IMF Executive Board Concludes 2021 Article IV Consultation with Belize

Washington, DC: The Executive Board of the International Monetary Fund (IMF) Concludes Article IV Consultation[1]with Belize.

The COVID-19 pandemic has hit Belize hard. After successful containment of the first wave of the pandemic, the country experienced a second wave from June 2020. This wave was brought under control, but it left Belize with one of the highest numbers of cases and deaths per capita in the Caribbean. The pandemic also led to a 72% drop in tourist arrivals in 2020 and a decline in activity in contact-intensive sectors, causing real GDP to contract 14.1% in 2020. The fiscal position s ” deteriorated markedly, with the primary deficit widening from 1.3% of GDP in fiscal year 2019/20 to 8.4% in fiscal year 2020/21, and public debt falling from 97.5% % of GDP in 2019 to 127.4% in 2020.

The recovery from the pandemic is expected to be extended. Tourist arrivals remain low but are expected to pick up at the end of 2021 when vaccines become more widely available in advanced countries. As a result, real GDP is expected to grow 1.5% in 2021 and 6.2% in 2022, not returning to its pre-pandemic level until 2025. The fiscal position is expected to improve over time. , in line with the fiscal consolidation measures included in the 2021/22 budget, and the expected revenue recovery and outcome of pandemic-related spending. However, public debt is expected to remain high, peaking at 132% of GDP in 2021 and gradually declining thereafter to reach 111% in 2031. External financing is expected to gradually decline over time, worsening reserve adequacy and threatening the sustainability of the economy. anchoring of the currency. Belize’s economic outlook is subject to significant downside risks, especially due to a resurgence of the pandemic and natural disasters.

Board assessment[2]

Directors noted that the pandemic had hit Belize hard, resulting in a high number of deaths and a deep economic recession. The recovery is expected to be prolonged and subject to significant risks. Directors noted that the country faces difficult challenges, including unsustainable public debt, growing external imbalances and vulnerability to natural disasters and climate change. In this context, Directors underscored the urgency of restoring debt sustainability while providing short-term support to the most vulnerable and implementing structural reforms to boost inclusive growth and build resilience.

Directors agreed that restoring debt sustainability requires sufficient debt restructuring and ambitious fiscal consolidation, anchored in a credible medium-term strategy. They welcomed the significant consolidation measures approved this year and encouraged a further gradual increase in the primary balance, building on both revenue and expenditure measures, while strengthening the social safety net. Directors recommended broadening the tax base, strengthening revenue administration and redefining spending priorities. They also encouraged the authorities to draw up contingency plans should downside risks materialize.

Directors stressed that growth-friendly structural reforms would support public debt reduction. They urged measures to improve access to credit, reduce barriers to entry for businesses, improve infrastructure, and strengthen law enforcement and social programs to reduce crime. Directors recommended continuing to build resilience to climate change and natural disasters, including developing a disaster resilience strategy.

Directors noted that restoring debt sustainability would also help reduce external imbalances and strengthen the currency peg. They called on the authorities to limit central bank funding to the government, which, together with fiscal consolidation, would help reduce the current account deficit, improve access to external financing and increase reserves.

Directors stressed the need to preserve financial stability. This requires maintaining appropriate rules for classifying and provisioning loans, phasing out loan forbearance and deferral measures by banks, and strengthening prudential standards as the pandemic recedes. Directors encouraged continued efforts to strengthen the AML / CFT framework, with emphasis on the application of sanctions for non-compliance and reforms to mitigate risks associated with the international financial services sector. .

Table 1. Belize: Selected social and economic indicators

I. Demographic and social indicators

Area (km²)

22 860

Human Development Index (ranking), 2017

106

Population (thousands), September 2020

421.5

Under-five mortality rate (per thousand), 2017

14.2

GDP per capita, (current US $), 2020

3 917

Unemployment rate (percentage), September 2020

13.7

Life expectancy at birth (years), 2017

70.6

Poverty (percentage of total population), 2009

42.0

II. Economic indicators

Projections

2018

2019

2020

2021

2022

2023

2024

2025

2026

National income and prices

(Annual percentage changes, calendar year)

GDP at constant prices

2.9

1.8

-14.1

1.5

6.2

4.2

2.0

2.0

2.0

Consumer price (average)

0.3

0.2

0.1

2.0

2.0

2.0

2.0

2.0

2.0

Central administration 1 /

(As a percentage of fiscal year GDP)

Revenue and grants

31.4

31.5

27.0

28.2

29.9

31.3

31.3

31.3

31.3

Current non-interest expenses

24.8

26.0

26.6

24.1

24.1

24.1

24.1

24.1

24.1

Interest payment

3.3

3.4

1.7

4.2

4.2

4.1

4.0

3.9

3.7

Net investments and loans

4.3

6.9

8.9

8.6

7.2

6.3

6.3

6.3

6.3

Capital expenditure

4.2

6.5

8.6

8.5

7.0

6.0

6.0

6.0

6.0

Net loan

0.1

0.4

0.2

0.1

0.2

0.3

0.3

0.3

0.3

Primary balance

2.4

-1.3

-8.4

-4.5

-1.5

0.8

0.8

0.8

0.8

Global balance

-0.9

-4.7

-10.1

-8.7

-5.6

-3.2

-3.1

-3.0

-2.9

Public debt

(As a percentage of calendar year GDP)

Public debt 2 /

96.0

97.5

127.4

132.4

128.6

124.9

123.2

121.4

119.7

Domestic debt

27.8

28.7

39.8

43.7

44.5

44.4

44.9

45.8

47.0

External debt

68.2

68.8

87.6

88.7

84.1

80.4

78.3

75.7

72.7

Main payment

7.2

6.2

7.7

10.3

10.3

10.1

9.7

9.8

9.8

National

4.9

3.9

5.1

6.8

6.7

6.2

5.9

5.9

5.8

External

2.2

2.3

2.6

3.6

3.6

3.9

3.8

3.9

4.0

Money and credit

(Annual percentage changes, calendar year)

Credit to the private sector

3.2

5.8

2.2

3.5

8.3

6.3

4.0

4.0

4.0

Money and quasi-money (M2)

2.6

5.7

10.6

3.5

8.3

6.3

4.0

4.0

4.0

External sector

(Annual percentage changes, unless otherwise indicated)

External current account (percentage of GDP) 3 /

-8.1

-9.2

-8.0

-7.7

-7.6

-6.8

-6.8

-6.8

-6.8

Real effective exchange rate (+ = depreciation)

-2.7

0.1

Gross international reserves (US $ millions)

294

278

348

360

345

321

276

237

193

In months of imports

2.9

3.5

4.2

3.9

3.5

3.1

2.6

2.1

1.7

Memorandum Articles

Nominal GDP (BZ $ million)

3 765

3,839

3 302

3 419

3,703

3 936

4,095

4 260

4,432

Sources: Belize authorities; UNDP Human Development Report; World Development Indicators, World Bank; Poverty assessment by country in 2009; and IMF staff estimates.

1 / Fiscal year (April to March).

2 / Public debt includes central government debt as well as financial and non-financial public sector external debt.

3 / Including official subsidies.


[1]Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with its members, usually annually. A team of employees visit the country, collect economic and financial information and discuss with those responsible for the development and economic policies of the country. Back at headquarters, the staff prepare a report which forms the basis for the Board of Directors’ discussion.

[2]At the end of the discussion, the Managing Director, in his capacity as Chairman of the Board, summarizes the points of view of the Executive Directors, and this summary is sent to the country’s authorities. An explanation of all the qualifiers used in the summaries can be found here:https://www.IMF.org/external/np/sec/misc/qualifiers.htm.

/ Public distribution. This material is from the original organization and may be ad hoc in nature, edited for clarity, style and length. View full here.

Source link

About Joan Ferguson

Joan Ferguson

Check Also

IMF Chief Economist Supports German Debt Brake Exemptions, Handelsblatt Reports | Invest News

BERLIN (Reuters) – Germany should apply its debt brake more flexibly and suspend it again …

Leave a Reply

Your email address will not be published. Required fields are marked *