Fiscal Deficit in 2025

By: Luis Carlos Jemio Ph.D.*

The fiscal deficit has been the factor that most contributed to the profound economic crisis affecting the Bolivian economy. From 2015 to 2024, the NFPS deficit averaged 8.7% of GDP annually. These deficits have been financed primarily from domestic sources (approximately 80%). Of the total domestic financing, approximately 80% came from the Central Bank, and the remainder from other sources, primarily the placement of TGN bonds in pension funds.

In 2025, the government has continued its policy of maintaining a high fiscal deficit, financing it primarily through domestic sources (the Central Bank and pension funds). However, the Ministry of Economy and Public Finance (MEFP) has not published any data on NFPS operations for this year to date, despite the importance and necessity of having this information to monitor economic performance, especially in the current situation, when a change of government is approaching, and the new authorities will be responsible for correcting this significant imbalance.

However, it is possible to estimate the fiscal deficit for 2025 based on available data on the evolution of public debt, both external and domestic, published by the Central Bank and the Ministry of Economy through July. According to this information, during the January-July 2025 period, the NFPS received total financing of US$2.604 billion (4.64% of GDP), an amount equivalent to the fiscal deficit incurred during this period. As has been the trend in recent years, financing came mainly from domestic sources (4.25% of GDP), of which US$1.191 billion (2.12% of GDP) was financed by the Central Bank of Bolivia (BCB) and US$1.196 billion (2.13% of GDP) came from private sources, mainly pension funds. Net external financing was only 0.39% of GDP (US$218 million), of which US$764 million were new disbursements and US$547 million were amortizations.

Estimated funding to the SPNF as of July 2025 (flows)

Source: Prepared based on information from the MEFP and BCB

The question is: how large could the fiscal deficit be for the entire year 2025, given the deficit reached through July? The following chart shows, first, that the deficit for the January-July period has been increasing in recent years. Second, it is observed that the majority of the deficit is generated in the second half of the year, due to the fact that a majority of public spending is concentrated in the final months of the year, as is the case with the payment of end of the year bonuses. For this reason, the fiscal deficit for 2025 is expected to be at levels similar to or higher than those reached in 2023 and 2024, that is, above 10% of GDP.

Annual SPNF deficit and as of July of each year

(percentage of GDP)

Source: Prepared based on information from the MEFP and BCB

* estimated

The high fiscal deficit observed through July 2025 will once again increase public debt, which has been steadily growing in recent years. By July 2025, it will reach US$44.06 billion, of which US$30.289 billion is domestic debt and US$13.77 billion is external debt. It is interesting to note that, although public debt has continued to grow in absolute terms through 2025, it has shown a significant decline as a percentage of GDP. This is because domestic debt is primarily denominated in bolivianos and is not indexed to the dollar or inflation. Nominal GDP has continued to grow at increasingly higher rates due to the higher inflation experienced by the Bolivian economy, although the real GDP growth rate is becoming increasingly lower.

SPNF debt

(US$ millions)

Source: Prepared based on information from the MEFP and BCB

In summary, public debt has continued to increase in absolute terms throughout 2025, due to the fiscal deficit remaining at high levels. As of July of this year, total financing to the NFPS, both external and domestic, amounts to US$2.604 billion (4.64% of GDP), which would be equivalent to the accumulated NFPS deficit for the year up to that month. With this additional financing, public debt as of July 2025 reached US$44.06 billion, mostly non-indexed domestic debt. Therefore, the debt-to-GDP ratio would have fallen to 78.5% of GDP, due to the higher inflation rate experienced by the economy, which is increasing GDP in nominal terms and reducing the real value of domestic debt. The biggest losers from this behavior are the holders of BCB liabilities, primarily the money in circulation that is losing value due to higher inflation, and the members of the pension system, whose pension contributions have been invested in non-indexed public debt securities.

* Senior Researcher at INESAD, ljemio@inesad.edu.bo
This blog is part of the ADÁMAS ECONÓMICO Project.
The views expressed in the blog are those of the authors and do not necessarily reflect the position of their institutions or INESAD.