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The Bolivian government informed the International Monetary Fund (IMF) it has no plans to negotiate a new Stand-By agreement once the current one becomes due on March 31. According to Mark Weisbrot, of the Center for Economic and Policy Research (CEPR), Bolivia’s long experience under IMF programmes has not always been a happy and successful one.

The Bolivian government is about to become another example of how Latin America is intending to live without the International Monetary Fund (IMF), being aware of the fact that its policies have not yielded good results in the region.

Recently, the government informed the IMF it has no plans to negotiate a new Stand-By agreement once the current one becomes due on March 31. The agreement signed in April 2003 for the amount of 248.9 million dollars - which was reduced in October to 211.6 million dollars at the request of Bolivian authorities - expires at the end of this month. This programme is a loan scheme related to criteria for structural and economic performance.

The domestic economy is currently undergoing a prosperous time. The Gross Domestic Product (GDP) grew by 3.9 per cent in 2005, the highest rate since 1999. The year 2005 came to an end with a fiscal deficit of 1.5 per cent in relation to GDP, compared to the 5.5 per cent registered in the previous year.

While Bolivia does not need the money of the IMF it is dependent on its approval in order to have access to other financing sources such as the World Bank, the Inter-American Development Bank and donor governments. If Bolivia decides not to sign a new agreement, it will continue to be a member of the IMF but the international institution will remain without any direct form of pressure to demand anything from the Morales administration. However, the usual monitoring activities, including the IMF annual economic revisions, will in fact continue to be carried out.

Mark Weisbrot, co-director at the Center for Economic and Policy Research (CEPR), reminded that Bolivia’s long experience under IMF programmes has not always been a happy and successful one. The institution exercised pressure in favour of the privatisation of the social security system in 1998, a measure which currently costs the Bolivian Treasury more than 400 million dollars and which increased the deficit. Now the IMF opposes the Hydrocarbons Law that raised the royalties paid by foreign-owned companies and somewhat contributed to reduce the deficit.

In his last work entitled “Bolivia’s challenges” (pdf), Weisbrot focuses on the country’s external sector and evaluates its vulnerability to pressures related to the external public debt, debt relief, donations, subsidies, external financing and trade.

Bolivia’s new government took office in January 2006 with a strong mandate for reform aimed at increasing economic growth and reducing poverty. The real GDP per capita in Bolivia is less today than it was 27 years ago and 63 per cent of the country lives below the poverty line, in spite of the fact that the country has completed numerous structural reforms recommended by multilateral lending institutions and has operated under IMF agreements almost continuously for the last 20 years.

“There is no doubt as to the failure of past policies,” stated Weisbrot. “The main point is whether the new government will be able to seek economic policies that could be potentially more successful – and I think that prospects are good.”

Source: Bolpress, La Jornada and CEPR

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