Bolivia has achieved political stability after President Evo Morales launched a reform in 2006. This reform included a major modification of the Constitution, the strengthening of the role of the state in the economy and the application of a variety of social programs. Strong citizen support for President Morales led to his re-election in 2009. He continues to enjoy broad-based support in the October 2014 elections. Thanks to high commodity prices and a prudent macroeconomic policy, economic growth has averaged 4.9% since 2004. The country has had significant current account surpluses since 2003 and the fiscal balance became positive beginning in 2006.
Due to this performance and the overall debt relief, public debt declined from 94% of the Gross Domestic Product (GDP) in 2003 to less than 40% in 2013. International reserves increased from nearly US$1 billion to over US$15 billion in recent years. Bank deposits and loans have more than tripled during the past 10 years and banks have strengthened their solvency and liquidity.
The positive economic context led to a reduction in moderate poverty, from 63% in 2002 to 45% in 2012, whereas the Gini Index fell from 0.60 to 0.46 in the same period. These extraordinary results reflect the fact that citizens living in poverty were the population segment that most benefitted from the economic bonanza, through an increase in household income. This increase was complemented by a variety of social programs. As a result, between 2002 and 2011, average income of the poorest 40% of the population grew three times more rapidly than average income.
Despite these advances, Bolivia faces significant challenges. Moderate poverty affects 45% of the population and income inequality remains high. In addition, several social indicators still fall short of regional averages.
Economic growth is vulnerable to changes in international commodity prices. Private investment requires strengthening and the large government-backed investment projects in extractive industries are behind schedule. Informal employment is high, which results in lower productivity. While there have been noteworthy advances in productive development in rural areas, where a third of the population lives, precarious infrastructure and services have hindered further progress. Additionally, governance of the public sector must be strengthened to improve policy implementation and service delivery.