UPDATE 1-Moody's downgrades Bolivia rating to 'Caa3', changes outlook to stable

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April 26 (Reuters) - Global ratings agency Moody's downgraded Bolivia's rating to 'Caa3' from 'Caa1' on Friday, citing ongoing governance challenges and heightened domestic political risk which have taken external liquidity pressures to critical levels.

In February, the Bolivian government unveiled a series of initiatives to increase investment and exports to address the worsening dollar scarcity that has left workers unpaid.

"Recent developments have increased the risk of a disorderly balance of payments adjustment and of Bolivia not having sufficient hard currency to ensure full and timely repayment of its external debt obligations and imports," Moody's said in a statement.

Bolivian President Luis Arce said its plan, in agreement with businesses, would aim to reduce red tape for exports, boost investment in grains production, make diesel imports easier, and premit bigger trucks on the roads.

The Bolivian economy has been dependent on the production and export of natural gas for the last two decades. However, reserves have plunged from a peak of some $15 billion a decade ago to under $2 billion now due to falling production rate.

Moody's also said that it expects significant credit challenges to remain, including very low foreign-exchange reserve levels, shrinking production levels in the hydrocarbon sector, and elevated domestic political risk.

The agency also changed its outlook on Bolivia to 'stable' from 'negative'.

In February, ratings agency Fitch downgraded Bolivia's sovereign credit ratings into deeper junk territory, while in November last year S&P slashed its ratings on the country to "CCC+". (Reporting by Sruthi Narasimha Chari and Anandita Mehrotra in Bengaluru; Editing by Shailesh Kuber)