Statement at the Conclusion of the IMF Article IV Consultation Mission to BelizePress Release No.14/212
May 9, 2014
An International Monetary Fund (IMF) team led by Jacques Bouhga-Hagbe visited Belize during April 28-May 9 to hold discussions in the context of the country’s 2014 Article IV Consultation. At the conclusion of the visit, Mr. Bouhga-Hagbe issued the following statement:
“The Belizean economy is estimated to have grown by only 0.7 percent in 2013 mainly because of continued decline in oil production and weak agricultural output, especially sugarcane and citrus. Inflation eased to 0.5 percent from 1.3 percent a year ago, as commodity price pressures abated. Private sector credit grew by 3.8 percent (y/y) in March 2014. While declining, Non-Performing Loans (NPLs) remained high at 17.6 percent of total loans at end 2013. The banking system’s capital buffers improved and weaknesses in the system are being addressed. The external current account deficit widened to 4.5 percent of GDP up from 1.2 percent in 2012, as exports of oil and agricultural products fell sharply, while imports of fuel and electricity picked up. Nonetheless, international reserves improved to 4.3 months of imports (up from 3.3 months at end-2012) owing mainly to PetroCaribe financing and private capital inflows. The primary fiscal surplus for FY2013/14 is estimated to have fallen to 1 percent of GDP, from 1.4 percent of GDP in FY2012/13. Revenue collection was better than budgeted, as robust tax revenues more than offset the decline in non-tax revenues. However, substantial increases in wages and salaries, transfers and interest payments drove up current expenditure. Capital expenditures were higher than budgeted because of the need to rebuild the infrastructure that was badly damaged by rain.
“Over the medium-term, real GDP growth is expected to hover around 2.5 percent a year as declining oil production would be offset by higher output of other commodity exports, tourism and construction. Inflation is projected to remain low owing to the exchange rate peg and subdued inflation in trading partners. The authorities’ medium-term policy plans would maintain the primary surplus around 1 percent of GDP, as in 2013, which could lead to significant increases in public debt as a share of GDP, especially if a court decision calls for the payment of compensation to the former owners of the recently nationalized companies.
“Risks continue to be tilted to the downside as additional external vulnerabilities could arise from a protracted period of weak growth in advanced economies or complications with PetroCaribe financing. New oil discoveries and growth-enhancing projects that are currently being implemented or envisaged could mitigate these risks.
“In this context, the mission pointed to the benefits of a more ambitious fiscal stance to create credible policy buffers that would help address downside risks. This could be achieved by a combination of revenue, expenditure, public financial management, and debt management measures. The mission also expressed the view that current efforts to further strengthen the banking system should continue. There are also significant gains to the adoption of growth-enhancing reforms, such as allowing for quicker judicial resolution of contract disputes and making it easier to start a new business and to register property. Greater flexibility in labor markets, especially working hours, and greater liberalization of the economy would foster Belize’s competitiveness.
“The mission expresses its gratitude to the authorities for their openness, cooperation, assistance, and hospitality.”
During its visit, the IMF team met with Prime Minister Dean Barrow, Financial Secretary Joseph Waight, Central Bank Governor Glenford Ysaguirre, other government and central bank officials, representatives of the private sector, labor unions and members of the opposition.