Plain demagogue?: The dollar exchange rate will not be changed this year

El Diario reports:

2016 Financial Fiscal Program

The dollar exchange rate will not be changed this year

• The announcement was made yesterday [03/16/2016] by the President of the Central Bank, so that the purchasing power of wages will be preserved
• The exchange rate policy in 2015 helped maintain low inflation

Screen Shot 2016-03-17 at 9.39.16 AMThe president of the Central Bank of Bolivia, Marcelo Zabalaga, reported yesterday that the exchange rate policy in this year will not be modified, which will aim to preserve the stability of the purchasing power of the incomes of Bolivians, maintaining stable domestic prices.

These statements were made during the signing of the Fiscal and Financial Program 2016 between the Ministry of Economy and the issuer Institute, which envisages a growth in the economy for this year of 5 percent and an inflation rate of 5.3 percent.


“Exchange rate policy will focus on consolidating the process of bolivianization, to mitigate the effects of external shocks and to stabilize domestic prices,” said Zabalaga, who said that 2015 had a dynamic effect on the economy. “These qualities will point to the importance of maintaining exchange rate stability in 2016,” he said.


According to his assessment, the rate in 2015 (Bs6.96 per unit of US currency) helped to keep inflation low and therefore supported the expansionary monetary policy, allowing low interest rates in the banking system. “Instead, many neighboring countries experienced significant depreciations of their currencies ended up moving to increases in domestic prices, to the detriment of the purchasing power of its population,” he mentioned. He said, in this regard, the authorities of those countries should increase their interest rates to tackle inflation, which accentuated the slowdown in their economies.


Zabalaga also said that the implementation of the financial program will seek to strengthen the bolivianization policy, through a policy exchange rate that was adopted in late 2011. The Finance Minister Luis Arce said that 96 percent of the loans were agreed with national currency and 86 percent of the savings in Bolivian currency.


He announced, moreover, that, like last year, this administration will continue the expansionary monetary policy, which will inject resources into the economy, to promote the domestic market and contain the fall in international prices of raw materials .

Zabalaga argued this situation, pointing out that “monetary policy was expansionary to counter the adverse external scenario, orientation was facilitated by low inflationary pressures. The injection of resources made available allowed liquidity at historically high levels and monetary interest rates went down to almost zero.” He added that, in this way, “interest rates of financial intermediation fell sharply, allowing a major expansion of credit to the private sector, mainly oriented to the productive sector and social housing, in line with the provisions of the Law of Financial Service”.


On this issue, Zabalaga said that “in effect, Bolivia showed out as the country with the highest economic growth in South America (4.8%), a result of fiscal and monetary impulses to a more dynamic domestic demand,” alluding to the results of year 2015. In this year, with the proposed objectives, Bolivia will be positioned again as the economy with the highest economic growth in the region by maintaining price stability.

It is proven that this government could care less for productivity, competitiveness of our exports … so, over the long run employment and take home income will also suffer … as a result of plain demagogue of current ochlocracy.

Published by Bolivian Thoughts

Senior managerial experience on sustainable development projects.

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