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Overview

When the commodities boom ended in 2014, Bolivia resorted to high public spending and growing domestic credit to maintain high economic growth. However, these measures resulted in a surge in public debt and a gradual reduction in international reserves and the fiscal savings accumulated during the boom.

The COVID-19 health crisis has plunged the economy into a deep recession that led to an upturn in poverty. The authorities have deployed different economic initiatives to protect the most vulnerable population, such as cash transfers and deferral of loans. However, the health crisis exposed some structural weaknesses such as the inadequate preparation of the health system, lack of targeting of social protection programs, insufficient macroeconomic buffers, and high labor informality.

The Government faces the challenge of joining forces with society to contain new infection waves, accelerate the vaccination and promote recovery in economic activity and employment. Nevertheless, high public debt and modest international reserves could limit efforts to boost the economy through expansionary policies, especially if they fail to propel the private sector on a sustained basis.

In addition to the immediate challenges associated with the health crisis, a sustainable recovery of inclusive growth requires Bolivia to address some structural challenges. After several years in which fiscal and external deficits increased public debt and reduced fiscal savings and international reserves, a consolidation process would contribute to strengthen confidence in macroeconomic management and exchange rate sustainability. 

On the other hand, in a challenging external context, growth and job creation require an improvement in the investment environment, mainly in labor and tax regulations, which will boost private investment to complement the efforts made by the public sector. Similarly, it is possible to improve the efficiency and progressiveness of public policies so the most vulnerable population can be protected, and the access and quality of public services can be improved without increasing spending in an unsustainable way.

Last Updated: Apr 05, 2021

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Bolivia: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments
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BOLIVIA +591 2 261-3300
Calle Fernando Guachalla, 342, Edificio Víctor, piso 9. La Paz
USA +1 202 473-1000
1818 H Street NW, Washington, DC 20433