Posted: Tuesday, October 8, 2019. 10:35 pm CST.
By Aaron Humes: An International Monetary Fund team led by Daniel Leigh visited Belize from September 23-October 4 to conduct the discussions for the 2019 Article IV consultation. The team met with Prime Minister Dean Barrow; Ambassador Joy Grant, Governor of the Central Bank of Belize; Mr. Joseph Waight, Financial Secretary; and other senior government officials, representatives of the opposition, private sector, and public sector unions.
The headline is that, according to the Fund, “Belize’s economic recovery continues but the pace is slowing.” After boosts of 3.2 percent in gross domestic product in 2018 and 4 percent in the first quarter of 2019, the effects of the agricultural drought saw a slight contraction and growth for 2019 is projected at just 1.5 percent. Tourism continues to carry the economy but the account deficit is near 8 percent of GDP in the end of 2018.
The Government’s fiscal consolidation efforts have boosted the primary fiscal surplus to the targeted 2 percent for the past two years, but spending on wages, public investment and weaker revenue collection has put this at risk, the IMF warned. It also noted the announcement of a two-year phase of increases in pension contribution rates for Social Security, intended to “shore up the sustainability” of that scheme.
The IMF lists the following as challenges to the medium-term outlook: the need to reduce public debt, currently at 94 percent of GDP; a boost to international reserves (projected at about 3 months of imports of goods and services over the medium term); weaker U.S. growth which would impact tourism; higher oil prices; and natural disasters to which Belize remains highly vulnerable. Elevated rates of crime pose risks to growth and competitiveness. Reputational risks from potential financial misuse of the international financial services sector’s entities, and governance concerns, could weaken investor confidence and renew pressures on correspondent banking relationships (CBRs).
Belize’s inclusion on the European Union list of non-cooperative tax jurisdictions, and uncertainty regarding standard setters expectations, could disrupt investment and trade flows. The government continues to contest legacy claims which could lead to large public and external financing needs. On the upside, an intensification of structural reforms could further raise investment, income, and employment.
A full report is to be prepared and discussed at the IMF executive level in November, but the Prime Minister has said in the past that Belize is not obligated to listen to and implement the IMF’s recommendations, which often involve cutting the wage bill and other public spending and increasing sources of revenue including taxes. We will have much more from the IMF report in subsequent stories.
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