Statement by an IMF Mission to BelizePress Release No. 11/314
August 25, 2011
Mr. Gerardo Peraza, the International Monetary Fund (IMF) Mission Chief for Belize, released the following statement today in Belmopan:
“An IMF mission visited Belize from August 15-25 to conduct its yearly review of the country’s economy. Belize weathered the financial crisis relatively well, when compared with other countries in the Caribbean Community. Output expanded in 2010—owing largely to activity in the electricity, and wholesale and retail trade. Twelve-month inflation was nil in 2010, reflecting the impact of tax exemptions on several food staples and continued weakness in domestic demand, but picked up slightly early this year (0.9 percent in February 2011), driven by higher food and fuel prices. Growth in 2011 is being supported by expansion in the manufacturing and agriculture sectors, as well as an improvement in the terms of trade, allowing the stabilization of the foreign reserves cover at about 3 months imports of goods and services. Meanwhile, Belize continues to face challenges due to a high the level of nonperforming loans (NPLs) – which require close and continuing monitoring by the central bank - high public debt, and concerns about the business environment.
“In this context, the discussions focused on three critical policy challenges facing Belize: achieving fiscal consolidation and gradual debt reduction; safeguarding financial and monetary stability; and strategies for boosting growth and reducing poverty.
“On fiscal consolidation, the government needs to adopt a stronger fiscal stance to reduce its dependence on grant and oil revenues, and rebuild macroeconomic buffers to deal with future shocks. The primary surplus would need to rise significantly over the medium term to lower gross financing needs and public debt. The mission also underscored the need to protect the public sector balance from the recently nationalized entities, and the need to further develop a clear plan of action to mitigate contingent fiscal liabilities.
“On financial sector stability, the authorities recently participated in its first Financial Sector Assessment Programme (FSAP), which reviewed sources of vulnerabilities and development gaps in the financial system, including access to finance. The mission supports the authorities’ plan to use the FSAP findings as an opportunity to rebuild momentum for financial sector reforms, including strengthening loan classification and provisioning rules and the bank resolution framework. The IMF stands ready to provide technical assistance in rapidly advancing these reforms.
“On growth and poverty, the government is working with the private sector to identify specific measures to improve the business environment, which is critical to support long-term investment and poverty reduction. However, more needs to be done to positively influence the private sector’s perception of the business environment over the medium term. Measures to improve long term competitiveness, such as enhancing critical infrastructure, along with close monitoring and evaluating of the poverty reduction programs, are also required.
“Upon its return to Washington, the mission will prepare a staff report that is scheduled to be discussed by the IMF Executive Board in late October. The mission is especially grateful for the open communication and close collaboration enjoyed over the past two weeks not only with government officials, but with all Belizean stakeholders, with whom it had the privilege of exchanging views.”