IMF asks Bolivia to abandon its successful economic model

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The IMF published today a report on the Bolivian economy in which it recommends the adoption of drastic neoliberal measures, in particular; cut workers’ wages, reduce public investment and end exchange controls. These policies have transformed Bolivia from one of the poorest countries in the region into its fastest growing economy.

The report takes aim at government spending on development, stating, “The government must restrain spending, including by eliminating the end-of-year wage bonus for workers, it must restrain wage growth for public sector workers and limit the growth of public investment. and grants.

The “end-of-year wage bonus” for workers (in both the public and private sectors) refers to a policy introduced under Evo Morales that requires employers to pay their workers a bonus equal to twice their monthly salary, but only if annual GDP growth is above 4.5%.

The bulk of public investment is for infrastructure, while the majority of subsidies are aimed at ensuring that the price of fuel does not rise. Bolivia is the only country in the region to experience no fuel price hikes, a policy that has kept inflation below 2%, unlike the rest of South America.

The report even indicates that fuel prices need to rise, and the inflation that would inevitably result could be offset by cash transfer programs for poorer sectors, the IMF says:

“The successful implementation of a household fuel price increase will require recycling some of the fiscal savings into cash transfer programs targeted at the poorest deciles of the population.”

Bolivian Economy Minister Marcelo Montenegro flatly rejected the report, saying today; “They prescribe the old recipes from decades ago where they call for cutting subsidies, cutting public spending, phasing out 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.

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

In a recent speech in Brazil, Bolivian President Luis Arce declared that the country’s impressive growth is due to the rejection of IMF recommendations; “We are in better conditions because, since 2006, Bolivia no longer has a single agreement with the IMF. In 2020, with the de facto government, they tried to do a loan program with the IMF, which we stopped as soon as we entered the government, we canceled that IMF loan because we think the best way to to do economic policy is to have a sovereign monetary policy. and economic policy without being subject to any international body”.

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By Kawsachun News

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