As a result of the profound changes in fiscal policy during the late 1980s, government spending was greatly curtailed and was directly budgeted according to projected revenues and external financing. Moreover, government expenditures, including systemic review processes for investment, became more responsible and targeted. In 1987 public sector expenditures equaled about 30 percent of GDP, and the budget deficit of nearly 11 percent was financed almost completely with official external finance. The budget was typically divided into four spending components: central government, financial and nonfinancial state-owned enterprises, departmental budgets, and municipalities. Over 60 percent of expenditures went toward government salaries and debt payments. Debt payments, which were as high as 30 to 40 percent of expenditures in the early 1980s, were below 20 percent by the late 1980s because of the rescheduling of Bolivia's debt terms. Capital expenditures had reached dangerously low levels as a consequence of the fiscal crisis. Although budgeted at 13 percent of GDP in 1987, actual capital expenditures were approximately 5 percent of GDP, indicating that long-term development projects lacked financing. Over half of all government capital expenditure in the 1987-90 fiscal plan was destined for investment in transportation and hydrocarbons.

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Source: U.S. Library of Congress