The Executive Board of the International Monetary Fund (IMF) today completed the first review of Bolivia's performance under a one-year, SDR 85.75 million (about US$121 million) Stand-By Arrangement, which was approved on April 2, 2003 (see Press Release No. 03/46). The completion of this review enables the release of SDR 10.72 million (about US$15 million) to Bolivia.

The Executive Board also approved Bolivia's request for waivers of the non-observance of certain performance criteria and of the applicability, until July 17, 2003, of quantitative performance criteria for end-June 2003.

Following the Executive Board discussion on Bolivia, Anne Krueger, First Deputy Managing Director and Acting Chair, said:

"Performance under Bolivia's economic program supported by the Stand-By Arrangement so far has been encouraging. Despite the difficult political and social environment, the economic situation remains under control, there are some signs of recovery in the agricultural and manufacturing sectors, bank deposits are almost back to end-2002 levels, and inflation remains subdued.

"The policy framework for 2003 is establishing a basis for sustained growth. A central element of the framework is a substantial reduction in the fiscal deficit needed to achieve fiscal sustainability, while protecting spending on poverty alleviation programs. Timely fiscal adjustments have been made to keep the 2003 fiscal program on track, mainly through better targeting of public investment and current spending. The government is continuing its efforts to push ahead with its fiscal reform agenda, including by proposing a modern tax procedures code to Congress, controlling the high transitional costs of the pension reform, and improving the effectiveness of fiscal decentralization.

"Progress is being made toward putting in place a comprehensive strategy for restructuring the corporate and financial sectors. Initial steps include the issuance of regulations for bank resolution and for prompt corrective action for banks with problems, and the appointment of a high-level team to oversee the overall strategy. Further steps in the authorities' agenda for 2003 entail the approval by Congress of a modern bankruptcy law and an appropriate voluntary debt workout mechanism, and strengthening the judicial system's ability to handle bankruptcy proceedings. The restructuring of the financial and corporate sectors is essential for the resumption of bank credit and sustained economic growth.

"Effective utilization of Bolivia's abundant natural gas resources is crucial to ensure favorable longer term growth prospects. The government is working to develop public support for proceeding with the LNG export project in a way that maximizes the project's contribution to realizing Bolivia's growth potential.

"The authorities are building upon the progress made under the Stand-By Arrangement by developing a medium-term economic program aimed at fostering a higher rate of growth and poverty reduction. They plan to request support under the IMF's Poverty Reduction and Growth Facility during the last quarter of 2003," Ms. Krueger stated.