On 18 December 2015 the IMF issued a report and selected issues paper following discussions with Bolivia under Article IV of the IMF’s articles of agreement. Bolivia has averaged 5% annual real GDP growth since 2006 but the end of the commodity boom poses economic challenges. There have been recent signs of a deceleration of the growth rate as shown by economic activity indicators in July and August 2015. The fiscal balance is in deficit and the non-hydrocarbons balance is worsening.

The government is finalizing a five year development plan centering on sizable pubic investments in infrastructure, health, education and technology. There are also key commodity related projects including the discovery and exploration for oil and gas reserves, petrochemical plants, hydroelectric plants, iron ore and lithium mines.

Certain revenue measures are suggested by the IMF to adjust the non-hydrocarbons fiscal balance. These include the introduction of a progressive personal income tax or the reform of the complementary VAT regime, and the introduction of measures in respect of transfer pricing practices by multinationals and training the tax administration to enforce the measures.

A progressive personal income tax regime could in the view of the IMF raise additional tax revenue amounting to around 1% of GDP and could improve the efficiency and fairness of the tax system. A transparent hydrocarbons and mining tax regime is also necessary to facilitate the discovery of new reserves and deposits thereby generating long term commodity-related revenues.

The share of investment to GDP is one of the lowest in the region, and increased private investment is essential for prospects in the medium term. This is held back by regulatory uncertainty which is not resolved by new laws, for example the Arbitration Law exempts many key sectors of the economy. Many aspects of the legal framework are left to Decrees, which in many cases are still pending or can still be modified. A few keys laws including the hydrocarbons and labor laws, a new tax code and sectoral incentive laws are still pending and this is creating uncertainty for business and potential investors.