IMF Economy-IMF Tells Bolivia To Drop Its Successful Economic Model.
Posted on September 26th, 2022

Courtesy orinoco tribune

The IMF released a report today on the Bolivian economy in which it recommends adopting drastic neoliberal measures, including; reducing workers’ salaries, cutting public investments, and ending currency controls. These policies have turned Bolivia from one of the poorest countries in the region into it’s fastest-growing economy.

The report takes aim at the government’s spending on development, saying, The government must restrict spending, including eliminating the end of year wage bonus for workers, they must restrict the growth of wages for public sector workers, and limit the growth of public investment and subsidies.”

The ‘end-of-year wage bonus’ for workers (in both the public and private sector) refers to a policy introduced under Evo Morales that requires employers to pay their workers a bonus equal to double their monthly wage, but only if annual GDP growth is over 4.5%.

Bolivia Has the Lowest Inflation in Latin America

The bulk of public investment is destined for infrastructure, while the majority of subsidies are for ensuring the price of fuel doesn’t rise. Bolivia is the only country in the region to see no rise in fuel prices, a policy that has kept inflation at less than 2%, unlike the rest of South America.

The report even states that fuel prices must rise, and the inflation that would inevitably cause could be offset by cash-transfer programs for the poorest sectors, says the IMF:

The successful implementation of an increase in domestic fuel prices will require recycling a part of the budget savings in cash transfer programs aimed at the poorest deciles of the population.”

Bolivia’s Economy Minister, Marcelo Montenegro, emphatically rejected the report, stating today; They prescribe the old recipes from many decades ago where they call for reducing subsidies, lowering public spending, gradually eliminating the end of year bonus for workers. We are not going to accept these recommendations because we are a sovereign country, and we have a sovereign economic policy.”

Bolivia’s Arce Rejects IMF Loan Negotiated Irregularly by Former De Facto Ruler Jeanine Áñez

The policies criticized by the IMF have helped Bolivia reduce poverty by over 50% since Evo Morales took office in 2006. It has also helped keep inflation at the lowest rate in Latin America. Meanwhile, when IMF policies were implemented in the early 2000s, over 60% of the country lived below the poverty line.

In a recent speech in Brazil, Bolivia’s President Luis Arce stated that the country’s impressive growth is due to rejecting IMF recommendations; We are in better conditions because, since 2006, Bolivia doesn’t have a single agreement with the IMF. In 2020 with the de facto government, they tried to enter into a loan program with the IMF, which we stopped as soon as we entered government, we reversed that IMF loan because believe the best way to make economic policy is to have a sovereign monetary and economic policy without being submitted to any international organism.”

*Biznomics Market Update 26.09.2022*

1) Ghana has begun debt-restructuring talks for local bonds. The nation is preparing its debt-sustainability plan for the IMF, under its 17th program. *Ghana’s currency has lost 39% this year, the world’s second-worst with Sri Lanka leading the list*. Sri Lanka too has now approached the IMF for the 17th time since 1965 and has intimated that it might have to consider the same fate for its local LKR debt (Bills and Bonds) following in the footsteps of Ghana.

2) The Central Bank of Sri Lanka budget 2023 to include further *fiscal tightening, an increase in*; *a)Corporate income tax* *b)Personal income tax* *c)Telecommunication levy* *d)Value added Tax and removing tax exemptions (CIT and VAT), and improving tax compliance through strengthening the collection*.  Sri Lanka’s projected growth rate to be below its potential until 2027, growth is expected to reach 3% by 2027. The primary surplus is to reach 2,.3% of GDP while the current account deficit remains at 1.2% of GDP until 2027.

3) *Sri Lanka’s bilateral creditors account for USD 14 billion*. Paris Club members USD 4.7 billion, non-Paris club members 9.3 billion of which China amounts to USD 7.3 billion and India USD 1.6 billion. The top 10 bilateral creditors 1) China (52%); 2) Japan (19%) ; 3) India (12%) ; 4) France (2.9%) ; 5) Korea (2.4%) ; 6) Austria (2.2) ; 7) Germany (1.4%) ; 8 ) UK (1.4%) ; 9) Saudi Arab (1.0%) ; 10) USA (0.9%)

4) *China’s trade surplus is set to top a record $1 trillion this year*, but its not enough to stop the yuan from sliding against the surging dollar as business confidence wanes, according Macquarie Group Ltd. While China’s goods surplus is on track to reach the highest ever in world history, exporters have been reluctant to convert their foreign exchange back into yuan given the plunge in business sentiment this year.

5) *Giorgia Meloni looks set to become Italy’s first far-right leader since World War 2*. The election follows the collapse of Mario Draghi’s broad-based coalition government in the summer.

6)  *H&M’s COS debuts at New York Fashion Week with see-now-buy-now show*. The brand, which launched in 2007, has grown to over 30 markets worldwide. They have become known for their higher-end quality compared to their parent company H&M’s approach to fast fashion.

*Biznomics Research*

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