The International Monetary Fund (IMF) issued a statement this evening at the conclusion of its annual visit to Belize, this time headed by Przemek Gajdeczka, Advisor in the IMF’s Western Hemisphere Department.
The IMF team led by Gajdeczka held discussions with government officials and private sector representatives, “…centered on the impact of the global slowdown on Belize and on the medium-term strategy of fiscal consolidation and structural reforms to improve macroeconomic management and enhance growth prospects.”
The IMF warns that, “Liquidity conditions in banks and other financial institutions will need to be monitored closely to help protect the stability of the domestic financial system.”
The statement describes Belize as “vulnerable to global developments, as the economy is likely to be affected by declining tourism receipts and remittances, as well as lower FDI [foreign direct investment] inflows, and that high external debt and relatively low external reserves limit the space for counter-cyclical policies.”
In reference to the new national budget to take effect next Wednesday, April 1, the IMF release opines that, “Overall, the government budget is increasingly dependent on volatile revenue sources (grants and oil) and external borrowing.”
It adds later that, “Fiscal policies aimed at lowering debt ratios substantially are the key element of the authorities’ medium-term strategy. This will require significant adjustments to the fiscal position starting in 2010, to reduce reliance on external borrowing and meet rising interest obligations on the private debt restructured in 2007.”
Belize’s economy is projected to grow by 1 percent in 2009, and inflation to ease further to 2.5 percent.
It urges that “…progress is needed to ensure financial viability of key public sector programs, including the social security, the pension system for the public servants, the National Health Insurance, and the Development Finance Corporation, and to improve transparency of the taxation regime for the petroleum industry.”
The IMF’s Executive Board is expected to discuss the Belize report in April, and the staff report should be made public shortly thereafter.