IMF Executive Board Concludes 2013 Article IV Consultation with Belize

Press Release No. 13/261
July 16, 2013

On June 21, 2013, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Belize.1

The Belize government’s completion of the exchange of its “super-bond” for new U.S. dollar denominated bonds due to expire in 2038 brought substantial cash-flow relief (about US$130 million over the next 5 years). The debt restructuring took place against prolonged legal disputes over the nationalization of two utility companies, Belize Telemedia Limited (BTL) and Belize Electricity Limited (BEL). No agreement has been reached yet over compensation payments; and the legal dispute may take a few years in court.

Output growth is estimated at 5.3 percent in 2012, led by a recovery from the 2011 effects of weather-related damages in commodity exports. Inflation averaged 1.4 percent, as commodity price pressures abated. The external current account deficit widened to about 1.7 percent of Gross Domestic Product (GDP) due to a steep drop in oil exports and higher imports of fuel and electricity. Notwithstanding this deterioration, international reserve coverage is estimated at 3.4 months of imports up from 3 months in 2011, thanks in part to strong foreign direct investment inflows in the sugar sector. Unemployment remains high at 16 percent.

The fiscal primary surplus for FY2012/13 (March 31- April 1) is expected to deteriorate to 1.3 percent of GDP compared to 2.3 percent of GDP in 2011. This deterioration largely reflects the continued decline in oil-related revenues and an increase in the wage bill, despite robust growth in General Sales Tax (GST) revenue.

After two years of decline, credit to the private sector recovered modestly in 2012. High non-performing loans (NPLs) in the banking system—20 percent of total loans at end-2012—and loan write-offs continue to hold back private sector credit growth, estimated at 1.1 percent, and are eroding banks’ net earnings. Broad money grew by 5 percent, mostly driven by expansion in net foreign assets. New provisioning and loan classification standards implemented by the central bank at end-2011 have resulted in declining NPLs in the banking system and improving provisioning.

Despite the acceleration in economic activity in 2012, output growth is expected to moderate to about 2.5 percent in the medium term. The primary surplus is projected at 1 percent of GDP in FY13/14, with public debt expected to decline to about 75 percent of GDP at end-2013, reflecting, in part, the net face value haircut of 3 percent from the recent debt exchange. The government may face large financing needs over the medium term largely associated with compensation to the former shareholders of nationalized companies, pending legal rulings. The external current account deficit is projected to widen to about 1.9 percent of GDP owing to the continued deterioration in crude oil exports and rising imports. The reserve coverage would remain at around 3 months of imports by end-2013.

Executive Board Assessment

Executive Directors congratulated the authorities on the strong economic performance last year and the successful completion of the external debt exchange. These positive developments notwithstanding, Directors noted that Belize’s economy still faces substantial challenges and vulnerabilities. They encouraged the authorities to take advantage of the existing breathing space to rebuild policy buffers, pursue active debt management, accelerate financial sector reform, and buttress the economy’s resilience to external shocks.

Directors underscored the need to sustain the momentum of fiscal consolidation while protecting spending in such priority areas as infrastructure, internal security, and social programs. They stressed that raising the primary surplus to levels consistent with debt sustainability would require strong adjustment efforts, including moderating wage increases and broadening the base for the general sales tax. Over the medium term, it will be important to strengthen public financial management and implement a tax reform that promotes growth and fairness. Directors recommended that the authorities avoid the earmarking of funds, and put in place appropriate safeguards for public resources should they be used for the creation of a specialized mortgage bank. Given uncertainties surrounding the potential liabilities associated with the nationalization of public companies and other contingent liabilities, Directors encouraged the authorities to take additional measures as necessary, with a view to ensuring fiscal sustainability.

Directors welcomed the authorities’ plans to revamp the debt management framework. They encouraged continued efforts to develop a more robust debt management, strengthen the institutional framework, and build capacity to implement a medium-term debt management strategy. Options to develop the domestic debt market should also be explored to mobilize domestic financing.

Executive Directors welcomed progress on financial sector reforms. However, given the remaining vulnerabilities, including the still high nonperforming loans, they called for continued vigilance, close monitoring of individual institutions, and intensified efforts to implement the remaining recommendations of the 2011 Financial Sector Assessment Program (FSAP). It will also be important to update the crisis management plan and the bank restructuring and resolution framework, making use of technical assistance from the Fund. Directors also saw a need to further strengthen the Anti Money Laundering/Combating the Financing of Terrorism framework.

Directors concurred that, while the fixed exchange rate has provided an important anchor for macroeconomic policies, efforts are needed to tackle Belize’s widening current account deficits and relatively low international reserves. They called on the authorities to advance structural reforms, focusing on removing impediments to private investment, boosting competitiveness and jobs, and promoting inclusiveness and the diversification of exports and energy sources.

Belize: Selected Economic Indicators
  2009 2010 2011 2012 2013
(Annual percentage change, unless otherwise indicated)

National income and prices


GDP at constant prices

0.0 2.7 1.9 5.3 2.5

Nominal GDP (US$ millions)

1,339.2 1,392.0 1,480.8 1,579.4 1,636.9

Gross domestic investment 1/ 2/

22.0 18.0 19.0 19.0 19.5

Gross national savings 1/

16.3 15.2 17.9 17.3 17.6

Consumer prices (end of period)

-0.4 0.0 2.5 0.6 2.0

Real effective exchange rate

4.5 -2.8 -9.4 2.0

Money and credit


Credit to the private sector

4.8 -3.6 -1.2 1.1 2.1

Money and quasi-money (M2)

5.8 -2.1 4.7 5.1 3.8
(In percent of GDP, unless otherwise indicated)

Central government 3/


Revenue and grants

27.2 27.5 27.8 26.0 26.4

Current expenditure

24.7 24.1 24.1 22.0 22.7

Capital expenditure and net lending

3.7 5.1 4.7 4.6 4.7

Primary balance

2.4 1.8 2.3 1.3 1.0

Overall balance

-1.2 -1.7 -1.1 -0.6 -1.1

External sector


External current account 4/

-4.9 -2.8 -1.1 -1.7 -1.9

Overall balance of payments (US$ millions)

47.3 5.2 18.1 52.8 -10.0

Public and publicly guaranteed debt

84.9 85.3 83.0 78.6 75.1

Domestic debt

7.5 12.1 11.2 12.2 12.0

External debt

77.3 73.2 71.8 66.4 63.1

Gross international reserves (US$ millions) 5/

213.7 218.0 236.1 288.9 272.5

In months of imports

3.3 3.2 3.0 3.4 3.1

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

1/ In percent of GDP.

2/ Including inventory accumulation.

3/ Fiscal year ends in March.

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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