IMF Praises Bolivia's Sound Fiscal Management

by Mike Godfrey, Tax-News.com, Washington

27 January 2010

Buoyed by a strong fiscal position before the crisis, Bolivia has been relatively unaffected by the economic crisis. However, lower exports, particularly of hydrocarbons, and a 5% of GDP fall in tax revenues have prevented the government from posting the 4% surplus it reported in 2008, and will likely only announce it balanced its books in 2009.

In its recommendations, the IMF Executive Board welcomed the authorities’ sound fiscal policy, with public debt expected to continue to decline gradually over the next few years. Given the budget’s reliance on revenue from natural resources, they encouraged the authorities to strengthen the non-hydrocarbon balance to generate additional savings over the medium and long term.

The Board also welcomed fiscal reforms under consideration. In particular the Directors looked forward to steps to strengthen direct taxation, simplify the tax system, rebalance spending responsibilities and revenue assignments across the national and subnational levels of government, and establish a formal framework for the fiscal management of natural resources. Concluding, the Board concurred that gradually phasing out fuel subsidies would create room for strengthening the fiscal position while further expanding development spending and social programs.

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