## 1blzea2020001 ## Source details **Canonical URL:** [1blzea2020001](https://www.imf.org/-/media/files/publications/cr/2020/english/1blzea2020001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2020/english/1blzea2020001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2020/english/1blzea2020001.pdf.json) --- ### Mission and participants; activities - Mission requested by the authorities of Belize to evaluate the public investment management system using the PIMA methodology. - Mission dates: visited Belmopan from January 15-28, 2020. - Mission led by M. Bruno Imbert (Economist, FAD). - Mission team included MM. Jean-Luc Helis and John Hooley (both Economist, FAD), Arnold Ainsley (Advisor, CARTAC), Eivind Tandberg (Expert, FAD), and MM. Joao Guilherme Morais de Queiroz, Pablo Andres Guzman Abastoflor and Eduardo Andres Estrada (Procurement and Public sector Specialists, World Bank). - Key meetings held with MOF, MED, CBB, line ministries, BWS, PUC, BIL, AGO, Mayors’ Association, IDB, EU Representative and others. - Activities: - Two plenary sessions to present and share approaches, recommendations and options; stakeholder feedback incorporated. - Presentation of conclusions and recommendations to the Financial Secretary at end of mission. ### Executive summary — context and high-level findings - Context and fiscal constraints: - Under a 2017 restructuring agreement with private external bondholders, the authorities committed to maintain a primary surplus of 2 percent of GDP. - Sharp increase in public debt has limited available fiscal space. - Resulting patterns: - Increase in externally financed investments as a share of the capital budget. - Growing interest in public private partnerships (PPPs). - Weak correlation between public investment and GDP growth; sharp deterioration in public capital stock as a ratio to GDP. - Stronger PIM practices identified: - Budget unity and comprehensiveness: consolidated overview of current and capital spending in budget documents. - Fairly comprehensive, detailed, updated and monitored PSIP and related project database. - Good correspondence between national strategy (GSDS) and line ministries’ and sub-national governments’ strategies. - Authorities publish a fair amount of documentation accessible to the public. - Structural weaknesses (summary): - Need to reorganize process: harmonized strategies with sound costing and performance frameworks; revised appraisal and selection processes; timely government financial statements. - Weak oversight of major risks and poor coordination between public entities; inadequate follow-up and recording of existing liabilities and guarantees. - Procurement institutional framework is weak; effectiveness relies heavily on development partner rules for externally financed projects. - Missing systematic cash management practices; reliance on overdraft facilities with the central bank rather than cash flow forecasts and commitment control. - External ex-post reviews and audits of projects not routinely undertaken; financial statements not produced on time and public assets not recorded. - Legal framework for PFM and PIM largely outdated. - IT systems lack cohesive strategy and interfacing; crucial need for capacity development (notably PPPs). - Strategic recommendations organized into an action plan with three categories; first category lists immediate actions reachable within 2020. ### Immediate actions recommended for 2020 (nine actions listed) - 1. Collect existing data on PPPs, Public Corporations (PCs), SNGs and statutory bodies; - 2. Disclose government guarantees and the level of exposure; - 3. Include the PSIP as an appendix to the budget documents and ensure consistency (bridge table, common classification); - 4. Issue a policy on the preparation and oversight of PPPs; - 5. Adopt the existing draft legislation and regulation for procurement; - 6. Improve public access to procurement information and complaints (e.g., CARICOM website); - 7. Prepare a provisional government financial statement (FS) for FY2019/20; - 8. Take stock of public accounts outside the treasury single account (TSA); - 9. Prepare an annual cash plan to be attached to the 2020/21 budget law. ### PIM sequencing and cross-cutting measures - Short-Medium term (2020-2022) examples: - Elaboration of a more comprehensive PSIP (including PCs/SNGs). - Disclosure of extended information in the budget (PCs, PPPs, liabilities). - Elaboration of a fiscal risk statement; develop tools for cash management; revamp project appraisal and selection; pass pending legislation. - Longer run (horizon 2025) examples: - Systematic ex post reviews and audits. - Implementation of asset management standards. - Use national PIM procedure for donors and elaborate missing legislation consistent with international good practices (e.g., PPPs). - Creation of contingent funds/mechanisms for guarantees and liabilities in the budget. - Cross-cutting strategic recommendations: - Identify evolution of legal and regulatory framework. - Elaborate an IT master plan. - Elaborate a capacity development strategy. ### Key cash management and accounting actions (action plan) - Prepare a provisional government financial statement (FS) for FY2019-20. - Progressively produce government FS for previous years and re-establish entry balances. - Progressively consolidate in the government FS all extra-budgetary public entities as required by IPSAS. - Take stock of public accounts outside the TSA. - Periodically update the list of government accounts and request information on balances of these accounts from commercial banks. - Prepare an annual cash plan to be attached to the budget law. - Prepare monthly cash-flow plans. - Develop regulation and guidelines on cash management and commitment control, and the use of SmartStream modules. ### Composition of public investment and financing (selected figures) - Composition: - Over half of public investment is allocated to infrastructure. - Remainder split equally between social protection (health and education projects) and economic services (agriculture, tourism, business development). - Government priorities have largely focused on the road network. - Financing (2017): - Externally financed investment = 7.7% of total spending in 2017. - Domestically financed capital expenditure = 5.9 percent (as reported). - Trends: - Externally financed investment increased threefold since 2005. - Domestically financed investment increased 22 percent since 2005. ### Public investment trends, stock and efficiency (selected figures) - Public investment: - Fell from 13 to 5 percent of GDP during 2001-2005; at 6 percent of GDP it remains below pre-2000 level. - Average public investment over the past 3 years was 7 percent of GDP in Belize; comparator averages: CARICOM 6 percent, EMDEs 6 percent, Central America 4 percent. - Volatility: - Between 1990 and 2017, average annual change in investment was 1.5 percent of GDP in Belize; comparator averages: CARICOM 0.4; Central America 0.3; EMDEs 0.2. - Public capital stock and debt: - Public capital stock rose to almost 120 percent of GDP in 2014, then declined to 87 percent in 2017. - Belize’s public capital stock stands at around $US 5.5 thousand per capita; comparator average $US 11.6 thousand. - Public debt increased from 76 percent of GDP in 2014 to 94 percent of GDP in 2017. - Efficiency: - Belize’s overall efficiency gap to the most efficient countries = 29 percent. - Comparable averages: EMEs = 31 percent; CARICOM peers = 17 percent. - Distance to the frontier marginally greater for physical access than for quality aspects. ### Climate-related spending and resilience - Belize ranks 3rd among small states for risk from natural disasters, and 5th for risk from climate change (CCPA, 2018). - Resilience-related spending ≈ one-third of the capital budget; allocations ≈ 1.7 percent of FY2018–19 GDP (BZ$66 million, or US$25 million). - Resilience-building concentrated in physical infrastructure and relies heavily on international support. ### PIMA diagnostic scores (selected) - Fiscal targets and rule: Medium institutional design; Low effectiveness; rating **. - National and sectoral planning: Medium institutional design; Medium effectiveness; rating ***. - Coordination between entities: Low institutional design; Low effectiveness; rating ***. - Project appraisal: Low institutional design; Low effectiveness; rating ***. - Alternative infrastructure financing (PPPs, PCs): Low institutional design; Low effectiveness; rating ***. - Budget comprehensiveness and unity: High institutional design; High effectiveness; rating *. - Budgeting for investment: Low institutional design; Medium effectiveness; rating **. - Maintenance funding: Low institutional design; Medium effectiveness; allocations current maintenance 0.88% and capital repairs 0.07% of capital stock (last three years); rating ***. - Procurement: Low institutional design; Low effectiveness; rating ***. - Availability of funding: Medium institutional design; Medium effectiveness; no payment delays but no commitment or cash flow plans prepared. - Portfolio management and oversight: Medium institutional design; Low effectiveness; PSIP fairly comprehensive but no guidelines for ex-post reviews; rating **. - Management for project implementation and monitoring of public assets: Low institutional design; Low effectiveness; rating ** and ** respectively. ### Contingent liabilities and fiscal risks (findings and examples) - Guarantees subject to MOF or Parliament approval but not systematically monitored or reported across entities. - MOF does not produce a fiscal risk statement. - Materialized contingent liabilities examples: - November 2017: Caribbean Court of Justice ordered Government to pay a guaranteed debt contracted by Universal Health Services, implying an increase of 2.5 percent of GDP in government debt. - 2015: Government settled a claim for $67 million related to renationalization of electricity and telecoms companies. - Recommendation: Greater disclosure of contingent liabilities of SNGs, PCs and PPPs; include consolidated statement of contingent liabilities in central government budget. ### Project appraisal and selection (findings and recommendations) - Current status: - No requirement for major projects to undergo appraisal prior to funding. - Development partner (DP) appraisals cover on average 56% percent of capital investment over 2016-2018 and use varying methodologies. - Domestically-funded projects not subject to formalized appraisal requirement. - Existing framework: - GSDS contains a ‘Prioritization Framework’ with four criteria (urgency, impact, funding availability, net systemic contribution) but not operationalized. - No guidelines for feasibility studies; MOF/MED do not provide technical support on appraisals. - Recommendations: - MOF/MED should strengthen pre-investment planning and prepare detailed guidance covering project consistency with national policy, alternative delivery options, value-for-money in design/procurement, and assessment of risks and mitigation. ### Alternative infrastructure financing — public corporations and PPPs - Main PCs: BEL, BWS, BTL; BEL and BWS operate as state monopolies; several generation companies in electricity sub-sector. - Regulation: Public Utilities Commission (PUC) under 2001 PUC Act. - PPPs: - Some exist (build-operate-transfer hydroelectricity; concessions for airport, waste collection, civic center). - BIL (established 2013) designated as government’s PPP unit but has limited in-house PPP expertise. - Information on PPPs not systematically collected by MOF nor disclosed in budget documents. - Coordination and fiscal exposure of PCs: - Investment plans of PCs and statutory bodies not coordinated with central government; not incorporated into PSIP or budget despite economic importance (3.7 percent of GDP in 2018). - Recommendations: - Strengthen oversight of PPPs and public corporations; develop PPP policy, legal framework, regulation; centralize oversight of PCs and collect financial information including contingent liabilities. ### Budgeting for investment, presentation and classification (selected figures) - Budget presentation: - Capital and current budgets prepared by MOF and presented together using organizational and program classifications. - Budget documents provide comprehensive information on capital spending, including externally financed projects, but should disclose capital spending through EBFs, PCs and PPPs. - Budget disclosures and PSIP: - PSIP maintained by MED includes comprehensive information for ongoing externally funded projects but does not use budget classification and is not reconciled with budget documents. - Recommendation: PSIP should use budget classification; include PSIP as appendix to budget; budget should incorporate total cost projections for major projects and reconciliation with PSIP. - Table 5 (Budget 2019/20, Thousand BZ $) excerpts: - Actual 2016/17: Total capital 250,721; Capital II 113,677; Capital III 137,043; Current 952,823; Total budget 1,203,544 - Actual 2017/18: Total capital 152,022; Capital II 59,176; Capital III 92,846; Current 1,006,598; Total budget 1,158,620 - Budget 2018/19: Total capital 155,065; Capital II 61,921; Capital III 93,144; Current 1,051,354; Total budget 1,206,419 - Expected 2018/19: Total capital 149,197; Capital II 61,343; Capital III 87,854; Current 1,028,400; Total budget 1,177,596 - Budget 2019/20: Total capital 170,910; Capital II 74,778; Capital III 96,132; Current 1,077; Total budget 171,987 - Estimate 2020/211: Total capital 183,121; Capital II 72,650; Capital III 110,471; Current 1,086,498; Total budget 1,269,619 - Estimate 2021/22: Total capital 185,436; Capital II 80,985; Capital III 104,451; Current 1,107,774; Total budget 1,293,210 - Source: MOF budget estimates 2019/20 ### Extrabudgetary and PC capital spending (selected figures) - Table 6 (Thousand BZ $) selected rows: - 2015/16: Budget 283,775; BSIF 11,179; BSIF/Budget 3.9%; Telemedia 40,307; Electricity 27,700; Water 21,041; PCs/budget 31.4% - 2016/17: Budget 250,721; BSIF 23,171; BSIF/Budget 9.2%; Telemedia 72,175; Electricity 38,900; Water 12,008; PCs/budget 49.1% - 2017/18: Budget 152,022; BSIF 18,147; BSIF/Budget 11.9%; Telemedia 78,178; Electricity 33,600; Water 17,544; PCs/budget 85.1% - 2018/19: Budget 149,197; BSIF 8,555; BSIF/Budget 5.7%; Telemedia 82,890; Electricity 30,600; Water 21,551; PCs/budget 90.5% - Total 2015-2019: Budget 835,715; BSIF 61,052; BSIF/Budget 7.3%; Telemedia 273,550; Electricity 130,800; Water 72,144; PCs/budget 57.0% - Source: Budget estimates 2016-2020, annual reports DIGI, BEL, BSW and BSIF. ### Maintenance funding (selected figures) - No standardized methodologies for maintenance estimation; Ministry of Works planning to develop structured road asset maintenance system. - Current maintenance budgets averaged 0.88 percent of estimated public capital stock over the last four budget years; capital repairs averaged 0.07 percent. - Table 7 (Million BZ $): - 2016-2017: Capital stock 3,478; Current maintenance 21.760 (0.63%); Capital repairs 1.654 (0.05%) - 2017-2018: Capital stock 3,216; Current maintenance 29.485 (0.92%); Capital repairs 0.820 (0.03%) - 2018-2019: Capital stock 3,277; Current maintenance 31.555 (0.96%); Capital repairs 2.999 (0.09%) - 2019-2020: Capital stock 3,277; Current maintenance 33.162 (1.01%); Capital repairs 3.578 (0.11%) - Average: Current maintenance 0.88%; Capital repairs 0.07% - Recommendation: Strengthen maintenance planning; report total capital repairs in budget; introduce standardized maintenance systems. ### Procurement — findings, numbers and reforms - Strength: Many major projects, especially externally-financed, are tendered competitively. - Weakness: Institutional framework incomplete; reliance on DPs for externally-financed projects; procurement system decentralized. - Direct award statistics (2018): - Direct award represents 33 percent in number and 47 percent in value in 2018. - Table 9 (Number and Value BZ $ of Contracts for Central Government by Tender Procedure, fiscal year 2018): - Total number contracts: 160; Total value: 101,124 - Open tender procedure: Number 104; Value 53,056 - Selective tender procedure: Number 4; Value 562 - Limited tender procedure: Number 52; Value 47,506 - Percent distribution (by number): 65% Open; 3% Selective; 33% Limited/Direct - Percent distribution (by value): 52% Open; 1% Selective; 47% Limited/Direct - Complaints and oversight: - Procedure for submission and resolution of procurement complaints exists but not clearly defined and publicly available. - Contractor General (CG) is independent body; in practice no complaint formally submitted in last two years and CG lacked capacity to investigate; a new CG appointed in January 2020. - PU mentioned only two rejects during last two years. - Recommendations: - Adopt new legal and regulatory framework consistent with international standards. - Develop comprehensive procurement database and improve transparency (consider CARICOM portal). - Clarify and strengthen roles of CG, BIL and PU; develop e-procurement and framework agreements for emergencies. ### Availability of funding — cash management (selected figures and findings) - Weaknesses: - No cash flow plans or commitment plans provided by ministries and public entities. - No consolidated forecasts submitted or periodically updated; limited coordination with borrowing program. - A Cash Management Unit created in the Treasury Department but not yet fully operational. - Practices and risks: - System relies on expensive liquidity facilities with CBB, including overdraft and securities rolled over. - Commitments and related documents not always registered in SmartStream (SS) timely. - Banking reconciliation process not efficient. - Key numbers: - Amount of authorized overdraft at the CBB for the year is 8.5 percent of the total domestic revenues of the previous year (Art 34 of the BCC Act 2011). - Current amount of overdraft used is around 40 million BZ $ out of an authorized overdraft of 97 million BZ $. - The average interest rate is around 9.5 percent. - Recommendations: - TD should prepare an annual cash flow plan annexed to the 2020/2021 budget. - Request main ministries and public entities to prepare annual cash flow and procurement plans. - Compile comprehensive list of government accounts and ensure CBB and MOF receive balance information. - Develop regulations, guidelines and strengthen capacity for cash management and commitment control and use of SS modules. ### Treasury Single Account (TSA) and government accounts - Treasury maintains one main account (Consolidated Revenue Fund) and two sub-accounts at CBB: revenue account and disbursement account. - Most externally-financed projects processed through TSA; some government accounts held in commercial banks with unknown balances to TD and CBB. - TD and CBB do not maintain a list of all government accounts opened in commercial banks. - Mission did not receive requested list of Government bank accounts registered at the CCB and MOF. ### Portfolio management, implementation, audits and asset monitoring - Portfolio management and oversight: - MED requests quarterly financial and physical implementation reports; information consolidated in PSIP. - PSIP does not cover projects implemented by public entities using own resources. - Analysis and reports on performance and risks not systematic or timely. - Ex-post reviews required under DPs but no national harmonized guidelines; ministries have limited capacity for ex-post reviews. - Project implementation: - Quality of project management varies; externally financed projects follow DP rules and often require PIUs. - No standardized rules or guidelines for project implementation adjustments; no formal reappraisal after adjustments. - External ex-post audits not routinely undertaken; absence of audited government financial statements since 2012 undermines AGO audits. - Last audited Government financial statement was for fiscal year 2011/2012; 2012/2013 and 2013/2014 statements being audited by Parliament; draft for 2014/2015 prepared. - Monitoring of public assets: - No up-to-date comprehensive registry of fixed assets for entire Government. - Asset registers for moveable assets maintained manually in excel by most ministries; SS asset module not used. - Recommendations: define standardized asset management provisions; consolidate asset registers and activate SS asset management module. - Recommendations on audits and internal control: - Develop harmonized monitoring procedures and guidelines for ex-post evaluations. - Strengthen managerial capacities; introduce internal audit function progressively in MOF and main ministries and public entities. ### Fixed assets, accounting rules and financial statements - The value of fixed assets is not included in the Government’s financial statements. - Asset records are incomplete and not regularly updated; not consistently include asset values. - Cash-basis IPSAS requirements (Box 6) retained verbatim include: - Cash-basis IPSAS financial statements should include statement of cash receipts and payments, comparison of budget and actual amounts, accounting policies and explanatory notes. - IPSAS requires that all government-controlled bank accounts be included in financial statements and COA be restructured to capture accumulated depreciation or revaluation; consolidated financial statements should consolidate controlled extrabudgetary agencies on a line-by-line basis. - Recommendations: - TD should prepare a provisional government financial statement for fiscal year 2019/20 and progressively produce statements for previous years to reestablish entry balances. - Adopt a Government Asset Management Policy (GAMP) and centralized inventory of fixed assets within MOF using SS asset module. - Review chart of accounts (COA) to better track public investment spending. ### IT systems, legal framework and staff capacity - IT systems and data management: - SmartStream (SS) used for general ledger, HR and procurement; project management and fixed assets modules not in use. - CPM 10 used to prepare annual budget and interfaced with SS; not used for tracking public investment performance indicators. - PSIP-MIS being piloted in six ministries with expected roll out after pilot phase ends in July 2020. - Recommendation: develop an IT Master Plan to integrate SmartStream, CPM10 and PSIP MIS; enable dashboards and improved access. - Legal framework: - Current legal framework largely outdated (legislations, regulations and guidelines dating back to 1960s). - Draft PFM and PIM bills and regulations exist but remain pending; PIM bill introduces systematic cost/benefit analysis, formalizes PSIP maintenance and gate-keeping for PSIP inclusion. - Suggested amendments: clarify PSIP vs budget process, reassign some functions between MOF and MED, reexamine roles of Statistics Institute and Central Bank in PIM. - Staff capacity: - PIM unit in MED has six staff; retention and capacity gaps exist. - Limited capacity for full-cycle project management, PPP negotiation and monitoring of public corporations. - External consultants used for gaps but limited knowledge transfer. - Recommendation: review human resource program; design capacity development plan; engage external experts with mentoring/apprenticeship deliverables. ### Appendix I — Fiscal Risk Statement (FRS) guidance (high-level) - Purpose: provide comprehensive overview of relevant fiscal risks, analyze and outline mitigation, disclose to public. - Potential fiscal risk areas include macroeconomic assumptions, revenues, spending, debt and guarantees, PPPs, local governments, SOEs, financial sector crises, natural disasters and other fiscal risks. - Suggested format: overview; data for last three years; projections for MTB period; quantification of risks (optimistic/pessimistic scenarios); risk mitigation measures. - Development path: staged improvements from Initial to Advanced FRS across risk categories. - Example guidance: impact high >3 percent of GDP, medium 1–3 percent, low <1 percent; probability thresholds also defined. ### Appendix II — Effective oversight of public corporations (summary) - Role and scale: - Investment spending by the three largest PCs (BEL, BTL and BWS) amounted to 3.7 percent of GDP (2018). - Key elements of oversight framework: - Transparent ownership policy specifying government objectives. - Centralized oversight unit in MOF responsible for financial performance analysis, review and approval of plans, setting targets, reviewing transfers/borrowing/guarantees, and assessing quasi-fiscal costs. - Publication of an annual public corporation monitoring report. - A new law on public corporations to clarify roles and financial management oversight. - Implementation approach: - Step-by-step, with immediate short-term actions: - Start collecting and monitoring data on financial performance of individual PCs. - Disclose this information in a fiscal risks statement or separate PC report. - Longer-term: build in-house capacity and enact supporting legislation. *Source: content unit 1blzea2020001 (PDF chapter/section) from the supplied IMF content.* ### PREFACE _________________________________________________________________________________________ 7 ### 1blzea2020001 - PREFACE ### Mission and participants - Mission requested by the authorities of Belize to conduct an evaluation of the public investment management system using the PIMA (Public Investment Management Assessment) methodology. - Mission dates: visited Belmopan from January 15-28, 2020. - Mission led by M. Bruno Imbert (Economist, FAD). - Mission team included: MM. Jean-Luc Helis and John Hooley (both Economist, FAD), Arnold Ainsley (Advisor, CARTAC), Eivind Tandberg (Expert, FAD), and MM. Joao Guilherme Morais de Queiroz, Pablo Andres Guzman Abastoflor and Eduardo Andres Estrada (Procurement and Public sector Specialists, World Bank). - Key meetings held with: - Mr. Joseph Waight, Financial Secretary, Ministry of Finance (MOF), Ms. Yvette Alvarez (Special Advisor at the MOF), Mr. Marion Palacio (Deputy Financial Secretary), and Ms. Yvonne Hyde, CEO of the Ministry of Economic Development (MED). - Ms. Joy Grant, Governor of the Central Bank of Belize (CBB) and staff. - Departments/services involved in investment management within MOF and MED: Budget Unit, Treasury Department, Central IT office, Policy and Planning Unit, Belize Social Investment Fund (SIF). - Line ministries: Ministry of Health, Ministry of Education, Ministry of Agriculture, Ministry of Works, Ministry of Local Government and Rural Development. - CEO of Belize Water Service Limited (BWS), Public Utility Commission (PUC), Secretariat for the Economic Development Council, Belize Infrastructure Limited (BIL). - Auditor General (AGO), Mayors’ Association, Works Committee of the National Assembly of Belize. - Inter-American Development Bank (IDB) Country Representative Ms. Cassandra Rogers and staff; Representative of the European Union (EU) Technical Office in Belize. ### Mission activities and outputs - Two plenary sessions to present and share approaches, recommendations and options with key stakeholders; stakeholder feedback was incorporated. - Presentation of conclusions and recommendations to the Financial Secretary and collaborators at the end of the mission. - Acknowledgement of the authorities’ organization, hospitality, discussions, and of Ms. Yvette Alvarez as focal point. ### Executive summary — context and high-level findings - Public investment in Belize has varied in recent years in the context of existing constraints; the sharp increase in public debt has limited available fiscal space. - Under a 2017 restructuring agreement with private external bondholders, the authorities committed to maintain a primary surplus of 2 percent of GDP. - Resulting patterns include: - An increase in externally financed investments as a share of the capital budget. - Growing interest in public private partnerships (PPPs) to achieve national strategy objectives. - A weak correlation between Belize’s public investment and GDP growth. - A sharp deterioration in public capital stock as a ratio to GDP, possibly pointing to investment inefficiencies. - Stronger PIM practices identified: - Budget unity and comprehensiveness: strong integration of public investment in the budget process; consolidated overview of current and capital spending in budget documents. - Fairly comprehensive, detailed, updated and monitored Public Sector Investment Program (PSIP) and related project database. - Good correspondence between national strategy (GSDS) and line ministries’ and sub-national governments’ strategies; GSDS includes general guidelines for project selection. - Authorities publish a fair amount of documentation accessible to the public (national strategy, some sectoral strategies, budget documents, PSIP). - Structural weaknesses identified (summary): - Need to reorganize process: (i) enhanced and harmonized strategies with sound costing and performance frameworks; (ii) revised appraisal and selection processes and methods; (iii) preparation of timely government financial statements. - Weak oversight of major risks and poor coordination between public entities, notably public corporations which implement a significant share of public investment; inadequate follow-up and recording of existing liabilities and guarantees. - Budget documentation could improve by disclosing risk/exposure information and including the PSIP in the budget law; maintenance and repairs cost methodologies need strengthening. - Procurement institutional framework is weak; effectiveness relies heavily on development partner rules for externally financed projects. - Missing systematic cash management practices; availability of funds mostly relies on overdraft facilities with the central bank rather than on effective and reliable cash flow forecasts and efficient commitment control. - External ex-post reviews and audits of projects are not routinely undertaken; financial statements are not produced on time and public assets are not recorded, impairing monitoring of quality and performance. - Legal framework for PFM and PIM is largely outdated and would benefit from a general update. - IT systems lack a cohesive strategy for needs, technological evolution and interfacing between systems, including at line-ministry level. - Crucial need for capacity development, particularly for challenges such as public-private partnerships (PPPs). - Strategic recommendations organized into an action plan with three categories; the first category lists immediate actions reachable within 2020. ### Immediate actions recommended for 2020 (as listed) - The mission identifies nine immediate actions to be conducted within 2020 as reachable in terms of skills and capacities; these would strengthen core PFM institutions and provide a base for PIM improvements. The actions listed in the source text are: 1. Collect existing data on PPPs, Public Corporations (PCs), SNGs and statutory bodies; 2. Disclose government guarantees and the level of exposure; 3. Include the PSIP as an appendix to the budget documents and ensure consistency (bridge table, common classification); 4. Issue a policy on the preparation and oversight of PPPs; 5. Adopt the existing draft legislation and regulation for procurement; 6. Improve public access to procurement information and complaints (e.g., CARICOM website); 7. Prepare a provisional government financial statement (FS) for FY2019/20; 8. Take stock of public accounts outside the treasury single account (TSA). *Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1blzea2020001.pdf* ### 9. Prepare an annual cash plan to be attached to the 2020/21 budget law. ### 9. Prepare an annual cash plan to be attached to the 2020/21 budget law. ### Summary of recommended PIM sequencing and cross-cutting measures - Second category (Short-Medium term - 2020-2022): build on prior actions to strengthen PIM processes, tools and capacities. Examples: - Elaboration of a more comprehensive PSIP (including PCs/SNGs). - Disclosure of extended information in the budget (PCs, PPPs, liabilities). - Elaboration of a fiscal risk statement, identifying mitigation actions and assessing the level of exposure. - Develop appropriate tools for cash management. - Revamp the PIM process with a focus on project appraisal and selection. - Pass necessary pending legislation on PIM and related regulation. - Third category (Longer run actions - horizon 2025): develop more elaborate practices required for advanced investments and domestic-funded projects. Examples: - Systematic ex post reviews and audits. - Implementation of asset management standards. - Use of national PIM procedure for donors. - Elaborate missing pieces of legislation consistent with international good practices (e.g., PPPs). - Creation of contingent funds/mechanisms for guarantees and liabilities in the budget. - Three cross-cutting strategic recommendations to support implementation: - Identification of the necessary evolution of the legal and regulatory framework. - Elaboration of an IT master plan. - Elaboration of a capacity development strategy. ### Priority PIM actions and cash management specifics (Year 2020 and onward) - Priority actions for 2020 include strengthening PIM through sound PFM functions and revamping PIM processes and tools in 2020-2022, moving toward more elaborate practices during 2021-2025. - Key cash management and accounting actions listed in the action plan: - Prepare a provisional government financial statement (FS) for FY2019-20. - Progressively produce government FS for previous years and re-establish entry balances. - Progressively consolidate in the government FS all extra-budgetary public entities as required by IPSAS. - Take stock of public accounts outside the TSA. - Periodically update the list of government accounts, and request information on the balances of these accounts to commercial banks. - Prepare an annual cash plan to be attached to the budget law. - Prepare monthly cash-flow plans. - Develop regulation and guidelines on cash management and commitment control, and the use of SmartStream modules. ### Additional targeted reforms in the action plan (selected items) - Planning and national strategies: - Develop common guidelines for formulation of sectoral strategies; prepare a comprehensive manual for elaboration of sectoral strategies (including harmonized templates and performance framework). - Develop a manual on costings of the strategies. - Include indicative financial envelopes and costing of major projects in the new GSDS. - Budget and risks: - Collect data on PPP, PC/SOEs, SNG, statutory bodies. - Include sections on investment by PCs, SNGs and extra budgetary funds (BSIF) in the budget and the PSIP; include the PSIP as an appendix to the budget and ensure consistency (bridge table, common classification). - Set up a PCs oversight central unit within the MOF and publish an annual and consolidated PCs report. - Disclose government guarantees and disclose the level of exposure; elaborate fiscal risk statements, assess the level of exposure and identify mitigation actions (to be included in the budget law). - Issue a policy on the preparation and oversight of PPPs; prepare and adopt legislation on PPPs and supporting regulation. - Introduce a transparent rule based fiscal framework based on the debt anchor. - Improve reporting on maintenance in the budget and develop a standardized maintenance methodology for government. - PIM process and procurement: - Adopt a PIM law (including provisions related to financial aspects) and develop supporting regulation. - Develop a manual on project appraisal and define criteria for project selection. - Provide training to line ministries on how to apply the new framework and develop standardized guidelines for project management. - Issue a strategy to encourage donors to use national procedures (procurement, project appraisal, cash management, etc.). - Adopt draft procurement legislation and regulation; develop a procurement monitoring system and an e-procurement system; improve public access to procurement information and complaints. - Control, audit and asset management: - Develop methodologies and guidelines for ex-post evaluation and audit; set up an internal audit unit in the MOF. - Issue a government asset management policy (GAMP) and use the asset management module of SmartStream across ministries and public entities. ### Key findings on public investment context, trends and risks - Recent trends and levels - Public investment increased over the past decade but remains below pre-2000 levels: fell from 13 to 5 percent of GDP during 2001-2005; at 6 percent of GDP it remains below pre-2000 level. - Total investment has remained around at 21 percent of GDP since 2015. - Average public investment over the past 3 years was 7 percent of GDP in Belize, compared to 6 percent in CARICOM countries and in EMDEs and 4 percent in Central America. - Volatility and efficiency - Between 1990 and 2017, the average annual change in investment was 1.5 percent of GDP in Belize, compared to CARICOM: 0.4; Central America: 0.3; EMDEs: 0.2. - Investment surges in early 1990s and early 2000s were followed by sharp declines; large swings are negatively correlated with private investment, suggesting public investment has not been strongly catalytic. - Public capital stock and debt - Public capital stock rose to almost 120 percent of GDP in 2014, then declined to 87 percent in 2017. - Belize’s public capital stock stands at around $US 5.5 thousand per capita, compared to an average of $US 11.6 thousand for the comparator group. - Public debt increased from 76 percent of GDP in 2014 to 94 percent of GDP in 2017, leading to deterioration in the coverage ratio of public debt to capital. - Investment-growth relationship - Correlation between Belize’s public investment and GDP growth was strong historically but has weakened since 2006-7; recent increases in investment were not accompanied by stronger growth, possibly pointing to a decline in investment efficiency. ### Composition of public investment and climate-related spending - The Government has an ambitious public investment program under Horizon 2030 and the Growth and Sustainable Development Strategy (GSDS), focusing on transport infrastructure, education, health, and the environment. - Belize’s climate exposure and resilience spending: - Belize ranks 3rd among small states for risk from natural disasters, and 5th for risk from climate change (CCPA, 2018). - Resilience-related spending is about one-third of the capital budget, with allocations of around 1.7 percent of FY2018–19 GDP (BZ$66 million, or US$25 million). - Resilience-building has been concentrated in physical infrastructure and relies heavily on international support. - CCPA recommendations include reforming the institutional and legal framework for investment and procurement, developing risk financing instruments, expanding renewable energy, and a greater focus on ecosystem resilience-building. ### Diagnostic assessments from the PIMA map (selected, priorities retained) - Fiscal targets and rule: Medium institutional design; Low effectiveness; rating **. - National and sectoral planning: Medium institutional design; Medium effectiveness; rating ***. - Coordination between entities: Low institutional design; Low effectiveness; rating ***. - Project appraisal: Low institutional design; Low effectiveness; rating ***. - Alternative infrastructure financing (PPPs, PCs): Low institutional design; Low effectiveness; rating ***. - Multi-year budgeting: Medium institutional design; Medium effectiveness; rating *. - Budget comprehensiveness and unity: High institutional design; High effectiveness; rating *; public corporation capital spending significant at 57 percent of capital budget last 5 years, extrabudgetary capital spending 7 percent. - Budgeting for investment: Low institutional design; Medium effectiveness; rating **. - Maintenance funding: Low institutional design; Medium effectiveness; allocations for maintenance and capital repairs amounted to 0.88 and 0.07 percent of capital stock last three years; rating ***. - Procurement: Low institutional design; Low effectiveness; rating ***. - Availability of funding: Medium institutional design; Medium effectiveness; no payment delays but no commitment or cash flow plans are prepared; TSA covers most externally financed projects but government accounts in commercial banks lack available information; cash management relies on extensive use of overdraft at CBB. - Portfolio management and oversight: Medium institutional design; Low effectiveness; PSIP fairly comprehensive but no guidelines for ex-post reviews; rating **. - Management for project implementation and monitoring of public assets: Low institutional design; Low effectiveness; rating ** and ** respectively. *Source: 1blzea2020001 - 9. Prepare an annual cash plan to be attached to the 2020/21 budget law.* ### 8. The current composition of public investment is focused on infrastructure. ### 8. The current composition of public investment is focused on infrastructure. ### Composition of public investment - Over half of public investment is allocated to infrastructure in Belize (Figure 8), a higher share than in EMEs. - The remainder of public investment is split equally between: - Social protection (which includes health and education projects) - Economic services (agriculture, tourism, business development) - This allocation reflects government priorities, which have largely focused on the development of the road network in recent years. ### Financing of public investment - Public investment in Belize is mainly externally financed. - Within overall public investment in 2017: - Externally financed investment = 7.7% of total spending in 2017 - Domestically financed capital expenditure = 5.9 percent (as reported) - Externally-financed investment mainly relates to large projects financed by multilateral development institutions. - Domestically-financed investment relates to smaller projects and includes counterpart funding for externally financed projects. - Trend over the past decade: - Externally financed investment increased threefold since 2005. - Domestically financed investment increased 22 percent since 2005. ### Public investment execution and actors - Public investment spending is executed by: - Central government - Sub-national governments (SNGs) — municipalities and village level - Public corporations (PCs) — in electricity, water and telecoms sectors - In 2017: - Central government investment spending accounted for 4 percent of GDP (around two thirds of public sector investment). - Average capital spending by SNGs (2014-2018) = 0.3 percent (average) — relatively small. - Capital spending by central government and public corporations averaged 3 percent of GDP (average over 2014-2018). ### Impact and quality of infrastructure - Access improvements: - Access to clean water increased from below 80 percent of population in the 1990s to 100 percent coverage in 2017. - Public health infrastructure: - Hospital beds per 1,000 persons halved from over 2 in the 1990s to 1 (Belize) in 2017. - Comparators: Caribbean = 2.8 beds per 1,000 persons; EME peers = 3.0 beds per 1,000 persons; Central America = 1.2 beds per 1,000 persons. - Education infrastructure: - Number of secondary school teachers per 1,000 persons increased since the 1990s but remains below comparator groups: - Caribbean = 6.7 teachers per 1,000 persons - EME peers = 6.6 teachers per 1,000 persons - Central America = 5.0 teachers per 1,000 persons - Perception of infrastructure quality: - Latest available World Economic Forum score for Belize = 3.5 (from 2011), below comparator groups (CARICOM 4.0; Central America 4.0; EMDEs 4.2). ### Efficiency of public investment - IMF methodology compares output of public investment to per capita public capital stock and measures distance to an efficiency "frontier". - Belize’s overall efficiency gap to the most efficient countries = 29 percent. - Comparable averages: EMEs = 31 percent; CARICOM peers = 17 percent (Belize is over 10 percent below CARICOM peers). - Within the overall efficiency gap, the distance to the frontier is marginally greater for physical access than for quality aspects. - The report notes "substantial scope" for Belize to adopt policies to improve public investment efficiency. ### Public Investment Management Assessment (PIMA) — overview - The revised IMF assessment tool (PIMA) evaluates 15 PIM institutions across planning, budgeting, implementation, plus 3 crosscutting institutions (IT support, legal framework, skills). - The PI cycle assessed across three phases: - Planning sustainable levels of investment across the public sector - Allocating investment to the right sectors and projects - Implementing projects on time and on budget - The report states that on average a country loses around 30 percent of the value of its investments due to inefficiencies in the PIM process. Improving the process can reduce the efficiency gap by up to two-thirds. - "The most efficient public investors get twice the growth 'bang' for their public investment 'buck' than the least efficient." ### Planning sustainable levels of public investment — findings and reform priorities - General finding: Belize has a strong strategic vision (national, subnational, sectoral development strategies), but weaknesses prevent effective translation to project-level planning, including: - Absence of appraisals for major projects - Lack of coordination on investment planning across levels of government - Inadequate framework for controlling fiscal risks - 1. Fiscal principles or rules - Institutional strength – Medium; Effectiveness – Low; Reform priority - Medium - The Ministry of Finance has a debt target stated in budget speech and fiscal strategy: - Target to reduce central government gross debt to GDP ratio to 80 percent in the medium term and to 60 percent in the long term. - The target is not formalized in legislation or regulations and is not binding. - Municipal governments can borrow subject to a nominal debt ceiling with MOF approval. - Public corporations can borrow but this is not captured in public debt statistics in Belize. - The Treasury Bills Act specifies a nominal ceiling for outstanding Treasury bills and notes. - Debt sustainability challenges: external debt restructured three times over a 10-year period (2006–07 and in 2012–13, 2016–17). - "The debt level is currently about 90 percent (Figure 7)." - Fiscal policy commitments under the 2017 debt restructuring: - Maintain a primary balance of at least 2 percent of GDP. - Target floor for the overall balance = -1.5 percent of GDP. - Public investment target = 5 percent of GDP. - These commitments are not formalized in legislation and are not binding; if the primary balance floor is missed, the government pays interest quarterly instead of semi-annually on the restructured bond. - Provisional fiscal data indicate the primary balance target was attained in 2017/2018 but missed in 2018/2019. - Medium-term fiscal forecasts guide budget preparation but have shown large deviations between forecasts and realizations; accuracy has improved over time (Table 3). - Policy recommendation: Adopt a transparent rules-based fiscal framework based on a debt anchor, potentially a fiscal responsibility law (FRL) combining a debt ratio target with an operational rule for the primary balance; consider an expenditure rule linked to long-run nominal GDP growth and include accountability and correction mechanisms. - 2. National and Sectoral Planning - Institutional strength – Medium; Effectiveness – Medium; Reform priority - High - Belize publishes multiple multi-year strategic plans: - Two long-term 20-year plans (Horizon 2030 and the National Development Framework for Belize 2010-2030) - A medium-term 4-year plan (Growth and Sustainable Development Strategy for Belize 2016-2019, GSDS) - These national plans do not separately identify priorities for public investment. - Sectoral strategies exist (~8) and some cross-cutting plans (e.g., National Climate Resilience Investment Plan), varying in costing and detail. - Some sectoral strategies are costed (e.g., Comprehensive National Transportation Master Plan); others are not (e.g., National Sustainable Tourism Masterplan). - Absence of costing in GSDS is a key weakness limiting its influence on annual budget prioritization and project selection. - Few sector strategies present measurable targets for outputs and outcomes; program-level indicators required by MOF are not consistent with sectoral strategies. - Recommendation: GSDS should provide costing allocations for public investment by sector; update sectoral strategies for consistency with GSDS; include public corporations and SNG investment plans; harmonize formats and include measurable indicators and reporting templates. - 3. Coordination between entities - Institutional strength – Low; Effectiveness – Low; Reform priority - High - Municipal and village development plans: - Municipalities (7 towns and 2 cities) and rural communities (194 communities with Village/Community Councils) prepare 5-year strategic development plans aligned with GSDS and sectoral plans. - Plans are discussed with the Ministry of Labor, Local Government and Rural Development (MLLGRD) but are not integrated into national investment planning and are not submitted to MOF or MED. - Central government lacks a clear rule-based system for fiscal transfers to municipalities and rural communities: - Fixed annual subventions to each municipality and village council are included in the budget and disbursed monthly. - Amounts typically fixed in nominal terms and not calculated by a formula. - Transfers are not specifically earmarked and can be used for capital or current expenditure. - Transfers represent a relatively small portion of municipal revenue; municipalities raise some revenues (e.g., trade licenses, traffic fines). *Source: National Authorities; IMF staff estimates.* ### 27. There is no systematic reporting to central government of contingent liabilities arising ### 27. There is no systematic reporting to central government of contingent liabilities arising ### Contingent liabilities disclosure and fiscal risks - Guarantees are subject to approval by the MOF or the Parliament but guarantees and other contingent liabilities are not systematically monitored and reported, neither by the Central Bank nor the MOF, irrespective of the government entity concerned (line ministries and departments, SNGs, state-owned enterprises (SOEs) and statutory bodies) or the type of contract involved (such as concessions or public-private partnerships (PPP)). - The MOF does not produce a fiscal risk statement. - Instances of materialized contingent liabilities: - In November 2017, the Caribbean Court of Justice ordered the Government of Belize to pay a guaranteed debt contracted by Universal Health Services to a commercial bank creditor, implying an increase of 2.5 percent of GDP in government debt. - In 2015, the Belize government settled a claim with investors for $67 million related to its renationalization of the electricity and telecoms companies. - Recommendation: Greater disclosure of contingent liabilities of SNGs, PCs and PPPs; publication of individual SNG budgets; inclusion of a consolidated statement of contingent liabilities in the central government budget to support assessment of total fiscal space for public investment and improve planning and budgeting. ### Project appraisal (Institutional strength – Low; Effectiveness – Low; Reform priority - High) - Current status: - There is no requirement for major projects to undergo appraisal prior to funding being sought. - Projects funded by development partners (DPs), which represented on average 56% percent of capital investment over 2016-2018 as shown in Figure 9, carry out their own appraisals with limited involvement by the Ministry of Economic Development or line ministries; these appraisals are financed by the respective DP. - DP appraisal methodologies are not harmonized, vary in depth and comprehensiveness, and are not always explicitly aligned with government strategy. - Domestically-funded projects are not subject to any formalized appraisal requirement, although in practice some major domestic projects (for example, in the Ministry of Works) undergo some limited form of appraisal. - Lack of appraisal largely reflects capacity issues within the Ministry of Economic Development and individual line ministries, both in terms of resources and expertise. - Existing framework: - The GSDS contains a ‘Prioritization Framework’ for appraisal and selection with four criteria: urgency, impact, funding availability and net systemic contribution, but it has not been operationalized and there are no supporting guidelines or manuals. - No guidelines exist for preparation of feasibility studies (including pre-feasibility) nor for appraisal of such studies at central or line ministry level. - MOF/MED do not provide technical support to line ministries on these matters. - Externally-funded projects are appraised using DP methodologies that generally check consistency with development strategies but do not systematically assess alternative delivery options. - Risks: - Risks are not systematically assessed by MOF/MED or line ministries; DP appraisals will often include risk assessment but no consistent national practice exists. - Recommendations: - MOF/MED should strengthen pre-investment planning so projects can be appraised prior to seeking funding by development partners. - MOF/MED should prepare detailed guidance on project preparation, in line with international practices, covering: - (i) whether the project is consistent with national and sectoral policy priorities; - (ii) whether there are other options for delivering the relevant facilities or services; - (iii) whether the design and procurement plans provide value for money; and - (v) an assessment of risks and possible mitigation measures. - This will require increased resources and expertise and reconsideration of the whole PIM process. - Some guidance is outlined in Appendix 3. ### Alternative infrastructure finance (Institutional strength – Low; Effectiveness – Low; Reform priority - High) - Role of public corporations (PCs) and market structure: - Main PCs: Belize Electricity Limited (BEL), Belize Water Services (BWS) and Belize Telecommunications Limited (BTL); all were previously private companies (BTL renationalized in 2009; BEL in 2011) with private minority shareholdings. - BEL and BWS operate as state monopolies in electricity distribution and water supply respectively; one other competitor exists in telecommunications alongside BTL. - Electricity generation sub-sector has 6 companies. - Regulation: single independent Public Utilities Commission (PUC) under 2001 PUC Act and individual industry Acts; PUC grants licenses; domestic and foreign firms legally allowed to enter utilities markets. - PPPs and institutional arrangements: - Some PPP projects exist (build-operate-transfer hydroelectricity; concessions for international airport operation, municipal waste collection, Belize City civic center). - Information on PPPs is not systematically collected by the Ministry of Finance nor disclosed in budget documents. - Belize Infrastructure Limited (BIL), established in 2013, designated as government’s PPP unit; intends to undertake several PPP projects in tourism sector; BIL has limited in-house PPP expertise and hires consultants. - Government has no oversight or governance arrangements for PPPs, nor any guidelines on their preparation; a draft PPP policy is being prepared. - Coordination and fiscal exposure of PCs: - Investment plans of public corporations and most statutory bodies are not coordinated with central government; no centralized oversight of PCs. - Government representative sits on each PC Board but investment plans are not reported to MOF/MED and are not incorporated into public investment planning or the PSIP or budget despite economic importance (3.7 percent of GDP in 2018). - Some statutory bodies (except BSIF) also undertake capital expenditure not coordinated with central government or included in PSIP. - Recommendations: - Urgently strengthen oversight of PPPs and public corporations to ensure efficiency and quality of public investments and guard against fiscal risks. - Develop a PPP policy, legal framework and supporting regulations consistent with international best practices, PIM and procurement legislation. - Proceed cautiously even after framework establishment since essential preconditions (e.g., rigorous system for appraising and selecting capital investment projects) are not yet in place. - Centralize oversight of PCs and collect financial information (including contingent liabilities) of existing PPPs and PCs in databases for regular monitoring. - Box 2 highlights principles for controlling fiscal costs of PPPs, including: - Creating a database recording project purposes, contracting agency, PPP company and owners, investment expected under the contract and each amendment, and the project’s timeline; MOF may create a special PPP unit to identify (potential) fiscal obligations. - A gateway process for new PPPs managed by the MOF with authority to prevent projects that fail conditions (e.g., value for money, fiscally unaffordable). - A framework for risk sharing; use PPP laws or standardized contracts; reject unsolicited proposals. - Limits on overall PPP exposure (e.g., on annual PPP-related spending or stock of PPP commitments). - Publishing PPP contracts for external scrutiny. - Ensuring PPPs have the same fiscal accounting effect as traditional investments of equal cost. ### Ensuring public investment is allocated to the right sectors and projects - PIMA pillar 2 objectives for investment: - Budgeting from a multi-year sustainability perspective accounting for overall costs of investment projects. - Comprehensive and unified budget preparation and presentation. - Appropriate provision to protect investments already under way. - Correct appraisal of operating and maintenance costs when launching projects. - Selection of investment projects based on objective criteria. - Assessment highlights: - Strong elements: budget comprehensiveness and unity. - Weaknesses: budgeting for investment and maintenance in institutional design (weak) but better in effectiveness; project selection framework exists but is not effective; multi-year budgeting scores medium on both institutional design and effectiveness. - Budget disclosures: - Capital budget comprises capital II (domestically funded) and capital III (externally financed); classification not consistent with international standards as categories include items that do not create capital assets and should be current spending. - Budget documents include forward estimates for three years ahead and actuals for two previous years, available by ministry and program. - Table 5 Budget 2019/20 (Thousand BZ $): - Actual 2016/17: Total capital 250,721; Capital II 113,677; Capital III 137,043; Current 952,823; Total budget 1,203,544 - Actual 2017/18: Total capital 152,022; Capital II 59,176; Capital III 92,846; Current 1,006,598; Total budget 1,158,620 - Budget 2018/19: Total capital 155,065; Capital II 61,921; Capital III 93,144; Current 1,051,354; Total budget 1,206,419 - Expected 2018/19: Total capital 149,197; Capital II 61,343; Capital III 87,854; Current 1,028,400; Total budget 1,177,596 - Budget 2019/20: Total capital 170,910; Capital II 74,778; Capital III 96,132; Current 1,077; Total budget 171,987 - Estimate 2020/211: Total capital 183,121; Capital II 72,650; Capital III 110,471; Current 1,086,498; Total budget 1,269,619 - Estimate 2021/22: Total capital 185,436; Capital II 80,985; Capital III 104,451; Current 1,107,774; Total budget 1,293,210 - Source: MOF budget estimates 2019/20 - Observations and recommendations: - Forward estimates have limited accuracy; approved budgets and actual outturns can deviate significantly from estimates (example: 2016/17 forward estimate 157 million BZ $ in 2015/16 budget → approved capital budget 189 million in 2016/17 → expected outturn 241 million in 2017/18 budget → final outturn 251 million in 2018/19 and 2019/20 budgets). - Annual budget call provides three-year ceilings for capital II but ceilings are indicative; approved budgets often exceed indicative ceilings. No ceilings for capital III in the budget call. - PSIP provides total project cost estimates for ongoing major projects, but budget documents do not contain total cost projections and PSIP reports have no annual breakdown. - PSIP database (maintained by MED) includes all capital projects involving external funding and contains comprehensive information for ongoing projects (total cost estimates, funding sources, expected cash flow, actual cash flow, physical implementation); pipeline and concept summaries included. - PSIP does not use the budget classification; PSIP and budget documents contain no explicit reconciliation with each other. - Recommendations: PSIP should use budget classification; PSIP reports should include how PSIP projects are reflected in the budget; budget should incorporate total cost projections for major projects and provide reconciliation with PSIP. ### Multiyear budgeting (Institutional Strength —Medium; Effectiveness —Medium; Reform Priority — Low) - The budget includes medium-term projections by ministry and program but forward estimates have limited accuracy and can be significantly revised. - The annual budget call provides indicative three-year ceilings for domestically funded capital spending (capital II) but these are not binding; no ceilings for externally funded capital spending (capital III). ### Budget comprehensiveness and unity (Institutional strength — High; Effectiveness — High; Reform Priority — Low) - Extrabudgetary entities: - Little capital spending by extrabudgetary entities; BSIF investments generally less than 10 % of total capital budget. - BSIF is funded by external grants and loans disclosed in the PSIP; funds are channeled through the budget which shows source but not project-specific information; priority areas decided by Cabinet; BSIF board (CEOs of key ministries) selects projects. - BSIF website provides detailed disclosure of priorities, projects and financing arrangements. - PCs and PPPs disclosure: - Domestically and externally financed capital spending are included in the budget, but PC and PPP investments are not disclosed in budget documents. - Capital investment of three main PCs (Belize Telemedia (DIGI), Belize Electricity (BEL) and Belize Water Services (BWS)) is equivalent to much more than 50 percent of the government capital budget and amounted about 3.7 percent of GDP in 2018. - BWS receives a capital transfer and indirect support through tax exemptions and deferred dividends valued at about 7 million BZ $ per year; this full support is listed in BWS’ annual reports but only the capital transfer is disclosed in budget documents. - The international airport concession contracted in 2003 is the only central government PPP and is not recorded in budget documentation. - Table 6. Extrabudgetary and PC Capital Spending (Thousand BZ $) - 2015/16: Budget 283,775; BSIF 11,179; BSIF/Budget 3.9%; Telemedia 40,307; Electricity 27,700; Water 21,041; PCs/budget 31.4% - 2016/17: Budget 250,721; BSIF 23,171; BSIF/Budget 9.2%; Telemedia 72,175; Electricity 38,900; Water 12,008; PCs/budget 49.1% - 2017/18: Budget 152,022; BSIF 18,147; BSIF/Budget 11.9%; Telemedia 78,178; Electricity 33,600; Water 17,544; PCs/budget 85.1% - 2018/19: Budget 149,197; BSIF 8,555; BSIF/Budget 5.7%; Telemedia 82,890; Electricity 30,600; Water 21,551; PCs/budget 90.5% - Total 2015-2019: Budget 835,715; BSIF 61,052; BSIF/Budget 7.3%; Telemedia 273,550; Electricity 130,800; Water 72,144; PCs/budget 57.0% - Source: Budget estimates 2016-2020, annual reports DIGI, BEL, BSW and BSIF. *Source: IMF country report content (1blzea2020001), sections on contingent liabilities, project appraisal, alternative infrastructure finance, and public investment management.* ### 46. Capital and current budgets are prepared by MOF and presented together in the budget, ### 1blzea2020001 - 46. Capital and current budgets are prepared by MOF and presented together in the budget, ### Budget presentation and classification - Capital and current budgets are prepared by MOF and presented together in the budget, using organizational and program classifications. - The budget includes a comprehensive overview of current and capital spending under each ministry, organization and program, further broken down by economic classification. - The program classification is largely a mixture of sub-functions and organizational units. - Budget documents include information about: - program objectives, priorities, targets and results, - a listing of staff complements. - Budget documents provide comprehensive information on capital spending, including externally financed projects, but should be extended to disclose capital spending through extrabudgetary funds (EBFs), PCs and PPPs. - Current budget documents include the financing flows to the BSIF but do not provide information about the use of this financing; recommendation: include an appendix that gives an overview of BSIF-funded projects and capital spending by the major public corporations. - Recommendation: budget documents should describe the government’s PPP program, including current PPPs as well as PPPs under consideration, giving information about the investments involved and the explicit and implicit liabilities these might entail. ### 8. Budgeting for Investment (Institutional Strength — Low; Effectiveness — Medium; Reform Priority — Medium) - Capital spending is appropriated annually; medium-term budget estimates and the total cost estimates in the PSIP give some predictability for future funding. - The budget provides three-year forward estimates for capital projects, and information about spending the last three years. - There is no specification of total project costs in the budget documents; total project costs are provided in the PSIP but reconciliation between PSIP and budget is not always easy. - Virement: - The MOF can approve virement from capital to current spending for budget-funded capital projects; virement is regulated in chapter IV of the Expenditure Control Regulation. - According to the regulation, MOF can approve reallocation between different sub-heads (programs) under a budget head (department); reallocation cannot be used to finance new positions or policies. - Virement from capital to current spending is generally not possible for externally financed (capital III) projects. - Budget reports do not provide information about aggregate virement, but the expected budget outturn should include any net reallocation from capital to current spending. - Ministry of Works example: - The Ministry is typically responsible for 25 – 30 percent of capital spending. - Figure 18 (MOF budget documents 2016 – 2019) shows significant adjustments in capital spending during the year: in 2016-2017 both capital II and capital III were adjusted upwards; in 2017-2018 and 2018-2019 capital II was adjusted downwards. Current spending was marginally reduced during the budget year. - There are no formal mechanisms to protect on-going projects, but practice indicates preference to ensure sufficient funding of ongoing projects before introducing new ones. - The budget call specifies that new projects must be described and justified separately in budget submissions, but there is no formal rule that ongoing projects have priority. - Example: 2019-2020 budget for the Ministry of Works: allocation to new projects was less than 10 percent of the capital budget. - Recommendation: modernize legal framework for public investment to: - clarify rules for virement from capital to current spending, - give explicit funding priority to ongoing projects, - include total project costs in budget documents, - provide explicit reconciliation between the budget and the PSIP. ### 9. Maintenance Funding (Institutional Strength — Low; Effectiveness — Medium; Reform Priority — High) - No general, standardized methodologies for estimation of current maintenance needs; no government-wide regulatory framework for maintenance of capital assets; no specific government policies in this area. - Ministries do not apply comprehensive, formalized maintenance systems; some line ministries use ad-hoc methodologies (including regular visual inspections). - Ministry of Works is planning to develop a more structured maintenance system for road assets. - Current maintenance budgets amounted to 0.88 percent of estimated public capital stock on average over the last four budget years. - Capital repairs budgets amounted to 0.07 percent of estimated public capital stock during the last four budget years. - Table 7. Maintenance and Capital Repairs 2016 – 2020 (Million BZ $) - 2016-2017: Capital stock 3,478; Current maintenance 21.760 (0.63%); Capital repairs 1.654 (0.05%) - 2017-2018: Capital stock 3,216; Current maintenance 29.485 (0.92%); Capital repairs 0.820 (0.03%) - 2018-2019: Capital stock 3,277; Current maintenance 31.555 (0.96%); Capital repairs 2.999 (0.09%) - 2019-2020: Capital stock 3,277; Current maintenance 33.162 (1.01%); Capital repairs 3.578 (0.11%) - Average: Current maintenance 0.88%; Capital repairs 0.07% - Source: MOF budgets 2016 - 2020 - Maintenance and capital improvements are separate budget categories; current maintenance is reported in the budget (aggregated and presented in summary budget tables by economic classification). - No consolidated budget report on capital repairs; aggregated capital repairs data is available internally in MOF but not published. - In absence of a register of public non-financial assets, estimated capital stock is used to assess adequacy of maintenance spending; current maintenance is slightly below 1 percent of public capital stock. - Note: Recommended allocations for current maintenance in many countries is in the range of 2 – 5 percent of asset values (footnote). - Conclusions and recommendations: - Maintenance planning is ad-hoc and should be strengthened considerably. - Budget documents should report total capital repairs in the same way as current maintenance. - Fiscal strategy should provide explicit discussion of maintenance needs and priorities compared to available funding. - Standardized maintenance systems and methodologies should be introduced across government; Ministry of Works’ efforts can serve as a pilot. ### 10. Project Selection (Institutional Strength — Medium; Effectiveness — Low; Reform Priority — High) - MED is responsible for scrutiny of major projects prior to funding decisions, but: - no systematic use of external experts, - assessment is largely qualitative, - assessments are not documented. - 2016-2019 GSDS provides objectives, targets (necessary conditions) and a priority framework, but these mechanisms are rarely applied in practice and are not effective; no project has been rejected as a result of this assessment. - GSDS priority framework criteria (as stated): - Level of Urgency: The degree to which an action is required in order to avoid near-term, system-critical disruptions or missed opportunities. - Level of Impact: The degree to which an action leads to visible and measurable improvements in quality of life for Belizeans in the medium term. - Availability of Resources: The extent to which resources (either internally or externally generated) have already been or can be easily committed to the action. “Resources” includes financial as well as human resources necessary to implement the policy. Actions linked to existing or easily mobilized resources receive higher priority. - Net Systemic Contribution: The extent to which an action contributes, over time, to the integrated or systemic achievement of the Critical Success Factors. - MED maintains a pipeline (PSIP) of projects for budget consideration, but projects may be selected from outside the pipeline and projects have not been subject to rigorous appraisal. - Example: 2019-2020 capital budget for the Ministry of Works: - Only five new projects added, constituting about 8 percent of total capital spending; three of the five projects had not been identified in the PSIP pipeline. - Table 8. New Capital Projects in 2019 – 2020 Budget for Ministry of Works (BZ $) - Capital II total: 13,162,000; new 1,127,000; Share new 8.56% - 1773 Rehabilitation Western Highway: 500,000 — From PSIP pipeline? No - 1936 Haulover bridge: 350,000 — From PSIP pipeline? No - 1962 Climate Vulnerability Reduction: 277,000 — From PSIP pipeline? Yes - Capital III total: 39,550,000; new 3,100,000; Share new 7.84% - 1571 Corozal - Sarteneja Upgrading: 100,000 — From PSIP pipeline? No - 1962 Climate Vulnerability Reduction: 3,000,000 — From PSIP pipeline? Yes - Source: MOF budget estimates 2019-2020, PSIP 2018-2019 - Recommendations: - Strengthen project selection mechanisms and ensure guidelines are applied in practice. - Make selection criteria more comprehensive to include: - quality of project appraisal documents, - project readiness for implementation, - strategic considerations. - Apply selection criteria to all major projects, regardless of funding source. - Establish a pre-selection mechanism for inclusion in the PSIP pipeline and a final selection process for implementation. - Define selection mechanisms in updated public investment legislation, regulations and manuals. - Appendix 3 provides further recommendations for revamping PIM processes (including stronger focus on selection). ### C. Delivering Productive and Durable Public Assets — Implementation weaknesses and priorities - PIMA pillar goals: determine whether authorities (i) have effective procurement and procurement monitoring, (ii) make financing for capital expenditure available on time, (iii) appropriately manage and monitor the whole investment portfolio, (iv) manage and oversee projects during implementation, and (v) guarantee monitoring of public assets by recording them and their value accurately in financial statements. - Strengths: absence of payment delays, good use of the treasury single account (TSA), existence of a monitored PSIP. - Weaknesses: - Institutional framework for procurement is weak; effectiveness relies mainly on Development Partners (DPs) rules for externally-financed projects. - Cash management is poor and relies on expensive liquidity facilities with the CBB. - Ministries and public entities have limited capacity and guidelines to manage and implement projects and to perform ex-post reviews. - External ex-post audits of public investment projects are not routinely undertaken. - Absence of audited government financial statements since 2012 and lack of public asset records undermine authorities’ capacity to assess quality and performance of public investment. ### 11. Procurement (Strength—Low; Effectiveness—Low; Priority of reforms – High) - Many major projects, especially externally-financed, are tendered competitively, but a significant number still use direct award and public information is limited. - Regulatory framework for procurement incorporates competitive procedures but is incomplete and provides limited information on type and timetable for publishing procurement information. - For externally-financed projects, DP procurement procedures are followed; for domestically-financed projects, ministries and public entities use their own tendering rules. SNGs use central government procurement regulations. - Direct award statistics (2018): - Direct award represents 33 percent in number and 47 percent in value in 2018. - Procurement system is decentralized; each ministry and public entity is responsible for procurement for its projects. - A CARICOM Procurement Protocol and related Draft Procurement Act and a Public Procurement Procedure Handbook are expected to be adopted in 2020; Belize Infrastructures Limited (BIL) and pilot ministries (including MOF and Ministry of Works) have started to use the CARICOM website for some bidding procedures. - No comprehensive published database of procurement information: - MOF Procurement Unit (PU) has an Excel database for central government tenders, but information is incomplete and not published; no reports produced to provide overall procurement situation or to support follow-up actions. - MOF plans to develop a more comprehensive and reliable automated database to manage and control procurement and produce and publish reports. - Table 9. Belize – Number and Value (BZ $) of Contracts for Central Government by Tender Procedure (fiscal year 2018) - Goods: - Open tender procedure: Number 84; Value 40,443 (thousand? — as presented) - Selective tender procedure: Number 2; Value 210 - Limited tender procedure: Number 7; Value 1,016 - Total: Number 93; Value 41,669 - Share: 58% (Number), 41% (Value) - Services: - Open tender procedure: Number 7; Value 1,051 - Selective tender procedure: Number 0; Value 0 - Limited tender procedure: Number 27; Value 7,665 - Total: Number 34; Value 8,716 - Share: 21% (Number), 9% (Value) - Works: - Open tender procedure: Number 12; Value 10,652 - Selective tender procedure: Number 2; Value 352 - Limited tender procedure: Number 12; Value 28,527 - Total: Number 26; Value 39,531 - Share: 16% (Number), 39% (Value) - Consultancy: - Open tender procedure: Number 1; Value 910 - Selective tender procedure: Number 0; Value 0 - Limited tender procedure: Number 6; Value 10,298 - Total: Number 7; Value 11,208 - Share: 4% (Number), 11% (Value) - Total across types: - Open tender procedure: Number 104; Value 53,056 - Selective tender procedure: Number 4; Value 562 - Limited tender procedure: Number 52; Value 47,506 - Total: Number 160; Value 101,124 - Percent distribution (by number): 65% Open; 3% Selective; 33% Limited/Direct - Percent distribution (by value): 52% Open; 1% Selective; 47% Limited/Direct - Source: MOF Procurement Unit Database *Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1blzea2020001.pdf* ### 64. A procedure for the submission and resolution of procurement complaints exists but does ### 64. A procedure for the submission and resolution of procurement complaints exists but does ### Procurement complaints, oversight, and transparency - Findings: - A procedure for submission and resolution of procurement complaints exists but does not follow processes that are clearly defined and publicly available, and procurement control is weak. - The Contractor General (CG) is an independent body legally in charge of reviewing procurement complaints.22 - In practice, no complaint has been formally submitted in the last two years and, in any case, the CG23 does not have the capacity to investigate them. - The CG’s decisions have been rarely enforced in the past, and data on resolution of procurement complaints are not generally published. - The institutional framework for the control, monitoring and auditing of procurement is not fully operational24 and only a few rejections have been made by the CG.25 - Key numbers and facts: - BIL assists ministries in all phases of project implementation but covers only 7 percent of government projects selected by the MOF.24 - The PU mentioned only two rejects during the last two years.25 - In the last two years, in absence of an appointed CG, his role was performed by the Solicitor General from the Attorney General Office. A new CG has just appointed in January 2020.23 ### Institutional weaknesses and recommended reforms for procurement - Findings: - The institutional framework for procurement remains weak and its effectiveness mainly relies on the rules of development partners for externally-financed projects. - Policy recommendations: - Adopt a new legal and regulatory framework, consistent with international standards. - Develop a comprehensive and accurate procurement database providing information on every procurement phase for major tenders. - Clarify and strengthen the respective roles, coordination procedures and capacities of the CG, BIL and the Procurement Unit (PU) of the MOF to ensure better control and monitoring of public procurement. - Make tenders more transparent and provide clear information on bidding procedures and on how interested parties can process a complaint and how it should be solved. - Consider using the CARICOM website to publicize procurement information and support transparency (see Box 4). - In the longer term, develop e-procurement capabilities and a Framework Agreement, especially for emergency response purchasing cases (i.e. climate change resilience). ### CARICOM portal (Box 4) — procurement notice board - Findings (as described): - CARICOM developed a website for member countries to publicize procurement information and facilitate centralized publication of procurement opportunities. - Portal features described include: secure, interactive environment; support for procurement of any nature, complexity or value; user registration; competition review; approval and publication; list of approved suppliers; list of Public Entities; national contact point; annual procurement plan; current competition; user guides; electronic public procurement; procurement legislation; statistics; procurement calendar. ### Availability of Funding — cash management (Strength- Medium; Effectiveness—Medium; Priority of reforms - High) - Findings: - Cash management remains weak and ministries and public entities are not provided with commitment ceilings in a timely manner. - Overall cash flow forecasting and management remains weak: no adherence to a formal forecasting calendar and no evidence of active cash management. - Specific weaknesses: - (1) no cash flow plans or commitment plans are provided by the Ministries and public entities;27 - (2) no consolidated forecasts are submitted (or reviewed, or periodically updated) and hence are not used in determining quarterly spending authorizations; and - (3) there is limited coordination with the international and domestic borrowing program. - A Cash Management Unit has just been created in the Treasury Department (TD)28 but is not yet fully operational. - Practices and risks: - Budget releases: monthly for recurrent and goods and services; domestic PSIP releases only on request or when commitment or invoices are received.29 - Daily cash balances obtained every morning and amounts set aside for essential payments; TD makes payments in principle in two/three days based on outstanding invoices and urgent requirements. - System relies on expensive liquidity facilities with the CBB, including overdraft and securities rolled over at the end of the year and ad-hoc issuance of treasury bills.30 - Commitments and related documents are not always registered in SmartStream (SS) in a timely manner, impairing cash and project management.31 - Banking reconciliation process is not efficient.32 - Key numbers and facts: - The amount of authorized overdraft at the CBB for the year is 8.5 percent of the total domestic revenues of the previous year (Art 34 of the BCC Act 2011).30 - The current amount of overdraft used is around 40 million BZ $ out of an authorized overdraft of 97 million BZ $.30 - The average interest rate is around 9.5 percent.30 - Some procurement plans are prepared for externally-financed projects.27 - Policy recommendations: - TD should prepare an annual cash flow plan to be annexed to the 2020/2021 budget presenting how the central government budget is expected to be financed and executed during the fiscal year. - Request main ministries and public entities to prepare annual cash flow plans and procurement plans starting with the implementation of the 2020/21 budget. - Compile a comprehensive, updated list of government accounts and ensure CBB and MOF receive information on balances of all these accounts. - Develop regulations and guidelines, and strengthen capacities, for cash management and commitment control and the use of SS modules at ministries and public entities’ levels. ### Treasury Single Account (TSA) coverage and government accounts - Findings: - While most external financing is processed through a TSA, some government accounts are held in commercial accounts on which information is not available. - Treasury maintains one main account (Consolidated Revenue Fund) and two sub-accounts at the CBB: the revenue account and the disbursement account.33 - Most accounts for externally-financed projects are held in special accounts at the CBB; TD receives information on transactions from these special accounts for accounting purposes. - Some ministries and public entities hold an unknown number of commercial bank accounts not under TD control, into which they deposit their own revenues as well as grants and transfers. - TD and CBB do not maintain a list of all government accounts opened in commercial banks, and do not receive information on balances on these accounts.34 - Key numbers and facts: - The mission did not receive from the authorities the requested list of Government bank accounts registered at the CCB and MOF.33 ### Portfolio Management and Oversight (Strength—Medium; Effectiveness—Low; Priority of reforms - Medium) - Findings: - Monitoring of central government capital projects is effective but comprehensiveness, timeliness, and quality of information could be improved. - Ministries and public entities are requested by the MED to report quarterly on financial and physical implementation; information is consolidated in the PSIP. - The PSIP does not cover projects implemented by public entities using their own resources (domestically or externally financed).35 - Analysis and reports on performance and risks related to project implementation are not systematic and not provided on time. - Reallocations and ex-post reviews: - In-year reallocation of funds between capital projects under a specific ministry or public entity are possible for domestically-financed projects but are prohibited for externally-financed projects. Ministries and public entities must submit reallocation requests to the MOF for approval.36 - Ex-post reviews focusing on costs, deliverables and outcomes are required and conducted under development partners’ rules, but there are no national and harmonized guidelines on ex-post reviews. - DPs perform ex-post reviews using their own methodologies; ministries and public entities have limited capacity and guidelines to undertake ex-post reviews on their own. - Policy recommendations: - Progressively extend the PSIP to cover all projects implemented by ministries and public entities. - Produce regular, timely standardized documentation and reports on project performance and risks. - Operationalize the PSIP Monitoring Information System (MIS) planned for June 2020 to improve central monitoring. - Develop guidelines and internal capacity to undertake ex-post reviews to hold project managers accountable and inform future investment decisions. ### Management of Project Implementation (Strength—Low; Effectiveness—Low; Priority of reforms - Medium) - Findings: - Quality of project management varies considerably across ministries. - Externally financed projects generally follow DP rules and often require Project Implementation Units (PIUs). Ministries employ in-house and/or outsourced staff, but capacity remains limited.37 - Implementation plans are developed in principle but their quality varies; original project details are sometimes not respected because of DP procedures, lack of funding and delays. - Important indicators such as quality and consistency with implementation plans are not systematically monitored. - No standardized rules, procedures or guidelines exist for management of project implementation and adjustments; no formal reappraisal requirement after proposed adjustments to determine continued validity of business case. - External ex-post audits of capital projects are not routinely undertaken; government financial statements have not been produced since 2014, preventing AGO from performing financial audits on public investment projects.38 - AGO has limited capacity to perform performance and on-site audits of capital projects.39 - AGO reports highlight cases of poor project management, misuse of funds, poor quality of outcomes, and weak efficiency of public investment; reports submitted to Parliament have not been routinely scrutinized. - The internal audit function and framework is not yet in place in the GoB. - Key numbers and facts: - The last audited Government financial statement was for the fiscal year 2011/2012. 2012/2013 and 2013/2014 financial statements are being audited by the Parliament. The draft for 2014/2015 has been prepared.38 - Policy recommendations: - Develop harmonized project monitoring procedures and guidelines for ex-post evaluations. - Strengthen managerial capacities and make the project manager position more attractive to recruit relevant expertise. - Ensure accountability and improve quality of public investment delivery and outcomes. - Introduce the internal audit function progressively in the MOF and main ministries and public entities. ### Monitoring of Public Assets (Strength—Low; Effectiveness—Low; Priority of reforms - Medium) - Findings: - Scope and procedures for management of non-financial assets are not clearly defined in legal and regulatory framework. - An up-to-date and comprehensive registry of fixed assets is not available for the entire Government. - Financial Orders (FOs) and Stores Orders (SOs) require registers of assets and documentation of purchases, sales and movements, but there are no clear and standardized provisions on: - asset recognition thresholds; - asset classification; - depreciation method; - valuation methods; - standard useful economic lives for common government assets; - data to be maintained for each asset; and - timeline for updating the register. - In general, only asset registers for moveable assets are maintained manually in excel sheets by most ministries and public entities and are not consolidated by the MOF.41 - A module for asset management exists in SS but is not used. - Policy recommendations: - Define clear and standardized asset management provisions (recognition, classification, depreciation, valuation, useful lives, data required, update timelines). - Consolidate asset registers across ministries and public entities and activate the SS asset management module. _Italic: Source — content unit 1blzea2020001 (PDF chapter/section) from the supplied IMF content._ ### 79. The value of fixed assets is not included in the Government’s financial statements. In ### 1blzea2020001 - 79. The value of fixed assets is not included in the Government’s financial statements. In ### Fixed assets and government financial statements - The value of fixed assets is not included in the Government’s financial statements. - Among sector ministries interviewed, asset records are: - neither complete nor regularly updated; - do not consistently include asset values; - therefore the information is not available for inclusion in the financial statements. - The absence of audited government financial statements since 2012 undermines the capacity of the Government and Parliament to assess the quality and performance of public investment and asset management. - Some exceptions noted: - The Ministry of Works records public assets and performs regular updates. - The city of Belmopan registers and values its non-financial public assets and includes them in its financial statements which are then audited by an independent private auditor. ### Accounting rules and depreciation (cash-basis IPSAS) - Accounting rules on the depreciation of nonfinancial public assets have not yet been implemented in the GoB. - Cash-basis IPSAS applied in Belize include the requirement to restructure the chart of accounts (COA) to capture the accumulated depreciation or revaluation of public assets, but this requirement is not implemented in the GoB. - For the recording of public fixed assets, both cash and accrual-basis need to be used: - The Government’s general ledger will record the stock of assets on a cumulative, depreciating basis for the purpose of showing the value of those fixed assets in the Government’s Balance Sheet. - For reporting acquisition of assets against the cash-based budget, the system needs to also report the purchase of assets on a cash (i.e. non-cumulative) basis. - Recommendation: - The TD should prepare a provisional government financial statement for fiscal year 2019/20 to assess the implementation of public investment, then progressively produce financial statements for previous years to reestablish entry balances. - Adoption of a Government Asset Management Policy (GAMP) and a centralized inventory of fixed assets within the MOF using the related SS module would provide a significant “head-start” for recording assets, developing a government balance sheet, and making provision for depreciation. - The chart of account (COA) needs to be reviewed to better track public investment spending. - Box 6 (Main Requirements of Cash-Basis IPSAS for the preparation of Financial Statements) — Key requirements retained verbatim: - Cash-basis IPSAS financial statements should include: - Statement of cash receipts and payments recognizing all cash receipts, cash payments and cash balances controlled by the entity or cash flow statement that reconciles the opening and closing cash and cash equivalents; - Comparison of the amounts in the publicly available budget and actual amounts (budget execution statement); - Accounting policies and explanatory notes. - IPSAS generally requires accounting on a gross basis; accounting on a net basis is allowed for administered and agency transactions, and items in which the turnover is quick, the amounts are large, and the maturities are short. - IPSAS also requires that: - All government-controlled bank accounts be included in the financial statements; - the chart of accounts (COA) be restructured, if needed, to capture the accumulated depreciation or revaluation of public assets; - the Government’s consolidated financial statement includes all controlled extrabudgetary agencies consolidated on a line-by-line basis. - The Government is encouraged to issue consolidated financial statements which consolidate all controlled entities, e.g.: agencies controlled by the Government and public corporations. This implies: - Eliminate cash balances and cash transactions between entities in full. - Adjust for the effects of significant cash transactions that have occurred between: the reporting date of the controlling entity’s financial statements and the reporting date of those financial statements used in a consolidation that are drawn up to different reporting dates. - Uniform accounting policies for like cash transactions. - Listing of significant controlled entities or the reasons for not consolidating a controlled entity. - Examples of eliminations of cash flows between government and public corporations: taxes, grants, dividends, borrowings raised and repaid, interest on loans, sales of goods and services. - Source for Box 6: IPSAS 2017 ### Cross-cutting issues in Public Investment Management (PIM) - Assessment covers information technology, legal and regulatory frameworks, and capacity development. - Current situation: - Different elements of cross-cutting issues are not able to support a modern, efficient and organized PIM process. - There is currently no automated PIM system in use. - The PSIP is testing a new MIS designed to serve as a project management tool and facilitate consolidation of information on projects in the PSIP. - The legal framework supporting PIM is outdated and inadequate, containing legislations, regulations, and guidelines dating back to the 1960s. - Draft PFM and PIM bills and regulations exist and contain useful features but remain largely pending. - Capacities of PIM teams are limited and can be undermined by staff turnover; both MOF and MED experience shortages in risk analysis, monitoring and evaluations, and PPPs. ### IT systems and data management - SmartStream (SS) is the backbone of the financial, accounting and reporting process: - SmartStream is used for general ledger, human resources and the procurement of goods and services. - The project management and fixed assets modules offered by SmartStream are not in use. - Treasury and Budget Departments are main users of SS for processing financial transactions including accounts payable and payroll. - Some requests are processed without using the funds control module designed to restrict unbudgeted payments. - Treasury uses SS as the main source of information for preparing annual financial reports, last presented to Parliament for the 2014 fiscal year. - Line ministries use SS to prepare purchase orders and request payments; the approved budget is uploaded into SS for in-year budget execution. - Table 10 (SmartStream Modules Currently Being Used) — modules in use: - Financials: Ledger, Payables - Human Resources: Payroll, Personnel - Procurement: Payables, Purchasing, Procurement – PO Approvals, Funds Control - Access for SmartStream: E-Portal, E-Invoice Approval - Source for Table 10: MOF, Central IT Office. - CPM 10 (Corporate Performance Management) software: - Used by all government ministries to prepare the annual budget and interfaced with SS for in-year budget execution. - Not currently used to create and implement methodologies and processes to track performance indicators reflecting public investment objectives. - Could be used for strategic planning, forecasting, alignment of financial and operational plans, and predictive analysis. - PSIP MIS: - No automated system for PIM currently; PSIP is comprised of all investment or development projects by the Central Government. - MED monitors and reports on financial and physical progress via an Excel document not integrated with SS. - The PSIP-MIS is being piloted in six government ministries: Agriculture, Economic Development, Education, Finance, Health, and Works. - Expected roll out across the Public Service once customization is completed, after the pilot phase ends in July 2020. - Staff in MED and line ministries will need training; final assessment of long-term benefits is pending. - Recommendation: develop an IT Master Plan focusing on: - Foster open and direct access to government services, information on public investment and procurement, financial and nonfinancial reports and analysis. - Enable improved decision-making through research and analysis, establish dashboards that display key performance indicators and trends, including connectivity of SmartStream, CPM10 and PSIP MIS. - Foster adoption of fast and agile technology permitting regular software upgrades and capacity development. - Create a more connected and engaged workplace with seamless and secure connections between all GoB IT systems; support anywhere, anytime, any device access. ### Legal framework for PIM - The legal framework supporting PIM in Belize is outdated and incomplete; supported by laws, regulations and guidelines dating back to the 1960s. - Table 11 (Current Legal Framework for PIM in Belize) lists: - The Belize Constitution - Finance and Audit (FAA Reform) Act 2010 - Financial Orders 1965 - Stores Orders 1962 - Control of Public Expenditure Handbook 1966 - Fiscal Transparency and Responsibility Regulations 2010 - Annual Budget Appropriation Act - Other guidelines provided by the Auditor General - Source for Table 11: MOF - Draft PFM and PIM bills and related regulations contain useful features to improve governance and accountability, including: - Enhanced procurement provisions; - Replacement of existing orders with new financial regulations; - Requirement for new guidelines and procedure manuals; - Requirement that plans for the approval of new PPP contracts are disclosed in annual budget documents; - Requirement that information on major public investments be included in the budget document for the forthcoming budget year and two additional years. - PIM bill introduces systematic cost/benefit analysis, formalizes maintenance of the PSIP and establishes a gate-keeping function for PSIP inclusion. - Suggested amendments to draft PIM legislation (Box 7): - The proposed framework does not distinguish clearly between the PSIP process and the budget process. - Some functions assigned to the MoF in the current draft should rather be assigned to the MED. - The draft indicates the Statistics Institute should play an important role in project appraisal and monitoring, but the Institute doesn’t seem to play a big role in PIM nor have capacities for that. - The draft suggests the Statistics Institute should participate in PSIP gatekeeping and resource allocation; this is not a natural role for a statistical institute. - The draft proposes involvement by the Central Bank that may undermine its independent position. - The draft contains provisions regarding fines for violations that don’t seem to fit a PIM legal piece aimed at revamping a process. - The draft does not assign monitoring and evaluation functions to the MoF and MED which is needed to enable oversight of public corporations’ investment programs. - Recommendation: - Conduct a comprehensive review of the draft PFM, PIM, Procurement and other legislation and regulations, ensuring consistency with the Constitution and strategic policies. - Consider amendments suggested in the report: assign M&E roles to MOF and MED, clearly define the PSIP process, and reexamine roles of the Central Bank and Statistics Institute in PIM. ### Staff capacity - PIM unit capacity issues: - Efforts to control the wage bill may have impacted PIM unit size, creating a capacity gap with no capacity development strategy. - There are six staff members in the PIM unit of the MED; retention has been a challenge. - Some analytical capacity exists within MOF and MED, but insufficient for full-cycle project management and reporting for the PSIP. - Projects are not properly appraised and selected using financial analytics; projects implemented by public corporations are not monitored and evaluated by MOF or MED. - No capacity to negotiate, implement and manage PPPs. - Use of external consultants: - External consultants and experts fill some capacity gaps, especially for externally financed projects. - Transfer of knowledge to local counterparts is limited; little increase in local capacity. - Recommendation: - Conduct a review of the current human resource program to identify medium-term capacity gaps and needs. - Design and implement a strategic development action plan based on the required mix of skills for PIM functions, including appraisal, selection, financial management, monitoring and evaluation, and PPP management. - Consider engaging external experts with deliverables focused on strategic mentoring and apprenticeship programs for local staff development. ### Appendix I — Fiscal Risk Statement (FRS): overview and development path - Definition and purpose: - A fiscal risk is the possibility of deviations of fiscal outcomes from what was expected at the time of the budget or other forecast. - The purpose of an FRS is to provide a comprehensive overview of relevant and significant fiscal risks, analyze these risks, outline measures to contain and mitigate these risks, and disclose this information to the public. - Potential fiscal risk areas (examples listed): - Macroeconomic assumptions and developments - Government revenues - Government spending - Government debt and guarantees - Public-private partnerships - Local governments - State-owned enterprises - Financial sector crises - Natural disasters and climate events - Other fiscal risks - Suggested format for presentation in an FRS (Table A1.1): - Overview of the issue or sector: Features; Risks - Data for last three years (or more): Data describing the issue or sector; Budget data - Projections for MTB period (or longer): Budget provisions related to the issue or sector - Quantification of risks: Definition of scenarios for optimistic and pessimistic outturns; Estimates of budgetary impacts; What-if analysis and simulation of shocks; Risk reflected by difference between optimistic and pessimistic scenarios - Risk mitigation: Existing measures; Possible additional measures - Development path for an FRS (Table A1.2) — staged improvements from Initial to Advanced FRS across risk categories such as macroeconomic shocks, revenue overestimation, unplanned expenditure, state guarantees, public debt exposure, SOE insolvency, financial sector insolvency, PPP payments, transfers to local governments, fiscal impacts of natural disasters, and other fiscal risks. - Example FRS summary guidance (Table A1.3): - High impact indicates more than 3 percent of GDP, medium 1 – 3 percent, low below 1 percent. - High probability indicates more than 30 percent, medium 10 – 30 percent, low below 10 percent. *Source: Excerpt from provided IMF content (1blzea2020001).* ### Appendix II. Effective Oversight of Public Corporations in Belize ### Appendix II. Effective Oversight of Public Corporations in Belize ### Role and scale of public corporations - In 2018, total assets of the three largest PCs (BEL, BTL and BWS) accounted for [x] percent of GDP. - Investment spending by these corporations amounted to 3.7 percent of GDP. ### Fiscal risks from public corporations - Government-owned corporations can create significant fiscal risks through: - Loss-making operations that require government guarantees, subsidies, loans, or capital injections. - Monopoly provision that can produce at high costs and pass those costs onto customers. - Many studies have highlighted how failures of public corporations can result in huge economic and fiscal costs. ### Key elements of an effective oversight framework - A transparent ownership policy: - Should provide a clear statement of the government’s objectives as shareholder in each PC, including financial objectives (such as profitability) and any economic/social objectives (for example, universal access to water). - A centralized oversight unit in the Ministry of Finance with responsibilities to: - i) analysis of PCs’ financial performance based on a range of indicators (e.g. profitability, risks, and financial relations with the government), - ii) review and approval of financial plans, targets, and annual statements; - iii) setting financial performance targets; reviewing requests for transfers, capital injections, borrowing, or government guarantees; - iv) analysis of the costs of any quasi-fiscal activities (for instance an investment made for policy rather than commercial objectives) and their disclosure in the budget. - Publication of a public corporation monitoring report: - An annual report should summarize the overall financial performance of the PC sector as well as provide information on individual companies. - A new law on public corporations: - A law would help to establish clearly the respective roles of the government and its PCs in the area of financial management and oversight. ### Implementation approach and short-term actions - Implementing the full oversight framework requires time, resources, specialized and advanced skills, and the development of policies and legislation. - A step-by-step approach is recommended. - Immediate/short-term actions that the Ministry of Finance (MOF) can take: - Start to collect and monitor data on the financial performance of individual PCs. - Disclose this information in a fiscal risks statement or a separate PC report. - Longer-term requirements: - Build in-house capacity for monitoring and analysis. - Develop and enact supporting legislation and institutional arrangements. *Source: Appendix II. Effective Oversight of Public Corporations in Belize* --- _Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1blzea2020001.pdf_