SOCIAL SPENDING DECLINED IN 2006

UNCLAS LA PAZ 000299 SIPDIS SIPDIS STATE FOR WHA/AND TREASURY FOR SGOOCH ENERGY FOR CDAY AND SLADISLAW E.O. 12958: N/A TAGS: ECON EFIN PGOV BL SUBJECT: SOCIAL SPENDING DECLINED IN 2006 REF: LA PAZ 1660 ¶1. Despite a year-end 2006 estimated fiscal surplus of almost six percent and an increase in government revenues of approximately 41 percent, social spending by the GOB declined by around six percent last year. Government revenue increases resulted from increased customs and general tax collections, domestic hydrocarbons sales and hydrocarbons taxes (USD 1 billion in 2005 to an estimated USD 1.6 billion in 2006),and foreign donations. Although health and education expenditures increased, in part due to a seven percent salary increase for workers in these sectors, sanitation and housing expenditures declined. Total public investment increased 17 percent in 2006 over 2005 figures, but expenditures were focused on infrastructure, production support, and extractive sectors. The national road service and prefectures (regional governments) had the lowest execution rates of their projected budgets -- 42 percent and 48 percent respectively -- due to reorganization, weak implementation capacity, and difficulty obtaining approval for projects from the central government. ¶2. Comment: In spite of the GOB's statist economic plan (reftel) and booming revenues, public investment increased only modestly in 2006, while social spending actually declined. The low level of spending reflects more the GOB's and regional government's limited executing capacities than the Movement Towards Socialism (MAS) government's spending intentions, which are reflected in its projected 2007 budget deficit of three percent. End comment. Public Investment (in millions of USD) 2005 2006(e) Infrastructure 326 427 Production Support 101 114 Extractive Sectors 7 11 Social Spending 195 183 Health 41 53 Education 43 45 Sanitation 51 41 Housing 60 44 Total Public Investment 629 735 GOLDBERG