IMF Executive Board Concludes 2011 Article IV Consultation with Belize

Public Information Notice (PIN) No. 11/131
October 31, 2011

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 21, 2011, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Belize.1


Belize has weathered the financial crisis relatively well when compared with Caribbean Community peers. Output expanded by 2.7 percent in 2010 owing largely to activity in the electricity and wholesale and retail trade. Twelve-month inflation was nil in 2010, reflecting primarily continued weakness in domestic demand, and picked up slightly in the quarter ending in May driven by higher food and fuel prices. The external position strengthened, as a narrowing in the current account deficit (from 6.1 percent of GDP in 2009 to 3 percent in 2010) underpinned an increase in foreign reserves to 3.25 months of imports at end-2010, equivalent to 300 percent of 2011 external financing needs. Public debt rose to 83 percent of Gross Domestic Product (GDP).

In Fiscal Year 2010/11, the overall fiscal deficit widened by 0.3 percentage point of GDP to
1.5 percent of GDP, reflecting an increase in expenditure and weak grant disbursements. This outturn was, however, better than envisaged in the budget. Meanwhile, bank prudential indicators have remained weak, with high nonperforming loans (NPLs) and low provisioning. Bank liquidity remains ample. In July, the authorities participated in their first Financial Sector Assessment Program (FSAP). Despite a cut in reserve requirements, bank credit growth has slowed as fewer investment opportunities and high NPLs continue to constrain new lending. Improvements in social indicators have been protracted, despite the allocation of significant resources to social protection.

The macroeconomic outlook for 2011 remains moderately positive. Output growth is projected at 2.5 percent, reflecting a strong performance in the first quarter—supported by an expansion in manufacturing and electricity sectors, and a modest recovery in stayover tourist arrivals. Higher food and fuel prices are expected to push inflation slightly upward. The external current account deficit is projected to remain at about 3 percent of GDP in the context of some improvement in the terms of trade. The reserve coverage would remain at around 3 months of imports by year-end.

Executive Board Assessment

Executive Directors commended the authorities for their macroeconomic management, which enabled Belize to weather the financial crisis relatively well. While the near-term outlook is positive, challenges arise from the uncertain global environment, vulnerabilities in the banking system, rising gross financing needs of the public sector, and the weak investment climate. The recent rise in poverty is also a cause for concern. Against this backdrop, Directors encouraged the authorities to strengthen the policy framework and advance the reform agenda.

Directors emphasized the need to further tighten the fiscal stance and rebuild macroeconomic buffers. A gradual increase in the primary surplus would keep financing needs manageable and place the public debt on a downward path. Directors cautioned that growing contingent liabilities could put an additional burden on public finances, requiring close monitoring over the medium term. Welcoming the authorities’ intention to strengthen tax administration, Directors stressed the importance of improving overall tax collections, including a reduction in tax concessions. They also highlighted the need to contain the growth of the wage bill, and streamline capital spending in line with implementation capacity and grant disbursements.

Directors endorsed the authorities’ emphasis on developing social programs aimed at reducing poverty. They underscored that these programs should be cost effective and better monitored and targeted.

Directors agreed that safeguarding financial sector stability should be a high priority. They welcomed the authorities’ plans to use the findings of the recent FSAP to guide their reform agenda and strengthen the financial sector. Noting the high level of non-performing loans, Directors stressed the importance of issuing revised loan classification and provisioning guidelines by year-end as planned, and of closely monitoring bank’s capital adequacy. They encouraged the authorities to follow through on recommendations to enhance the bank’s supervisory capacity and reinforce the bank resolution and consolidated supervision frameworks. Directors also called for greater autonomy of the central bank. They welcomed the ongoing efforts to revamp the monetary policy framework.

Directors noted that the fixed exchange rate has provided an important anchor for macroeconomic policies. Given that rising gross external financing needs over the medium-term would increase vulnerability, they recommended building a higher level of foreign reserves as a buffer against shocks.

Directors emphasized the need to strengthen the macroeconomic framework and the business climate to tackle Belize’s low productivity growth. They called for timely compensation to former owners of the nationalized entities, once the courts have reached a final verdict. Improving the long-term conditions for growth would also require the implementation of steady programs to enhance physical and financial infrastructure, promoting the formation of skilled labor, and reforming the tax system. Directors stressed the importance of close collaboration between the Fund and development partners in these areas.

Belize: Selected Economic Indicators
        Prel. Proj. Proj.


2007 2008 2009 2010 2011 2012

(Annual percentage change, unless otherwise indicated)

National income and prices


GDP at constant prices

1.2 3.8 0.0 2.7 2.5 2.8

Nominal GDP (US$ millions)

1,277 1,359 1,349 1,401 1,474 1,552

Gross domestic investment 1/ 2/

17 27 22 18 19 19

Gross national savings 1/

12.9 17.7 15.7 15.0 15.9 14.6

Consumer prices (end of period)

4.1 4.4 -0.4 0.0 4.2 2.5

Real effective exchange rate (July for 2011)

-4.9 -0.6 4.5 -3.1 -5.6

Money and credit


Credit to the private sector

13.9 11.6 4.8 -3.6 0.3 1.5

Money and quasi-money (M2)

15.0 14.0 5.8 -1.8 4.2 5.0

(In percent of GDP, unless otherwise indicated)

Central government 3/


Revenue and grants

28.2 28.7 27.0 27.4 28.6 27.4

Current expenditure

23.2 23.4 24.5 24.0 24.9 24.6

Capital expenditure and net lending

5.7 4.9 3.7 4.5 5.4 5.4

Primary balance

3.8 4.2 2.4 1.9 2.2 1.8

Overall balance

-0.7 0.4 -1.2 -1.5 -1.6 -2.5

External sector


External current account 4/

-4.1 -10.7 -6.2 -3.0 -3.1 -4.4

Overall balance of payments (US$ millions)

22.9 57.9 47.3 4.6 3.8 16.1

Public and publicly guaranteed debt

86.3 79.7 82.1 83.3 80.4 78.1

Domestic debt

8.2 7.4 7.1 11.9 12.1 11.5

External debt

78.1 72.3 75.0 71.4 68.3 66.6

Gross international reserves (US$ millions) 5/

108.5 166.4 213.7 218.0 221.8 235.2

In months of imports

1.6 2.1 3.3 3.2 2.9 2.9

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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