The Main Challenge of Bolivian Economy

Bolivian coin

20 Bolivian centavos

Over the past ten years, Bolivia has enjoyed a dramatic reduction in national poverty and internal inequality. Even though its GDP growth in 2015 fell slightly to 4.1%, Bolivian economy still keeps growing stably and remains among nations with strongest economic growth in Latin America.

However, IMF stated in its annual report on Bolivian economy that Bolivian fiscal and external balances have begun weakening in 2015. IMF also prospects the situation will worsen in 2016. The main challenge of Bolivian economy is to stop the continuous decrease after the booming of the commodity prices. In other word, the government currently finds it challenging to adjust its policies and economic measures to a changing external economic environment, not to mention its dedication to continue fulfill its developmental objectives while remain the social gains over the past decade.

Fortunately, the large buffers gained from the previous strong economic performance should enable the Bolivian government to take measured and gradual adjustments in both fiscal and external environment to meet the challenge and overcome it.

As recommended by IMF Western Hemisphere Department, the necessary fiscal and external adjustments include ensuring financial sector stability and boosting private investment in a gradual way. Though the financial sector in Bolivia seems stable and sound at the moment, the external changes of global economy influence the local allocation of credit flows. According to Bolivian financial services regulations in 2013 which regulate specific lending and deposit rates. the authority introduced quotas for lending. This regulation has dramatically cautioned the potential investors and impacted considerably on Bolivian financial satiability. Meanwhile, it would be the central to enhance Bolivian economic growth by improving its private investment, said Mr. Sumiko Ogawa from IMF. He also suggested that efforts to reduce uncertainty of legal and regulatory environment would be the key to boosting private investment.

By Desherinka (It’s my own work!) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons

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