Government asks the Assembly to approve 6 credit contracts for $us 771.3 MM

The Executive Branch submitted to the Legislative Assembly six bills for the approval of six external credit contracts for 771.3 million dollars for different highway projects and pre-investment plans. Among them is a contract for 500 million dollars to support populations affected by the covid with the IDB.

The opposition points out that validation is sought in an accelerated manner with freely available resources and that they serve the Government and the Central Bank of Bolivia (BCB) to strengthen the depressed net international reserves.

The deputy of the Citizen Community (CC) José Luis Pórcel said that the entry of the bills to the Legislative Assembly were announced yesterday and will be referred to the Planning and Plural Economy Commission for analysis.

“There is a bill of 500 million dollars to support populations due to covid. I don’t know what criteria they are going to use to allocate all these resources for 771 million dollars, they are freely available. They are resources to, surely, strengthen the RIN, the Minister of Economy announced it recently, ”Pórcel warned.

The contracts

The first loan contract is for 58.4 million dollars (US$58,400,000) for the construction of the Oruro-Challapata Double Track highway Section I: Oruro-Cruce Vinto-Cruce Huanuni, which was signed with CAF and the Development Bank on January 27 of this year.

The second contract is for 80.9 million dollars (US$80,925,650) for the construction and paving project of La Joya – Chuquichambi, Huayllamarca – Totora and the La Joya and Crucero vehicular bridges on RVF 031, signed on January 27 of this year with CAF and the Development Bank.

The third contract is for a value of 50 million dollars (US$50,000,000) for the “Territorial connectivity and development program for Bolivia”, signed on December 30, 2022 between the Plurinational State of Bolivia and the Inter-American Bank of Development (IDB).

The fourth contract is for a value of 52 million dollars ($us 52,000,000) for the “Preinvestment Support Program for Development II”, signed on January 24 of this year between the Plurinational State of Bolivia and the Inter-American Development Bank (IDB).

The fifth contract is for a value of 500 million dollars (500,000,000) for the project “Support for vulnerable populations affected by coronavirus II”, signed between the Plurinational State of Bolivia and the Inter-American Development Bank (IDB) on January of this year.

The sixth contract is for a value of 30 million dollars (US$30,000,000) for the “Multisectoral Pre-investment Program II (Promulpre II)”, signed on January 30, 2023 between the Plurinational State of Bolivia and CAF Banco developmental.

Debt

The balance of Bolivia’s external debt as of October 2022, according to the Central Bank of Bolivia (BCB), amounted to 13,111 million dollars and is equivalent to 29.9% of GDP. Of this amount, 9,136.6 million dollars is with multilateral organizations (69.7%), 1,867.4 million dollars was contracted with countries (bilateral) and represents 14.2% of the balance.

The private debt is 74.4 million dollars (0.8%) and the debt for the issuance of sovereign bonds or debt securities reaches 2,033.4 million dollars (15.5%).

The 2023 General State Budget Law (PGE) authorizes the Ministry of Economy and Public Finance to enter into public debt operations in external capital markets for an amount of up to 2,000,000,000 dollars (two billion dollars) for budget support and/or liability management.

This issuance of sovereign bonds may or may not materialize depending on the situation of external capital markets and/or the need for financing from the General Treasury of the Nation, the law indicates.

In this regard, the economist Germán Molina opined that this new State indebtedness is still within the sustainability margins that are managed internationally, as long as they do not exceed 50% of GDP. If the country is today in debt with more than 30% of GDP, it still has room.

He said that since they are credits granted by serious international organizations, the country was required to meet all the requirements and that the projects to be financed with these resources be put out to tender and have pre-feasibility studies.

According to Molina, these new credits as they are disbursed will help to partially alleviate the NIR. For example, the 58.4 million dollars approved by the CAF for the Oruro-Challapata Double Track highway project, surely 10% will first be delivered, equivalent to about 12 million dollars. “These resources will strengthen the RIN, the BCB will receive them and change them to Bolivians for the start of the works to the ABC,” he explained.

For the economist, to the extent that international organizations accept Bolivia’s requests for new credits, it is good, because surely before its approval, the country’s indebtedness capacity was evaluated.

According to the Ministry of Economy, the country’s external debt is sustainable since it is within the limits of the metrics of the Andean Community of Nations (CAN) that establish that obligations should not exceed 50% of GDP.

In addition, public debt is within the thresholds set by international organizations such as the Maastricht Treaty of 60% and maintains an acceptable margin to access greater investment resources.

The Government clarified that the organizations do not make loans if they are not intended for investment and are evaluated before being disbursed, that is, a study of the macroeconomic performance of the requesting country is carried out.