News Brief No. 99/30

News Brief: IMF Executive Board Completes Bolivia Midterm Review

June 16, 1999

IMF Executive Board Completes Bolivia Midterm Review

Shigemitsu Sugisaki, Deputy Managing Director of the International Monetary Fund (IMF), said: "The Executive Board of the IMF met today to assess progress under Bolivia's economic and financial program supported by the Enhanced Structural Adjustment Facility¹ and completed the midterm review under the program's first year. As a result, SDR 16.82 million (about US$22.6 million) is available to Bolivia.

"The authorities' economic program for 1999 supports the medium-term strategy to reduce the still-high incidence of poverty in Bolivia through faster economic growth and a more equitable distribution of income. The program was developed with the aim of achieving economic growth of 4.5-5 % and limiting inflation to 5.5 % in 1999. The authorities remain committed to meeting these policy targets. However, the latest developments suggest that, partly on account of regional conditions, El Niño effects, and adverse terms of trade changes, real GDP growth and inflation may turn out slightly lower than expected.

"The key economic policies include an overall fiscal deficit of 3.9 % of GDP, slightly higher than that envisaged in the original program. While variations in output growth may inevitably affect the fiscal balance, the authorities recognize the need to strengthen the underlying fiscal position. In this regard, they plan to intensify efforts to improve the tax and customs administration and the efficiency of public expenditure. Credit policy will remain tight, while exchange rate policy will continue to be set with a view to preserving external competitiveness as well as the hard-won benefits of low inflation.

"In this connection, the authorities recognize the importance of wage restraint in both the public and private sectors, as well as the need for structural measures to continue to raise the economy's basic efficiency. Structural policies in the coming year will emphasize education and health, governance, and fiscal decentralization, as planned in the original program.

"Directors stressed that attention should be given by both the authorities and the World Bank and the Fund to ensuring that reform efforts in Bolivia translate into more significant gains in poverty alleviation.

"Directors considered that the authorities' economic program for 1999 constitutes a sound response to the uncertain international environment. They noted the authorities' commitment to remain vigilant, but recognized that, in close consultation with the IMF, some policy adjustments may be needed over the year in the present difficult environment. Directors endorsed the program and also supported the authorities' request for a waiver for the delay in publishing bids for the privatization of the refineries of the state petroleum company," Sugisaki said.

1 See Press Release No. 98/41 of September 18, 1998.