net domestic financing of the combined
public sector.
6. In the financial sector, the economic slowdown contributed to a deceleration in both
money demand and credit to the private sector. Private sector deposits declined during the
first half of 1999, before recovering significantly during the third quarter. The central
bank has been providing additional liquidity to the banking system, including as part of the
resolution process of a medium-sized bank that was intervened by the Superintendency of Banks
in May. During the first three quarters of 1999, the demand for domestic currency
declined and, to avoid a sharp tightening in monetary policy which may threaten the incipient
recovery in economic activity, the Government of Bolivia is requesting a modest relaxation
(US$50 million) in the end-December 1999 net international reserves target of the
program. This will leave gross reserves at the equivalent of 6½ months of imports of goods
and services.
7. Key structural reforms are being implemented under the 1999 program. A
new Customs Law, which replaces the old law dating back to 1929, was approved by
Congress in July. This new law emphasizes accountability and enforcement through the
establishment of a Customs Board, the appointment of an independent president of customs for a
five-year period, and the replacement of politically-related personnel with highly qualified staff.
Following the appointment of the new president in August, the customs department has been
reorganized around five regional directions, the units for the repression of contraband have
become operational since late October, and politically-related staff are being replaced. In the area
of privatization, the public shareholdings in the cement company FANCESA were sold in
September, the sale of the refineries of the state petroleum company YPFB was completed in
November, and that of the state smelting company Vinto is expected to be completed in early
January 2000. Financial sector regulations have continued to be strengthened, with improved risk
assessment requirements in effect since the beginning of 1999 for classification of new
loans and the implementation in September 1999 of the first stage of the
December 1998 regulation aimed at tripling provisioning requirements over a five-year
period.
III. Economic Program For 2000
8. The key aim of our economic program is to create the conditions for a higher rate of
economic growth and a significant reduction in poverty. Important efforts have been made
in recent years, including through a substantial increase in public sector social spending in
relation to GDP and improvements in the quality of social programs. A series of restructurings of
external debt, including the debt relief received by Bolivia in September 1998 under the
Highly Indebted Poor Countries (HIPC) Initiative, have helped lower the stock of external debt
and free resources for social programs. The government believes that the enhanced HIPC
Initiative will help bring further improvements in the living standards of the poorest segments of
the population. Policies directly aimed at reducing poverty will be enhanced, and the
Government of Bolivia intends to organize, during the first half of 2000, a national
dialogue aimed at defining a national strategy in that area. Improvements will be measured by
several indicators, including extreme poverty indices, the poverty gap, child and maternal
mortality, and child malnutrition.
9. To ensure achievement of these goals, the government intends first to preserve
macroeconomic stability and implement a well-targeted structural reform program.
Consistent with economic growth of 4-4.5 percent, the program for 2000 aims at
limiting inflation to 4-4.5 percent and containing the external current account deficit to the
equivalent of 6.8 percent of GDP (entirely financed by foreign direct investment), with a
modest gain in net official international reserves. Fiscal policy will contribute to an increase in
national savings to help finance the expected growth in private investment and keep the external
current account deficit on a sustainable path. The central bank will continue to control the
expansion of its net domestic credit and maintain an exchange rate policy stance consistent with
a steady improvement in external competitiveness.
A. Fiscal Policy
10. The Government of Bolivia places high priority on fiscal consolidation. The
combined public sector overall deficit (after grants) will be contained at 4.2 percent of
GDP in 1999, and reduced to 3.7 percent in 2000. General government
current revenue is projected to increase from 22.4 percent of GDP in 1999 to
22.8 percent in 2000, as revenue efforts are being stepped up. Tax revenue is
projected to improve by 1 percentage point of GDP, reflecting in part a rise in
hydrocarbon royalties based on higher exports of gas to Brazil and improvements in tax
administration, particularly in the customs area. These revenue gains are expected to offset
moderate declines in nontax revenue and central bank operating profits in relation to GDP. Net
external financing is projected to cover two-thirds of the combined public sector financing
requirement in 2000, mostly in the form of concessional external resources from
multilateral and bilateral creditors. Net domestic financing will not exceed
Bs 723 million (1.3 percent of GDP), a level somewhat lower than the
resources that the private pension funds are expected to accumulate in 2000. The fiscal
targets of the program will be monitored on the basis of quarterly ceilings on the overall deficit
and the net domestic financing of the combined public sector, as presented in the attached Tables 1 and 2.
11. The implementation of the reform of customs will help boost revenue.
In 2000, customs revenue and VAT receipts on imports are projected to grow by close to
23 percent, taking into account both the projected recovery in imports and improvements
in tax collections. Building on the progress made so far, further steps are being implemented in
that area. An automated international transit control system with magnetic cards will be
progressively implemented beginning in November 1999, to become fully operational on
the entire territory by July 2000. Implementation of the computerized control system,
which will be selected by mid-December 1999, will begin in early 2000. The
regulations for implementation of the Customs Law, including those dealing with administrative
procedures and tax violations, will be issued by end-February 2000. The establishment of
a professional career stream and selection based on merit and open recruitment is being
undertaken, and a system of customs control a posteriori for imports will be established
during 2000.
12. Tax administration is being strengthened. The regulations for implementation
of the law on the civil servant status approved in October 1999, aiming at promoting
professionalism and continuity in the civil service, will be issued by end-March 2000. The
draft tax procedures code, which aims at strengthening the enforcement power of the tax and
customs administration, will be introduced to congress no later than end-March 2000; this
measure will be a structural performance criterion under the program. In the internal revenue
service, during the first half of 2000 all employees will have to pass a competency
examination as a precondition to becoming permanent staff. A new tax administration law, aimed
at restructuring the internal revenue service into an autonomous agency with its own resources,
will be submitted to congress during the first half of 2000. The draft law will also aim at
removing political influence in the selection of staff and establishing a career system for
professionalized staff recruited on the basis of merit.
13. To ensure attainment of the overall deficit targets for 1999 and 2000,
the government will continue to strictly control the growth of nonpension current spending while
making room for social outlays. In 2000, nonpension current outlays are projected to
rise only slightly faster than nominal GDP, reflecting in part a prudent wage policy. Specific
provisions have been made for annual wage increases and, overall, the general government wage
bill will be reduced in relation to GDP. In 2000, net pension costs are estimated to amount
to 4 percent of GDP, broadly unchanged from 1999. To contain expenditure
growth, the limits on the indebtedness of local governments have been tightened since
early 1999.
14. In 2000, capital expenditure by the general government is projected to rise to
the equivalent of 6.8 percent of GDP. Emphasis will be placed on roads and social
sectors, while investment by public enterprises will decline, reflecting the sale to the private
sector of the main assets of the state petroleum company YPFB. The government will continue to
enhance the implementation of public investment by ensuring that adequate domestic counterpart
funds are available for projects approved in the budget. Both in 1999 and in 2000,
the program allows for privatization proceeds from the sale of public enterprises to be spent on
public investment, up to a maximum of US$45 million; privatization proceeds in excess
of that amount will be used to lower the deficit of the overall combined public
sector.
15. Expenditure on social sectors and infrastructure will increase in 2000. In
line with the recommendations of the Public Expenditure Review of the World Bank,
expenditure on health will be increased; spending on the distribution of water and sanitation will
be raised while refraining from extending new public subsidies; and steps will be taken to
reorient education expenditure toward primary and secondary education. Outlays on social
reforms, including pensions, are projected to amount to about 3.1 percent of GDP
in 1999-2000 (Table 3). The program also provides for
additional outlays designed to alleviate poverty, including in social sectors and infrastructure, in
amounts equivalent to the additional relief that may be provided under the enhanced HIPC
Initiative during 2000.
B. Monetary, Credit, and Exchange Rate Policies
16. During 1999-2000, the central bank of Bolivia will continue to promote the
objective of keeping inflation at a low level. To that effect, the central bank will keep
developments in the money market under close review. For 2000, the growth in net
domestic assets will be somewhat less than the expansion in currency issue (projected to grow
broadly in line with nominal GDP) to secure a modest gain in net international reserves. Broad
money is projected to grow by about 6 percent in 1999 and close to
11 percent in 2000. Bank credit to the private sector, which has slowed
significantly this year, is expected to recover in 2000. To monitor the monetary program,
quarterly targets on the net international reserves and ceilings on the net domestic assets of the
central bank have been established, as presented in attached Tables 4 and
5.
17. The prudential ratios of financial intermediaries will continue to be strengthened.
Under the timetable that became effective in September 1999, provisioning
requirement will be raised twice in 2000, in March and September. A draft financial
sector law, aimed at establishing a comprehensive bank resolution framework, including a
deposit insurance scheme based on fair premia, has been introduced in congress for approval by
March 2000. The draft law aims at reinforcing the role of the Superintendency in early
bank intervention, strengthening accountability for bank managers and directors, and bringing
capital adequacy risks weights for mortgage loans in line with Basle requirements. Also, norms
will be issued to strengthen internal controls, auditing, and rating agencies for the financial
sector, and bring consolidated supervision in line with Basle core principles.
18. The government will continue implementing an exchange rate policy aimed at
improving Bolivia's external competitiveness. The Government of Bolivia believes that the
current exchange rate system, by which the central bank manages the boliviano in the daily
foreign exchange auctions, has served the country well. The central bank will continue to
monitor developments in the foreign exchange market closely.
C. Poverty Reduction and Structural Reforms
19. The program of social policies will be carried out in accordance with the strategy
described in the Interim Poverty Reduction Strategy Paper (PRSP). The government
believes that the strategy of the fight against poverty should be broad encompassing, and include
improving the road network, as the poor quality of the network keeps transportation costs high
and limits the potential for economic growth. The government will take steps to improve existing
mechanisms for managing, rehabilitating, and expanding the network. The key policy actions to
carry out social and structural reforms are presented in Table 6 of
this Memorandum, including two structural performance criteria, on the submission to congress
of the tax procedure code by end-March 2000 and the introduction of the comprehensive
tax reform in congress in October 2000.
20. The government intends to take major steps to modernize the domestic tax
system. During 2000 the special tax regimes in the commercial and transportation
sectors will be modified, so that the relatively few large taxpayers in these sectors, who have
often been avoiding taxation, can be incorporated in the general tax regime. A comprehensive
reform of the tax system will be elaborated and implemented in several steps during 2000,
with the objective of making the tax system more progressive and efficient, based on the
recommendations of the Fund's Fiscal Affairs Department. The reform is scheduled to be adopted
before year-end, for full implementation by January 1, 2001. It will aim at replacing
distortive taxes, such as the cascading transactions tax, with alternative revenue sources, either
by increasing existing tax rates or by introducing new, more equitable, taxes. Submission of the
draft tax reform law to congress by October 2000 is a structural performance criterion
under the program.
21. The government will initiate the necessary technical and legal actions for the
development and implementation during 2002 of a unified system of accounts for the
private enterprises, which will allow for standardization of their accounting systems.
Regulatory supervision will thus be facilitated, as well as tax administration. Also, this unified
system of accounts will allow for better risk assessments, thus contributing to the development of
the market for securities.
22. The Government of Bolivia intends to complete its privatization program by the end
of 2000. Following the privatization in 1999 of the refineries of the state
petroleum company YPFB and the sale of its service stations to the company's employees, the
government will privatize its remaining assets, including the oil storage facilities, the natural gas
distribution networks, the airport jet fuel stations, and the natural gas bottling plants during the
first half of 2000. The government also intends to offer for sale in 2000 the
electricity distribution company of Tarija (SETAR), the electricity generation and distribution
company of Potosi (SEPSA), and the electricity generation company of Trinidad.
During 2000, the government plans to offer in concession to the private sector the
operation of the postal service company ECOBOL.
23. During 1999 and 2000 the government will deepen the reform of the
pension system initiated in recent years. In the public pension system, steps will be taken
in 2000 to prepare for the payment of compensatory pensions to those who contributed to
the public pension regime and have now transferred to the private system. A norm will be issued
in the first half of next year to specify the computation of such pension rights. With regard to the
funds accumulated under the capitalization program, work on the National Identification System
(RIN) aimed at identifying beneficiaries, will continue during 2000, for completion
by 2001.
24. During 2000, the government intends to continue improving decentralization
and financial management in the public sector. To improve public sector cash management,
a financial management system has been developed since March 1999, aimed at providing
daily information on the financial position of public sector entities, and enhancing public
expenditure control. A pilot version of the system will be in place by June 2000 in five
ministries, including the ministry of finance, generalized to the other ministries by the end of the
year, and subsequently extended to regional and local governments. During the first quarter
of 2000, regulations for the implementation of the October 1999 law of local
governments, which aims at limiting their current spending to 40 percent of their own
recurrent income, will be issued. Also, during 2000 the budgetary and accounting
classification, standards, and practices of all levels of government will be harmonized and a
generalized accounting plan will be adopted for local governments, consistent with that used by
the central government. A plan for further reform on fiscal decentralization will be formulated
with the assistance of the Fund's Fiscal Affairs Department.
25. The Government of Bolivia believes that current labor regulations are excessively
complex and intricate, and it intends to introduce in congress in 2000 a draft law aimed at
modernizing them. Some flexibility was introduced in working hours in all sectors of the
economy in May 1999, and a law aimed at protecting the rights of children and preventing
child labor exploitation was approved by congress in September 1999. The new labor law,
prepared in consultation with all economic and social agents, will be introduced in congress in
October 2000, for approval by year-end. It will aim at modernizing the labor market and
at bringing Bolivian labor regulations in line with the norms of the International Labor
Organization, particularly with respect to equality of treatment among genders and labor safety.
The government also intends to introduce in congress a law aimed at promoting employment
generation, with special emphasis on microenterprises, which account for two-thirds of
employment in Bolivia.
26. During 2000, the government will continue implementing its comprehensive
program aimed at reforming and strengthening the judicial system. During the year, the
government will submit to congress a new civil code, a law on administrative procedures, and an
industrial property law. Work on the preparation of a commercial code, a law on conflict
resolution in local communities, and one on public access to justice will proceed
during 2000, for adoption in 2001. Training for judges will be strengthened with
the creation in 2001 of a Training Institute, while professionalism will be promoted with
the development of a career stream in the judiciary.
27. The government is aware that improvements are still required in the quality of monetary
statistics, and the recommendations of the Fund's January 1999 technical assistance
mission in that area are being implemented. All necessary steps are being taken to ensure that
Bolivia joins the General Data Dissemination Standard of the Fund
during 2000.
D. External Sector
28. The external current account deficit, which is estimated to decline from
7.9 percent of GDP in 1998 to 6.3 percent in 1999, is projected to
rise to 6.8 percent in 2000. In 1999, a weakening in export
performance associated mainly with lower export prices is being more than offset by a decline in
imports reflecting the slowdown in economic activity. Imports of capital goods are estimated to
remain high because of large investments undertaken by capitalized enterprises and in the mining
and energy sectors. In 2000, exports are projected to recover significantly, reflecting
higher prices for mineral and agricultural products, while imports would grow somewhat faster
than GDP. Over the medium-term, the current account deficit will fall gradually to about
5½ percent of GDP as new exports come on line. Taking into account envisaged
capital disbursements, the central bank will be able to maintain the international reserve cushion
at the equivalent of six months of imports of goods and services. During the period of the
program, Bolivia will keep the current account of the balance of payments free of restrictions and
will refrain from increasing external tariffs or introducing nontariff barriers for balance of
payments purposes.
29. The Government of Bolivia views the medium-term outlook for foreign direct
investment as a signal that Bolivia's reforms are yielding significant gains. The investment
projects in export sectors, such as oil and gas exploration, electric energy, and mining, are
expected to contribute to a vigorous growth in exports and economic activity over the medium
term. Nonetheless, this outlook depends in part on the environment in the region, and the
Bolivian authorities stand ready to adjust, if necessary, their policies to ensure attainment of
these medium-term objectives.
30. The programs for 1999 and 2000 are fully financed, and the
Government of Bolivia would like to express its gratitude to Bolivia's official creditors for the
relief already granted under the HIPC Initiative. The assistance received since
September 1998 has helped reduce the external debt burden to a more manageable level
and covers the fiscal costs of structural reforms without compromising social expenditure.
Poverty remains widespread in Bolivia, and the government intends to ask official creditors
in 2000 to consider favorably a further reduction in the net present value of its external
debt, from close to 214 percent currently to 150 percent, in line with the
recommendations of the enhanced HIPC Initiative. The Government of Bolivia will continue to
improve the structure of its external debt in order to maximize the benefits that would accrue to it
under the HIPC Initiative. In this respect, Bolivia's nonconcessional external public debt is
projected to remain unchanged both in 1999 and in 2000 (Table 7). Bolivia does not have any external payments arrears, and will
not incur any new external payments arrears at any time during the arrangement.
Table 1. Bolivia: Limits on the Deficit of the
Combined Public Sector1,2
and Domestic Financing of the Combined Public Sector1,3
|
| Date |
Limits |
|
| (Cumulative amounts in millions of bolivianos from
January 1, 1999) |
| |
|
| I. Deficit of the Combined Public
Sector4 |
| December 31, 1999 |
-2,066 |
| |
|
| II. Domestic Financing of the Combined Public
Sector4,5 |
| December 31, 1999 |
821 |
| |
|
| (Cumulative amounts in millions of bolivianos from
January 1, 2000) |
| |
|
| I. Deficit of the Combined Public
Sector4 |
| March 31, 2000 (performance criterion) |
-311 |
| June 30, 2000 |
-475 |
| September 30, 2000 (performance
criterion--indicative) |
-1,040 |
| December 31, 2000 (indicative) |
-2,029 |
| |
|
| II. Domestic Financing of the Combined Public Sector
4,5,6 |
| March 31, 2000 (performance criterion) |
138 |
| June 30, 2000 |
-28 |
| September 30, 2000 (performance
criterion--indicative) |
230 |
| December 31, 2000 (indicative) |
723 |
1Quarterly
benchmarks for the remainder of the first annual program of the three-year PRGF arrangement,
covering calendar year 1999, and quarterly benchmarks and performance criteria for the second
annual program, covering calendar year 2000.
2The combined deficit is the sum of domestic and external financing of the
nonfinancial public sector, and the cash operating results of the central bank. The nonfinancial
public sector comprises the central administration, public sector social security institutions, the
local governments, other decentralized agencies, and the public enterprises.
3Defined as the sum of: (i) the increase in the net claims of the domestic financial
system and the nonfinancial private sector on the nonfinancial public sector; (ii) the net increase
in floating debt and fiscal certificates; less (iii) the cash operating profits of the central bank.
4These limits will be adjusted downward by the full amount of: (i) net proceeds
from the sale of assets in excess of Bs 265 million during 1999 and Bs 280 million during 2000;
and (ii) the difference in 1999 between programmed cumulative cash outlays for severance
payments to workers of public enterprises of Bs 70 million and actual cash outlays to workers of
public enterprises excluding those related to the privatization of YPFB.
5These limits will be adjusted downward by the full amount of: (i) any overdue
obligations to foreign official creditors; and (ii) the difference in 1999 between the programmed
cumulative cash outlays for severance payments listed in footnote 3 above and actual cash
outlays.
6These limits will be adjusted upward in 2000 by the full amount of the
difference between projected cumulative net external financing to the nonfinancial public sector
and actual cumulative net external financing, with a maximum upward adjustment of Bs 160
million. |
Table 2. Bolivia: Fiscal Indicators
(In percent of GDP)
|
| |
1998 |
1999
|
2000
Program |
| Program |
Revised |
|
| Nonpension balance |
-0.1 |
0.3 |
-0.2 |
0.2 |
| Revenue and grants |
24.9 |
24.7 |
24.0 |
25.1 |
| Of which: |
|
|
|
|
| Current
revenue |
22.9 |
22.7 |
22.4 |
23.1 |
| Expenditure |
24.9 |
24.4 |
24.2 |
24.9 |
| Current |
18.6 |
17.9 |
17.5 |
17.9 |
| Capital |
6.3 |
6.5 |
6.7 |
6.9 |
| |
|
|
|
|
| Pension costs (net) |
3.9 |
4.2 |
3.9 |
3.9 |
| |
|
|
|
|
| Overall deficit |
4.0 |
3.9 |
4.2 |
3.7 |
| Net external financing |
2.8 |
2.9 |
2.5 |
2.4 |
| Net domestic financing |
1.2 |
1.0 |
1.7 |
1.3 |
Sources: Ministry of Finance; and Fund
staff estimates. |
Table 3. Bolivia: Annual Fiscal Cost of Structural
Reforms
(In percent of GDP)
|
| |
1995 |
1996 |
1997 |
Prel.
1998 |
Est.
1999 |
Proj.
2000 |
|
| Total costs |
1.0 |
1.5 |
3.0 |
5.6 |
5.0 |
5.0 |
| One-time costs |
0.8 |
1.3 |
0.7 |
1.0 |
0.6 |
0.4 |
| Recurrent costs |
0.3 |
0.2 |
2.3 |
4.6 |
4.4 |
4.6 |
| |
|
|
|
|
|
|
| By program |
|
|
|
|
|
|
| Pension reform (incremental cost from
1996) |
0.0 |
0.0 |
1.3 |
2.8 |
2.7 |
2.7 |
| |
|
|
|
|
|
|
| YPFB capitalization |
0.0 |
0.0 |
0.7 |
1.1 |
1.1 |
1.1 |
| Balance of YPFB |
0.0 |
0.0 |
0.4 |
0.7 |
0.7 |
0.7 |
| Change in royalties |
0.0 |
0.0 |
0.2 |
0.4 |
0.4 |
0.4 |
| |
|
|
|
|
|
|
| Severance payments |
0.4 |
0.7 |
0.5 |
0.7 |
0.4 |
0.2 |
| General government |
0.2 |
0.4 |
0.2 |
0.1 |
0.2 |
0.2 |
| Enterprises |
0.2 |
0.2 |
0.3 |
0.6 |
0.3 |
0.0 |
| |
|
|
|
|
|
|
| Cost of increased remuneration for bank reserves |
0.0 |
0.0 |
0.0 |
0.2 |
0.2 |
0.2 |
| |
|
|
|
|
|
|
| Judiciary reform and governance |
0.0 |
0.0 |
0.0 |
0.1 |
0.1 |
0.1 |
| |
|
|
|
|
|
|
| Customs administration reform |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.1 |
| |
|
|
|
|
|
|
| Investment in education (gross capital formation) |
0.2 |
0.2 |
0.1 |
0.2 |
0.1 |
0.1 |
| |
|
|
|
|
|
|
| Other |
0.4 |
0.6 |
0.4 |
0.5 |
0.5 |
0.4 |
| Education reform (training) |
0.0 |
0.0 |
0.0 |
0.1 |
0.1 |
0.1 |
| Wages (extraordinary increases and new
positions) |
0.1 |
0.1 |
0.2 |
0.2 |
0.1 |
0.1 |
| Education |
0.1 |
0.1 |
0.1 |
0.1 |
0.1 |
0.1 |
| Civil
service |
0.0 |
0.0 |
0.1 |
0.1 |
0.1 |
0.1 |
| Capitalization |
0.2 |
0.4 |
0.1 |
0.0 |
0.0 |
0.0 |
| Of which:
studies |
0.1 |
0.3 |
0.0 |
0.0 |
0.0 |
0.0 |
| Goods and services |
0.1 |
0.1 |
0.1 |
0.2 |
0.1 |
0.1 |
| Education |
0.1 |
0.0 |
0.1 |
0.1 |
0.1 |
0.1 |
| Children development
program |
0.0 |
0.0 |
0.0 |
0.1 |
0.0 |
0.1 |
| Foregone interest payments on capitalized enterprises |
0.0 |
0.1 |
0.0 |
0.0 |
0.0 |
0.0 |
| Sectoral reforms |
0.0 |
0.0 |
0.0 |
0.1 |
0.0 |
0.0 |
| |
|
|
|
|
|
|
| Memorandum item: |
|
|
|
|
|
|
| Social sector |
0.4 |
0.3 |
1.6 |
3.4 |
3.1 |
3.2 |
Sources: Ministry of Finance; and Fund staff
estimates. |
Table 4. Bolivia: Minimum Gain of Net International
Reserves of the Central Bank of Bolivia1,2,3,4,5
(Cumulative amounts in millions of U.S. dollars from January 1,
1999)
|
| Date |
Targets |
|
| January 31, 20006 |
-146 |
| March 31, 2000 (performance criterion) |
-185 |
| June 30, 2000 |
-155 |
| September 30, 2000 (performance
criterion--indicative) |
-120 |
| December 31, 2000 (indicative) |
-85 |
1Quarterly benchmark for
the remainder of the first annual program of the three-year PRGF arrangement, covering calendar
year 1999, and quarterly benchmarks and performance criteria for the second annual program,
covering calendar year 2000.
2Defined as central bank foreign assets, less all liabilities to nonresidents with an
original maturity of up to and including one year, plus outstanding purchases and disbursements
from the Fund (excluding disbursements from the Trust Fund), net liabilities to the Latin
American Reserve Fund, and any other balance of payments loans, including bridging loans and
those obtained by pledging the gold of the central bank.
3The net international reserve flows will be measured by the difference in stocks.
4These targets will be adjusted upward by the full amount of: (i) any overdue
obligations to foreign official creditors; and (ii) net proceeds from the sale of assets in excess of
the amount indicated in footnote 4 of Table 1, valued at the accounting exchange rate of the
corresponding period.
5If currency issued is less than envisaged in the program, the targets for 2000 will
be adjusted downward by the difference between projected cumulative currency issued and actual
cumulative currency issued, up to a maximum amount equivalent to US$35 million.
6Target evaluated at the end of January because of the expected increase in the
demand for foreign currency banknotes associated with the year 2000 problem at the end of
December 1999. |
Table 5. Bolivia: Limits on the Changes in Net
Domestic Assets of the Central Bank of Bolivia1,2,3,4
(Cumulative amounts in millions of bolivianos from January 1,
1999)
|
| Time Period |
Limits |
|
| January 31, 20005 |
482 |
| March 31, 2000 (performance criterion) |
639 |
| June 30, 2000 |
653 |
| September 30, 2000 (performance
criterion--indicative) |
488 |
| December 31, 2000 (indicative) |
629 |
1Quarterly benchmark for
the remainder of the first annual program of the three-year PRGF arrangement, covering
calendar year 1999, and quarterly benchmarks and performance criteria for the second annual
program, covering calendar year 2000.
2Defined as the difference between changes in currency issued and changes in net
international reserves of the central bank evaluated at the corresponding exchange rate.
3The net international reserve flows will be measured by the difference in stocks.
4These limits will be adjusted downward by the full amount of: (i) any overdue
obligations to foreign official creditors; and (ii) net proceeds from the sale of assets in excess of
the amount indicated in footnote 4 Table 1.
5Limit evaluated at the end of January because of the expected increase in the
demand for foreign currency banknotes associated with the year 2000 problem at the end of
December 1999. |
|
Table 6. Structural Benchmarks and Performance Criteria, 1999-2000
|
Performance
criteria/benchmark
|
Policy Measure
|
Timetable
for
Implementation
|
| Public
Sector Institutional Reform
|
| Performance criteria
|
Submit to Congress draft amendments to the tax code that will strengthen
the tax authorities' ability to enforce tax laws.
|
March 2000
|
| Benchmark
|
Submit to Congress new draft tax administration law that will
restructure the Internal Revenue Service, giving it more autonomy.
|
April 2000
|
| Benchmark
|
Enactment of tax code and tax administration laws.
|
June 2000
|
| Benchmark
|
Reach decision on new computerized control system to be adopted by
customs and begin implementation.
|
December 1999
|
| Benchmark
|
Issue implementing decrees on customs procedures and
penalties.
|
February 2000
|
| Benchmark
|
Automated international customs transit control system to be fully
operational.
|
July 2000
|
| Benchmark
|
Establishment of controls a posteriori in the Customs
Administration.
|
September 2000
|
| Privatization
|
|
Prior Action
|
Offer the state smelting company Vinto for sale.
|
December 1999
|
|
Prior Action
|
Complete the bidding process for the privatization of the refineries of
YPFB.
|
November 1999
|
|
Benchmark
|
Complete privatization of the residual assets of YPFB, including the natural
gas network, jet fuel stations, and natural gas bottling plants.
|
June 2000
|
|
Benchmark
|
Complete the privatization process fully, including the dairy product
company Milka, the electricity companies SEPSA, SETAR, and the electricity generation of
Trinidad.
|
December 2000
|
| Tax System
reform
|
|
Benchmark
|
Modify the simplified and integrated tax regimes (involving tax exemption
of small traders and inclusion of the largest ones in the general tax regime).
|
December 31, 2000
|
|
Benchmark
|
Elaborate and implement a comprehensive reform of the tax system in
several steps with the objective of making the tax system more progressive and fair.
|
During 2000
|
|
Performance Criteria
|
Submit to Congress the draft legislation for the reform of the tax
system.
|
October 2000
|
| Labor market
modernization
|
|
Benchmark
|
Initiate consultation on labor reform.
|
January 2000
|
|
Benchmark
|
Submit to Congress a new draft labor legislation.
|
October 2000
|
| Financial
sector and capital markets
|
|
Benchmark
|
Publication of the law establishing a comprehensive bank resolution
framework, including a deposit insurance scheme.
|
March 2000
|
|
Benchmark
|
Issue norms for consolidated supervision of financial conglomerates, in line
with the core principles established by the Basle Committee on Banking Supervision.
|
June 2000
|
|
Benchmark
|
Issue norms on credit risk to ensure a more precise definition of risk weights
for mortgages and on the strengthening of internal and external audits.
|
June 2000
|
|
Benchmark
|
Complete and implement new regulations on securitization and develop
plans for the establishment of a secondary housing mortgage market.
|
March 2000
|
| Social
reforms
|
|
Benchmark
|
Health: Implement the basic Health Insurance System, designed to provide a
basket of basic health services free to the entire population.
|
October 2000
|
|
Benchmark
|
Education: Develop a reform proposal for higher education in order to
reduce the share of public resources for higher education.
|
September 2000
|
| Legal and
judicial reforms
|
|
Benchmark
|
Submit to Congress revisions to the civil code procedures.
|
October 2000
|
|
Benchmark
|
Submit to Congress revisions to the commercial code.
|
December 2000
|
| Roads and
Transportation
|
|
Benchmark
|
Submit a new transport law, with corresponding regulation, to promote
competition in the transport sector.
|
June 2000
|
Table 7. Bolivia: Limits on the Net Increase of
Public
and Publicly Guaranteed External Debt1
|
| Date |
Short Term2 |
Maturities of
More than
One Year3 |
(Cumulative amounts in millions of U.S. dollars from
January 1, 1999) |
| December 31, 1999 |
0 |
0 |
| |
|
|
| (Cumulative amounts in millions of U.S. dollars from
January 1, 2000) |
| March 31, 2000 (performance criterion) |
10 |
10 |
| June 30, 2000 |
10 |
10 |
| September 30, 2000 (performance
criterion--indicative) |
10 |
10 |
| December 31, 2000 (indicative) |
0 |
0 |
1Quarterly benchmark for
the remainder of the first annual program of the three-year PRGF arrangement, covering calendar
year 1999, and quarterly benchmarks and performance criteria for the second annual program,
covering calendar year 2000.
2Excludes normal import credits.
3Excludes: (i) concessional loans with a grant element of 35 percent or more using
the most recent OECD commercial interest reference rates (CIRRs); (ii) changes in central bank
liabilities defined in Table 5 as part of the net international reserves; and (iii) debt renegotiation
with official creditors. Includes total outstanding external debt of: (i) the nonfinancial public
sector as defined in footnote 2 of Table 1; (ii) the central bank; and (iii) the private sector with
official guarantee. |
