IMF Executive Board Concludes 2010 Article IV Consultation with Belize

Public Information Notice (PIN) No. 10/142
October 22, 2010

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

On October 15, 2010, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Belize.1


The Belizean economy in the past two years has been vulnerable to adverse shocks mainly because of a weak external position, policy rigidities, and reduced access to external financing. Since 2006, growth has been lackluster, with sources limited mostly to petroleum extraction and tourism-related construction. In 2007, debt restructuring eased external debt service, but public debt has remained high, limiting the policy capacity to respond to shocks. Macroeconomic management was complicated in 2008 by soaring fuel and food prices.

Economic activity stagnated in 2009, as a result of the global slowdown and the lingering effects from the 2008 floods. Inflation fell to minus 0.4 percent during 2009, driven by a reversal in fuel and food prices and weak domestic demand. Helped by a lower external current account deficit and the SDR allocations, foreign reserves have strengthened substantially from the low levels seen in previous years to reach 3.2 months of imports of goods and services or 160 percent of the country’s external financing needs.

In FY2009/10 (April–March), the fiscal balance weakened by 2 percentage points of GDP, to a deficit of 1.6 percent of GDP, due to lower grants and higher current spending (mainly wages), despite a decline in investment. The central bank has taken steps to improve the conduct of monetary policy, by relying on market-based monetary instruments. In the banking system, nonperforming loans have risen sharply in the recent period, while provisioning remains low.

For 2010, the economy is projected to grow by 2 percent, on an expansion in electricity generation. Inflation would rise transitorily to 6 percent, after a rebound in fuel prices and recent tax measures. Despite some increase in debt payments abroad, the external current account deficit would narrow to under 6 percent of GDP, reflecting lower energy and FDI-related imports. The foreign reserve position would improve slightly. Despite tax revenue actions taken in April, the budgeted fiscal deficit is projected to widen to 2.2 percent of GDP in FY2010/11, due largely to lower grant disbursements and increased investment. The public debt is projected to decline slightly under 80 percent of GDP at year-end.

Executive Board Assessment

Executive Directors commended the authorities for their prudent macroeconomic management in the face of the global crisis and severe floods. Growth has resumed, albeit at a slow pace, and the external position has improved. Nevertheless, the Belize economy remains vulnerable to shocks, with weak public finances, limited external financing, and risks in the banking system. This vulnerability highlights the urgency of further rebuilding macroeconomic and financial buffers, strengthening the banking system, and promoting an environment conducive to private sector-led growth.

Directors emphasized the need for an ambitious fiscal consolidation strategy, with a view to reducing public debt to more sustainable levels over time. They supported plans to improve public financial management and tax administration, building on recent progress in revenue reform. Directors encouraged further efforts to contain the public sector’s wage bill and to put the pension system on a sounder footing, and welcomed the authorities’ intention to build consensus around their reform program. They also considered it important to create space for priority social spending and infrastructure investment in a manner consistent with the fiscal consolidation strategy, and to incorporate plans in these areas into a medium-term budget framework.

Directors underscored that protecting the stability of the banking system is a priority. This will require an agreement on recapitalization plans for a few banks and their early implementation. Directors welcomed plans to upgrade the regulatory and bank resolution frameworks, bringing prudential rules in line with international best practices, with technical assistance from the Fund. They also welcomed ongoing efforts to intensify bank oversight and looked forward to continued progress in the supervision of the offshore and non-banking sectors.

Directors welcomed recent improvements in the monetary policy framework and liquidity management, particularly a shift to more market-based monetary instruments. They stressed that the fixed exchange rate regime has provided an anchor for macroeconomic policies and expectations. Its long-term stability depends on sustained fiscal consolidation, a disciplined monetary policy, and strengthened financial stability.

Directors endorsed the authorities’ development plan, which seeks to boost competitiveness and private investment. Its successful delivery, along with adequate donor support, will go a long way toward raising medium-term economic prospects and reducing poverty. Continued improvements in the business climate would help foster private sector-led growth.

Belize: Selected Economic Indicators



  Prel. Proj.


2006 2007 2008 2009 2010
(Annual percentage change, unless otherwise indicated)

National income and prices


GDP at constant prices

4.7 1.2 3.8 0.0 2.0

Nominal GDP (US$ millions)

1,213 1,277 1,359 1,352 1,431

Gross domestic investment 1/ 2/

17.7 16.9 27.5 22.0 23.0

Gross national savings 1/

15.6 12.9 17.7 15.2 17.3

Consumer prices (end of period)

2.9 4.1 4.4 -0.4 5.9

Real effective exchange rate (June for 2010)

0.9 -2.9 0.5 2.5 2.3

Money and credit


Credit to the private sector

13.1 13.9 11.6 4.8 2.4

Money and quasi-money (M2)

17.3 15.0 14.0 5.8 2.9
(In percent of GDP, unless otherwise indicated)

Central government 3/


Revenue and grants

25.8 28.2 28.7 26.4 28.0

Current expenditure

25.1 23.2 23.4 24.4 24.9

Capital expenditure and net lending

4.6 5.7 4.9 3.7 5.3

Primary balance

4.1 3.8 4.2 1.9 1.9

Overall balance

-3.9 -0.7 0.4 -1.6 -2.2

External sector


External current account 4/

-2.1 -4.0 -9.8 -6.8 -5.7

Overall balance of payments (US$ millions)

49.8 22.9 58.6 47.3 7.9

Public and publicly guaranteed debt

92.5 84.8 78.2 80.2 78.1

  Domestic debt

8.7 8.2 7.4 7.1 7.0

  External debt

83.9 76.6 70.8 73.1 71.2

Gross international reserves (US$ millions) 5/

85.6 108.8 167.1 214.3 222.2

  In months of imports

1.3 1.6 2.1 3.2 3.4

Sources: Belize authorities; and IMF staff estimates and projections.

1/ In percent of GDP.

2/ Including inventory accumulation.

3/ Fiscal year ends in March. Budget projection for 2010

4/ Including official grants.

5/ For 2009, includes the share of Belize in the IMF Special and General SDR allocations in the equivalent of SDR 18 million (US$28 million).

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. 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:


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