BELIZE CITY, Thurs. May 26, 2016–The International Monetary Fund (IMF) announced today that it had just concluded its two-week mission to Belize which began on Wednesday, May 11. Jacques Bouhga-Hagbe, who led the IMF team, has issued a statement conveying the preliminary findings.
Bouhga-Hagbe said that, “The economic outlook has worsened further since the 2015 Article IV Consultation and is subject to significant downside risks.”
Bouhga-Hagbe added that while the banking system continued to strengthen, “the challenges posed by loss of correspondent banking relationships with international banks have increased since the 2015 Article IV Consultation.”
He noted that the Belize economy is slowing and fiscal and external vulnerabilities are rising. Falling oil production and multiple shocks in the primary sector reduced the growth of the country’s gross domestic product to only 1% in 2015, the IMF rep said, pointing to a worsening forecast as, “GDP growth is projected to decline further to 0.5 percent in 2016 and average less than 2 percent in the medium term.”
“In the absence of fiscal measures, rigid current spending would fuel high fiscal deficits and add to the already high public debt burden,” the IMF report said.
According to the report, the current stock of public debt has climbed to 82 percent of GDP. In his budget presentation delivered this March, Prime Minister and Minister of Finance Dean Barrow said that the total, public debt, external and domestic, then stood at 79% of GDP.
“Following partial compensation payments for the two nationalized companies, international reserves fell to 4.6 months of imports in March 2016,” the IMF report also said.
The vulnerabilities facing the Belize economy “could be exacerbated by both domestic and external risks, such as the end of PetroCaribe financing, protracted period of weak growth in trading partners, and challenges posed by withdrawal of correspondent banking relationships,” the IMF report said.
It recommends that, “Sustained fiscal consolidation, supported by strong structural reforms, is required to put public finances on a more sustainable footing.”
It added that the determination of Belizean authorities “to keep the financial system under tight supervision is welcome.”
The IMF also said that, “The adoption of the Growth and Sustainable Development strategy is a welcome development,” but added that, “It should be complemented by reforms increasing labor market flexibility, further development of the financial markets, and developing a well-designed framework for public private partnerships.”
It said that there is also room for improvement in providing the right climate and mechanisms for starting a business, getting credit, cross-border trade, timely resolution of contract disputes, and strengthening small business.