IMF Executive Board Concludes 2022 Article IV Consultation with Belize
IMF News, May 10, 2022
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- Published: May 10, 2022
Overview
- The Executive Board concluded the Article IV consultation with Belize and endorsed the staff appraisal without a meeting on a lapse-of-time basis.
- The COVID-19 pandemic caused a 16.7 percent contraction in real GDP in 2020 and increased public debt to 133 percent of GDP.
- The government presented a Medium-Term Recovery Plan (MTRP) aiming to lower public debt to 85 percent of GDP in 2025 and 70 percent of GDP by 2030 through fiscal consolidation, growth-enhancing structural reforms, and debt restructuring.
- A debt-for-marine-protection swap with The Nature Conservancy reduced public debt by 12 percent of GDP in 2021 and enhanced marine environment protection.
Economic outlook and inflation
- Real GDP expanded by 9.8 percent in 2021.
- Projected GDP growth: 5.7 percent in 2022 and 3.4 percent in 2023, led by tourism recovery.
- End of period inflation: 4.9 percent in 2021; projected 5.2 percent for 2022 due to elevated global energy and food prices from the war in Ukraine and related economic sanctions.
Fiscal performance and public debt trajectory
- Fiscal year FY2021 primary balance increased to 1.7 percent of GDP, aided by cyclical revenue recovery and expenditure decline from fiscal consolidation.
- Public debt declined to 111 percent of GDP in 2021.
- Primary balance projected to decline to –0.1 percent of GDP in FY2022 due to temporary measures to mitigate fuel price rises; projected to stabilize near 0.6 percent of GDP during FY2023-32 in a passive scenario with no additional measures.
- Public debt projected to fall to 85 percent of GDP by 2032 in the baseline projection but would remain assessed as unsustainable absent additional measures because it would remain above the 70 percent of GDP threshold for sustainability over the next decade.
- Executive Board calls for increasing the primary balance to 2.5 percent of GDP in FY2025 and reducing public debt to 60 percent of GDP by 2031 as an objective to restore debt sustainability.
Policy recommendations and required measures
- Preserve fiscal savings achieved in FY2021 and ensure measures adopted to mitigate fuel price rises are temporary.
- Implement additional fiscal consolidation and growth-enhancing structural reforms anchored on a medium-term fiscal strategy with clear targets and specific measures to enhance credibility.
- Fiscal consolidation should rely on both revenue and expenditure measures:
- Consider raising revenue by broadening the tax base and enhancing revenue administration.
- Contain current expenditure and expand targeted social and resilience spending.
- Prepare contingency plans in case public debt does not fall as planned, including additional revenue and expenditure measures and debt operations.
- Continue seeking financing for climate change mitigation and adaptation actions aligned with Belize’s updated Nationally Determined Contribution for 2021-30, including donors and bilateral and multilateral creditors.
Structural reforms and resilience priorities
- Implement growth-enhancing structural reforms to accelerate public debt reduction and reduce reliance on fiscal consolidation:
- Strengthen business climate: improve access to credit for SMEs; reduce entry barriers for new businesses.
- Enhance human capital and infrastructure.
- Reduce crime by providing adequate resources to law enforcement and social programs.
- Build resilience to climate change and natural disasters by adopting a DRS focused on improving structural, financial, and post-disaster resilience and based on a consistent multi-year macro-fiscal framework.
External sector and central bank policy
- Belize’s external position is assessed as weaker than justified by medium term fundamentals and desirable policies.
- Reducing the current account deficit to its equilibrium level and improving reserve adequacy requires:
- Preserving fiscal savings from FY2021 and making fuel price mitigation measures temporary.
- Implementing additional fiscal consolidation and growth-enhancing structural reforms.
- Reducing central bank financing to the government and strengthening central bank independence.
- Authorities should continue seeking financing for climate change mitigation and adaptation priorities.
Financial stability and AML/CFT
- Safeguarding financial stability and strengthening the AML/CFT framework remain priorities.
- Following review of loan portfolios of banks and credit unions, the central bank should ensure any extended measures are time-bound and targeted, and that financial institutions resume regular classification and restructuring procedures.
- Continue efforts to strengthen AML/CFT supervision of banks and enforce sanctions for non-compliance.
- Prioritize reforms to mitigate ML/TF risks stemming from the IFS sector to help protect correspondent banking relationships.
Table of selected social and economic indicators — key figures (as presented)
- Area (sq.km.): 22,860
- Human development index (rank), 2020: 110
- Population (thousands), 2021: 432.5
- Under-five mortality rate (per thousand), 2020: 11.7
- GDP per capita, (current US$), 2021: 4,177
- Unemployment rate (percent), 2021: 10.2
- Life expectancy at birth (years), 2019: 74.6
- Poverty (percent of total population), 2018: 52.0
Selected macroeconomic projections and historical values (calendar year unless noted)
- GDP at constant prices: 2.0 (2019), -16.7 (2020), 9.8 (2021), 5.7 (2022), 3.4 (2023)
- Consumer prices (end of period): 0.2 (2019), 0.3 (2020), 4.9 (2021), 5.2 (2022), 2.5 (2023)
- Consumer prices (average): 0.1 (2019), 3.2 (2020), 4.8 (2021), 3.7 (2022), 2.2 (2023)
- Central government revenue and grants (percent of fiscal year GDP): 31.5 (2019), 27.5 (2020), 32.3 (2021), 30.8 (2022), 31.4 (2023), 2024: (not shown in source table for revenue)
- Current non-interest expenditure (percent of fiscal year GDP): 25.9 (2019), 27.0 (2020), 24.0 (2021), 24.2 (2022), 24.1 (2023)
- Interest payment (percent of fiscal year GDP): 1.7 (2019), 2.4 (2020), 2.7 (2021), 2.8 (2022), 2.8 (2023)
- Capital expenditure and net lending (percent of fiscal year GDP): 6.8 (2019), 9.0 (2020), 6.6 (2021), 6.7 (2022), 6.6 (2023)
- Primary balance (percent of fiscal year GDP): -1.3 (2019), -8.5 (2020), -0.1 (2021), 0.7 (2022), 0.6 (2023)
- Overall balance (percent of fiscal year GDP): -4.7 (2019), -10.3 (2020), -0.7 (2021), -2.8 (2022), -2.0 (2023), -2.1 (2024), -2.2 (2025)
- Public debt (percent of calendar year GDP): 96.3 (2019), 133.1 (2020), 111.0 (2021), 102.5 (2022), 97.7 (2023), 95.9 (2024), 94.2 (2025), 92.8 (2026), 91.4 (2027)
- Domestic debt (percent of calendar year GDP): 28.4 (2019), 41.4 (2020), 36.6 (2021), 32.0 (2022), 28.9 (2023), 28.1 (2024), 27.9 (2025), 28.5 (2026), 28.9 (2027)
- External debt (percent of calendar year GDP): 68.0 (2019), 91.7 (2020), 74.4 (2021), 70.5 (2022), 68.8 (2023), 67.8 (2024), 66.3 (2025), 64.7 (2026), 62.9 (2027)
- Principal payment (percent of GDP): 5.9 (2019), 8.3 (2020), 9.9 (2021), 5.6 (2022), 5.5 (2023), 4.5 (2024)
- Domestic principal payments (percent of GDP): 3.9 (2019), 5.3 (2020), 6.4 (2021), 4.7 (2022), 3.3 (2023), 2.6 (2024), 1.8 (2025), 1.9 (2026)
- External principal payments (percent of GDP): 2.1 (2019), 3.0 (2020), 3.5 (2021), 2.3 (2022), 2.9 (2023)
- Credit to the private sector (annual percent change): 5.8 (2019), 5.0 (2020), 7.2 (2021), 4.3 (2022), 4.0 (2023)
- Money and quasi-money (M2) (annual percent change): 10.6 (2019)
- External current account (percent of GDP): -9.5 (2019), -8.1 (2020), -8.9 (2021), -9.3 (2022), -7.9 (2023), -7.7 (2024)
- Gross international reserves (US$ millions): 278 (2019), 348 (2020), 420 (2021), 409 (2022), 404 (2023), 395 (2024), 385 (2025), 373 (2026), 368 (2027)
- In months of imports: 3.8 (2019), 3.1 (2020)
- Output gap (percent of potential output): -15.9 (2020), -8.6 (2021), -4.3 (2022), -0.3 (2023)
- Nominal GDP (BZ$ millions): 3,891 (2019), 3,171 (2020), 3,593 (2021), 3,982 (2022), 4,270 (2023), 4,452 (2024), 4,632 (2025), 4,819 (2026), 5,014 (2027)
International Monetary Fund, Press Release No. 22/146, May 10, 2022.