Will Bolivia kiss the IMF goodbye?
- 26 Mar 06, 04:59 PM
Could Bolivia - indeed Latin America - be about to kiss the IMF goodbye? The answer is yes – according to a report this month from the Center for Economic Policy and Research. In Bolivia’s case we will find out next week: the IMF’s three-year standby facility runs out on 31 March and looks unlikely to be renewed...
Bolivia Evo Morales
In their report Bolivia’s Challenges, Washington-based researchers Mark Weisbrot and Luis Sandoval show that, while economic growth remains inadequate – 4% is just over half what is needed to avoid poverty worsening – the growth in hydrocarbon revenues and multilateral debt write-offs have restored Bolivia’s finances.
- In 2005 Bolivia borrowed just $80m, less than 1% of GDP.
- Since upping tax on hydrocarbons from 18% to 50% last year (under Carlos Mesa) the country has moved from a current account deficit to a surplus.
- Its external debts are $4.2bn owed to multilateral agencies, mainly the International Development Bank and World Bank.
- Its bilateral debts stand at $420m, with Spain and Brazil prominent as creditors.
- The IMF cancelled $233m last year; the World Bank is in the process of agreeing terms for the cancellation of $1.53bn (agreed at Gleneagles); while the IDB is discussing cancelling the further big chunk - $1.6bn.
All of this means that Evo Morales has inherited an exceptionally positive economic framework from a combination of a) the hydrocarbon law passed under Carlos Mesa but opposed both by Mesa and the IMF and b) the debt write-off agreed at Gleneagles. Despite this, economic performance remains weak and fairly dependent on the rise in global primary commodity prices.
The non-renewal of a small-ish, short term credit facility with the IMF would be more symbolic than substantial – but the IMF, argue the authors, has played a gatekeeper role for conditionality on the bigger debts. They point out that Venezuela, with $30bn in the bank, is beginning to play the role of underwriter for debt in the continent – and that Nestor Kirchner’s left-leaning government in Argentina recently cleared its IMF debt as a way of buying economic policy freedom. About 1/3 of Argentina’s debt buy-back was in fact financed by Venezuela.
An unnamed IMF official told Reuters on 7 March that Bolivia’s short term borrowing needs were so small that it would not need a new 3-year facility, adding: "If you put it into the Latin American context, certainly the fund is having a problem with keeping clients and has not been very popular in Latin America."