Dangerous growth of external debt [… evo’s legacy!]

A good Editorial from El Diario, photo from Pagina Siete [03/25/2018]:

When the times of financial boom have passed and it is necessary to live with what little you have, it is worrisome and dangerous that the government is determined to increase the country’s external debt. There are announcements that “there will be a new indebtedness of 2 billion dollars” for the present administration year, as announced in the fiscal budget. At the beginning of this year, the Minister of Economy announced: “this year there will be a loan of more than 2 billion dollars. In 2016, the public external debt closed with obligations for around US $7,500 million and as of December 2017 it rose to $9,400 million dollars.”

According to the Deputy Minister of the Treasury: “In accordance to the data of the Bolivian Economy Report 2017, a proportion of 43 percent is destined to Transport infrastructure, 18% is for multisector spending, 7% to basic sanitation and 4% to agricultural sector”. The new indebtedness for this year “would be similar to the one executed in 2017 that reached $2,397 million dollars, of which 41.7% came from the issuance of sovereign bonds, 45% from multilateral sources and 12% from bilateral loans.” The same official clarified: “the acquired foreign debt is sustainable, although any obligation of this nature with their respective interests must be paid, besides that 23 percent is attributed to the so-called “Gross Domestic Product” (GDP) the same as when concluding 2017 went up to 25 percent.” As of May, the amount disbursed reached $9,575 million dollars, but if the amount contracted were disbursed, the stock of external debt for the present year would reach $11,000 million dollars” (ED 31-7-18).

It is undeniable that borrowing when there is sufficient production and availability of money is good as long as it is invested in something profitable, in what ensures the honoring of the loans contracted; but when there is no investment or production and exports have dropped considerably, any loan that is contracted increases the external debt that, later, at maturity, is difficult to honor. The government, in accordance with the studies of its economic authorities and surely with the advice of the International Monetary Fund, would have foreseen all the contingencies that derive from an excessive indebtedness.

In any case, what the community will require at all times is that there be clear information about the state of the debt and about the investments made; otherwise, the problem is crucial because the situation could arise in which there is no assurance of with what money will it be paid, in addition, includes generally high interest, as is the case of commercial banks. Prudence and clarity are required in all the economic-financial aspects of the country and this for the benefit of the government itself, which based on the detailed reports, will know what to expect.


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