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IMF Executive Board Concludes 2018 Article IV Consultation with Belize
November 16, 2018
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IMF Communications Department
MEDIA RELATIONS
PRESS OFFICER: Randa Elnagar
Phone: +1 202 623-7100Email: MEDIA@IMF.org
On November 12, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Belize.
Belize’s economic recovery is strengthening, supported by a favorable global environment. Real GDP is estimated to have increased by 1.4 percent in 2017, and recent data indicate an acceleration in economic activity. This acceleration reflects growth in the tourism and agricultural sectors, on the back of economic expansion in Belize’s trade partners, expanded capacity, and foreign direct investment. Unemployment decreased to 9.4 percent in April 2018 from 9.7 percent six months earlier, the current account deficit narrowed to 7.6 percent of GDP in 2017 from 8.4 percent of GDP in 2016, and the financial sector is strengthening. The government delivered a significant fiscal adjustment in FY2017/18, with a primary fiscal balance surplus of 1.3 percent of GDP.
The medium-term outlook remains challenging. Real GDP growth is projected at just below 2 percent in the medium term. The current account deficit is projected to gradually narrow, but remain significant, with international reserves projected below 3 months of imports of goods and services over the medium term. A fiscal stance that is stronger than currently projected would be needed to reduce public debt from its end-2017 level (94 percent of GDP) to prudent levels over the long term and build buffers against shocks. Contested legacy claims, estimated at about 5 percent of GDP, could lead to large public and external financing needs. The risk of renewed pressures on correspondent banking relationships (CBRs) remains. On the upside, additional foreign direct investment, including in connection with the tourism industry’s expansion, and a successful implementation of the Growth and Sustainable Development Strategy (GSDS) could result in a sustained rise in growth.
Executive Board Assessment2
Belize’s economic recovery is strengthening and Directors welcomed the authorities’ progress in restoring fiscal sustainability and financial sector soundness. However, the medium‑term outlook remains challenging with elevated government debt and external imbalances. With this background, Directors encouraged the authorities to implement reforms to raise economic growth and resilience, reduce government debt, and strengthen the financial sector.
Structural reforms are key to enhance the business climate and improve medium‑term growth prospects. Directors encouraged the authorities to take steps to facilitate access to credit, address labor market rigidities and skill gaps, improve governance, and amplify support for crime prevention. Directors welcomed the Climate Change Policy Assessment, conducted with support from the IMF and the World Bank, and emphasized the need to intensify ongoing efforts to build resilience to natural disasters, through investment in adaptation infrastructure, greater self‑insurance, and optimized use of risk management instruments.
Directors welcomed the significant fiscal consolidation achieved in FY2017/18 and further adjustment envisaged in the FY2018/19 budget. Reducing public debt to prudent levels would require additional fiscal reforms. Directors highlighted the need to broaden the tax base, strengthen tax administration, reduce wage spending and undertake pension reform. To support the poverty alleviation strategy, Directors saw merit in strengthening the social safety net by increasing the use of formal targeting mechanisms. They encouraged the authorities to support fiscal adjustment with a well‑designed fiscal rule.
Directors noted that the financial system is strengthening but should remain under tight supervision. They encouraged the authorities to fortify the bank resolution legal framework with more effective tools and greater regulatory autonomy, with IMF technical assistance. They also highlighted the need to undertake an asset quality review to assess banks’ capital buffers.
Directors welcomed recent progress in strengthening the AML/CFT framework and recommended further steps to enhance its effectiveness and support the recovery of Correspondent Banking Relationships. They underlined the need to strengthen the regulatory, supervisory, and enforcement powers of the International Financial Services Commission. Directors also encouraged the authorities to further develop their capacity to conduct AML/CFT risk‑based supervision. They saw merit in conducting a study on the overall benefits as well as the costs and risks of the offshore sector.
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Belize: Selected Social and Economic Indicators, 2015-2022 |
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I. Population and Social Indicators |
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Area (sq.km.) |
22,860 |
Human development index (rank), 2016 |
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103 |
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Population (thousands), June 2018 |
398.1 |
Under-five mortality rate (per thousand), 2016 |
15 |
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GDP per capita, (current US$), 2016 |
4,811 |
Unemployment rate (percent), April, 2018 |
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9.4 |
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Life expectancy at birth (years), 2016 |
70.1 |
Poverty (percent of total population), 2009 |
42.0 |
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II. Economic Indicators, 2015-22 |
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2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
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Prel. |
Proj. |
Proj. |
Proj. |
Proj. |
Proj. |
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National income and prices |
(Annual percentage changes, calendar year) |
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GDP at constant prices |
3.4 |
-0.6 |
1.4 |
2.2 |
2.1 |
2.0 |
1.8 |
1.7 |
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Consumer prices (average) |
-0.9 |
0.7 |
1.1 |
1.2 |
1.5 |
1.7 |
2.0 |
2.0 |
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Central government 1/ |
(In percent of fiscal year GDP) |
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Revenue and grants |
28.2 |
28.9 |
29.6 |
29.9 |
30.1 |
30.1 |
30.1 |
30.2 |
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Current non-interest expenditure |
23.1 |
23.8 |
24.1 |
24.0 |
24.0 |
24.0 |
24.0 |
24.0 |
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Interest payment |
2.5 |
3.3 |
3.0 |
3.0 |
2.9 |
2.8 |
2.7 |
2.6 |
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Domestic |
0.4 |
0.5 |
0.9 |
0.9 |
0.9 |
0.8 |
0.8 |
0.8 |
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External |
2.1 |
2.8 |
2.2 |
2.1 |
2.1 |
2.0 |
1.9 |
1.8 |
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Capital expenditure and net lending |
10.2 |
7.0 |
6.5 |
3.9 |
4.0 |
4.1 |
4.1 |
4.1 |
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Capital expenditure |
7.3 |
6.9 |
4.0 |
3.8 |
4.0 |
4.1 |
4.1 |
4.1 |
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Net lending |
2.8 |
0.1 |
2.5 |
0.1 |
0.1 |
0.1 |
0.1 |
0.1 |
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Primary balance |
-5.1 |
-1.9 |
-1.1 |
2.0 |
2.1 |
2.0 |
2.0 |
2.0 |
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Overall balance |
-7.5 |
-4.2 |
-3.9 |
-0.9 |
-0.8 |
-0.8 |
-0.7 |
-0.7 |
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Public debt |
(In percent of calendar year GDP) |
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Stock of public debt |
79.3 |
93.3 |
93.6 |
94.2 |
91.8 |
89.4 |
86.9 |
84.5 |
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Domestic debt |
14.0 |
28.3 |
27.6 |
30.0 |
29.1 |
28.7 |
28.7 |
28.9 |
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External debt |
65.3 |
65.0 |
66.1 |
64.2 |
62.7 |
60.7 |
58.3 |
55.7 |
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Principal payment |
2.1 |
2.2 |
2.4 |
2.6 |
2.7 |
3.3 |
3.4 |
4.2 |
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Domestic |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.8 |
0.7 |
1.7 |
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External |
2.1 |
2.1 |
2.4 |
2.6 |
2.7 |
2.5 |
2.6 |
2.6 |
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Money and credit |
(Annual percentage changes, calendar year) |
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Credit to the private sector |
4.8 |
-3.0 |
3.9 |
3.0 |
3.0 |
3.0 |
3.5 |
4.5 |
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Money and quasi-money (M2) |
7.3 |
2.6 |
-0.3 |
3.4 |
3.6 |
3.7 |
3.8 |
3.7 |
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External sector |
(Annual percentage changes, unless otherwise indicated) |
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External current account (percent of GDP) 2/ |
-9.8 |
-8.4 |
-7.6 |
-6.2 |
-6.1 |
-5.8 |
-5.7 |
-5.3 |
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Real effective exchange rate (+ = depreciation) |
8.6 |
1.7 |
-2.1 |
… |
… |
… |
… |
… |
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Gross international reserves (US$ millions) |
437 |
377 |
304 |
299 |
308 |
311 |
305 |
286 |
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In months of imports |
4.8 |
4.2 |
3.3 |
3.1 |
3.1 |
3.0 |
2.9 |
2.6 |
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Memorandum items |
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Primary balance (excluding one-off capital transfer 3/ |
-5.1 |
-1.9 |
1.3 |
2.0 |
2.1 |
2.0 |
2.0 |
2.0 |
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Nominal GDP (BZ$ millions) |
3,525 |
3,613 |
3,725 |
3,853 |
3,992 |
4,141 |
4,299 |
4,458 |
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Sources: Belize authorities; UNDP Human Development Report; World Development Indicators, World Bank; 2009 Poverty Country Assessment; and IMF staff estimates. 1/ Fiscal year (April to March). 2/ Including official grants. 3/ Excludes assumption of UHS debt by the government in FY 2017/18 (2.5 percent of GDP). |
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1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
2 At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.
