Bolivian government claims debt is no cause for concern

Pastor Landívar

LA PAZ, Bolivia - Bolivia's domestic debt reached record levels in Aug. 2009 at US$4.35 billion, as a result of a US$600 million emergency fund loaned by the Bolivian Central Bank to the National Treasury to cover the 2008 budget, revealed Deputy Treasury Minister Róger Rojas.

Rojas said there was no cause for alarm and emphasized that debt had grown annually by five percent, reported Erbol, representing less than a quarter of Bolivia's Gross Domestic Product (GDP). He added that the country can manage debts of up to 40 percent of the GDP.

The Central Bank justified the debt increase with market operations undertaken to control inflation, reported El Diario, which so far this year stands at just 0.2 percent . Furthermore, in 2008, the bank issued domestic bonds, allowing the public to buy them directly.

The BCB also revealed that in recent years it had accumulated significant revenue in U.S. dollars from international remittances and exports, increasing its reserves to over US$8 billion, compared with less than US$2 billion in 2006, when President Evo Morales came to power.

However, Bolivia's domestic debt is only part of the country's entire debt. Foreign debt in April reached US$2.41 billion and non-financial public sector debt (treasury commitments to the central bank used to finance public investment) reached US$2.98 billion in the same month, but was later increased to cover recent state pension reforms.

None of this seems to worry the government. On Aug. 25, Finance Minister Luis Arce announced that Bolivia's year-on-year GDP for the second quarter of 2009 grew by 3.11 percent, well above that of neighboring countries affected by the global crisis. Arce also revealed, according to Erbol, a trade surplus of US$388 million, despite a US$1 billion decrease in exports in the first sixth months of the year compared to the same period in 2008.

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