## 1blzea2022001 - 5.2 percent for 2022 as the war in Ukraine and related economic sanctions keep global energy

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---

### Recent developments, outlook, and risks
- Real GDP growth:
  - 2020: -16.7 percent
  - 2021: 9.8 percent
  - 2022 (projected): 5.7 percent
  - 2023 (projected): 3.4 percent
- Inflation (consumer prices):
  - End of period: 2020: 0.3 percent; 2021: 4.9 percent; 2022 (projected): 5.2 percent
  - Average: 2021: 3.2 percent; 2022 (projected): 4.8 percent
- Unemployment:
  - 2020: 13.7 percent
  - 2021: 10.2 percent
  - 2022 (projected): 8.2 percent
- External sector:
  - External current account (percent of GDP): 2019: -9.5; 2020: -8.1; 2021: -8.9; 2022 (projected): -9.3
  - Gross international reserves (US$ millions): 2019: 278; 2020: 348; 2021: 420; 2022 (projected): 409
  - Reserves in months of imports: 2019: 3.7; 2020: 3.8; 2021: 4.0; 2022 (projected): 3.7
- Outlook risks:
  - Downside risks include escalation of the pandemic, tighter global financial conditions, natural disasters, and higher commodity prices.
  - Impact of the war in Ukraine expected to be modest for tourism but inflationary via higher global energy and food prices.

### Key social and economic indicators (selected)
- Population (thousands), 2021: 432.5
- GDP per capita (current US$), 2021: 4,177
- Poverty (percent of total population), 2018: 52.0
- Life expectancy at birth (years), 2019: 74.6
- Human development index (rank), 2020: 110
- Area (sq.km.): 22,860
- Under-five mortality rate (per thousand), 2020: 11.7

### Authorities’ views
- Authorities expect real GDP growth of 6 percent in 2022-23 led by tourism recovery.
- FY2022 budget targets:
  - Primary surplus of 0.4 percent of GDP in FY2022.
  - Projects primary surpluses of about 2 percent of GDP between FY2023 and FY2026.
  - With GDP rebasing (to be released in May 2022), these would lower public debt to below 85 percent of GDP in 2025 and below 70 percent of GDP in 2030.
- Authorities introduced temporary reduction in specific taxes for diesel and targeted fuel subsidies for eligible bus and tour operators.

---

### Fiscal position and public debt dynamics
- Fiscal outcomes (percent of GDP):
  - Primary balance: 2019: -1.3; 2020: -8.5; 2021: 1.7; 2022 (projected): -0.1
  - Overall balance: 2019: -4.7; 2020: -10.3; 2021: -0.7; 2022 (projected): -2.8
  - Revenue and grants: 2019: 31.5; 2020: 27.5; 2021: 32.3; 2022 (projected): 30.8
  - Current non-interest expenditure: 2019: 25.9; 2020: 27.0; 2021: 24.0; 2022 (projected): 24.2
  - Capital expenditure: 2019: 6.5; 2020: 8.7; 2021: 6.5; 2022 (projected): 6.7
- Public debt (percent of calendar year GDP):
  - 2019: 96.3; 2020: 133.1; 2021: 111.0; 2022 (projected): 102.5; 2023: 97.7; 2024: 95.9; 2025: 94.2; 2026: 92.8; 2027: 91.4
  - Domestic debt: 2019: 28.4; 2020: 41.4; 2021: 36.6; 2022 (projected): 32.0
  - External debt: 2019: 68.0; 2020: 91.7; 2021: 74.4; 2022 (projected): 70.5
  - Principal payment (percent of GDP): 2019: 5.9; 2020: 8.3; 2021: 9.9; 2022 (projected): 6.7
- Debt dynamics key projection:
  - Primary balance projected to stabilize near 0.6 percent of GDP during FY2023-32 in a passive scenario with no additional measures.
  - Public debt projected to continue falling to 85 percent of GDP by 2032 under the passive scenario, but would remain above the 70 percent of GDP threshold for sustainability and thus be assessed as unsustainable absent additional measures.

### FY2021 consolidation and FY2022 projection drivers
- FY2021 improvement drivers:
  - 4.8 percent of GDP cyclical recovery of revenues plus grants.
  - 5.4 percent of GDP fall in noninterest expenditure due to fiscal consolidation.
- FY2022 primary balance projected decline to –0.1 percent of GDP partly due to:
  - 0.7 percent of GDP cut in specific taxes on fuel.
  - 0.1 percent of GDP subsidy to public transportation.
  - 0.2 percent of GDP fall in revenue due to the reopening of borders.
  - 0.5 percent of GDP drop in grants.
  - 0.2 percent of GDP rise in the wage bill (partly restitution of a prior 10 percent wage cut from July 2022).

---

### Executive Board assessment and policy priorities
- Central objective:
  - Restore debt sustainability and strengthen the currency peg.
- Fiscal strategy targets:
  - Increase the primary balance to 2.5 percent of GDP in FY2025.
  - Reduce public debt to 60 percent of GDP by 2031.
  - Implement 1.9 percent of GDP of additional fiscal consolidation over three years (to reach the 2.5 percent primary balance objective).
- Recommended fiscal approach:
  - Preserve the fiscal savings achieved in FY2021.
  - Ensure that measures adopted to mitigate fuel price increases are temporary.
  - Rely on both revenue and expenditure measures: broaden the tax base, enhance revenue administration, contain current expenditure, and expand targeted social and resilience spending.
  - Prepare contingency plans including additional revenue and expenditure measures and debt operations if public debt does not fall as planned.

---

### Composition of recommended fiscal consolidation
- Revenue-side measures (estimated revenue impact):
  - Broadening the tax base and strengthening tax administration could raise revenue by 2 percent of GDP over three years.
  - Taxing zero-rated GST items at standard 12.5 percent could raise 1.5 percent of GDP by FY2025.
  - Standardizing Personal Income Tax exemption thresholds at BZ$20,000 could add 0.2 percent of GDP.
  - Raising excise taxes and fees on vehicle registrations and driver licenses could add 0.1 percent of GDP.
  - Strengthening tax administration could add 0.2 percent of GDP.
- Expenditure-side measures:
  - Contain noninterest current expenditure while raising social and resilience expenditure.
  - Consider capping increases in noninterest current expenditure to inflation during FY2023-25, which would reduce its ratio to GDP by 1.4 percent by FY2025.
  - Consider increasing social expenditure by 1 percent of GDP over four years.
  - Create a natural disaster contingency fund of 1 percent of GDP over four years.

### Pension reform
- Reform PPPO in FY2022:
  - Move from unfunded defined-benefit to a defined contribution system.
  - Raise PPPO retirement age to 60–65 years.
  - Near-term government expenditure increase due to contributions to individual accounts; significant long-term savings expected.

### Contingency measures (menu)
- Options: raise GST rate, broaden GST base, cut nonpriority expenditure beyond recommendations, tax property and capital gains, restructure public debt. Required adjustment could be smaller if growth outperforms.

---

### Structural reforms, climate agenda, and financial stability
- Growth-enhancing structural reforms recommended:
  - Strengthen business climate: improve access to credit for SMEs, reduce entry barriers for new businesses.
  - Enhance human capital and infrastructure.
  - Reduce crime by resourcing law enforcement and social programs.
  - Reprioritize public expenditure given limited fiscal space.
- Climate change financing:
  - Continue seeking financing from donors and bilateral and multilateral creditors to implement Belize’s updated Nationally Determined Contribution for 2021-30.
- Financial sector and AML/CFT priorities:
  - Safeguard financial stability by ensuring pandemic-related forbearance measures are time-bound and targeted; resume regular classification and restructuring procedures for banks and credit unions.
  - Strengthen AML/CFT supervision of banks; enforce sanctions for non-compliance.
  - Prioritize reforms to mitigate ML/TF risks from the IFS sector to protect correspondent banking relationships.
  - Reduce central bank financing to the government and strengthen central bank independence to improve reserve adequacy and support the currency peg.

---

### Debt for marine protection swap (main facts and fiscal impact)
- Swap finalized on November 5, 2021, with The Nature Conservancy (TNC).
- Transaction mechanics and amounts:
  - Belize Blue Investment Company issued a Blue Bond of US$364 million and loaned proceeds to Belize; US International Development Finance Corporation insured the loan.
  - Uses of US$364 million:
    - US$301 million to buy back the superbond with face value of US$553 million at 55 cents per dollar (including US$27 million coupon payment).
    - US$24 million to establish a marine conservation endowment fund.
    - US$18 million original issue discount.
    - US$10 million to a debt service reserve account.
    - US$10 million to cover closing costs.
  - Result: public debt stock declined by US$216 million or 12 percent of GDP in 2021.
- Blue Loan characteristics:
  - Maturity: 19 years.
  - Grace period: 10 years.
  - Interest: 3 percent in the first year, gradually rises to 6 percent over the medium term.
  - Conservation payments: US$4.2 million per year for 20 years.
  - Management fees: US$0.6 million per year for 20 years.
  - Insurance: US$0.8 million per year on average for 19 years.
- Fiscal near-term effect:
  - Focusing on the next 10 years, Belize’s interests and fees decline by 0.1 percent of GDP per year on average.
  - Some fees to be paid in Belizean dollars instead of US dollars, reducing pressure on the currency peg.

---

### Disaster Resilience Strategy (DRS) and access to financing
- Adoption of a DRS would enhance access to financing from bilateral and multilateral creditors, the Green Climate Fund, and The Conservation Fund.
- DRS should:
  - Focus on improving structural, financial, and post-disaster resilience.
  - Be based on a consistent multi-year macro-fiscal framework.
- Financial and post-disaster resilience gaps:
  - Legislation creating a natural disaster contingency fund passed but no funds allocated.
  - Contingent credit line with the IDB exists but is insufficient.
- Recommended actions:
  - Expand parametric insurance and other contingent financing.
  - Reform the social protection safety net to scale up quickly after a disaster.
  - Reprioritize expenditure to advance resilience agenda.

---

### Illustrative reform scenario and fiscal targets (Active Scenario)
- Scenario summary:
  - Implementation of fiscal consolidation measures and structural reforms, together with rebasing of GDP, would reduce public debt to 60 percent of GDP by 2031.
- Key fiscal arithmetic and assumptions:
  - Raise the primary balance to 2.5 percent of GDP by FY2025 and keep at 2 percent of GDP afterwards.
  - Implement structural reforms that raise growth by 0.5 percent over the medium term.
  - Using the current GDP series, public debt would be 72.3 percent of GDP by 2031 (Active Scenario).
  - Using a preliminary rebased GDP series (a 20 percent increase in nominal GDP relative to current series), public debt would be around 60 percent of GDP by 2031.
- Active scenario operational assumptions:
  - Implementation of 1.9 percent of GDP in fiscal consolidation over three years.
  - Fiscal multiplier of -0.5.
  - Growth-enhancing structural reforms that lift growth by 0.25 percent in 2026 and 0.5 percent during 2027-32.

---

### Baseline medium-term projections (selected figures preserved exactly)
- Growth (percent): 2020 -16.7; 2021 9.8; 2022 5.7; 2023 3.4; 2024 2.0; 2025 2.0; 2026–2032 mostly 2.0.
- Overall fiscal balance (percent of GDP): 2020 -10.3; 2021 -0.7; 2022 -2.8; 2023 -2.0; 2024 -2.1; 2025 -2.1; 2026–2032 -2.2.
- Primary fiscal balance (percent of GDP): 2020 -8.5; 2021 1.7; 2022 -0.1; 2023 0.7; 2024 0.7; 2025 0.6; 2026–2032 mostly 0.6 to 0.4.
- Public debt (percent of GDP): 2020 133.1; 2021 111.0; 2022 102.5; 2023 97.7; 2024 95.9; 2025 94.2; 2026 92.8; 2027 91.4; 2028 90.0; 2029 88.7; 2030 87.4; 2031 86.2; 2032 85.0.
- Current account balance (percent of GDP): 2020 -8.1; 2021 -8.9; 2022 -9.3; 2023 -8.9; 2024 -8.5; 2025 -8.1; 2026 -7.9; 2027 -7.7; 2028 -7.6; 2029 -7.5; 2030 -7.5; 2031 -7.4; 2032 -7.4.
- International reserves (months of imports): 2020 3.8; 2021 4.0; 2022 3.7; 2023 3.5; 2024 3.3; 2025 3.1; 2026 2.9; 2027 2.7; 2028 2.6; 2029 2.5; 2030 2.4; 2031 2.3; 2032 2.1.

---

### Financial sector and AML/CFT priorities (selected)
- Banking sector indicators:
  - Regulatory Capital to Risk Weighted Assets (percent): 2019 22.8; 2020 19.8; 2021 19.2.
  - Non-Performing Loans to Total Gross Loans (percent): 2019 5.1; 2020 7.7; 2021 5.0.
  - Loan Loss Coverage (percent): 2019 71.9; 2020 57.3; 2021 69.7.
  - Liquid Assets to Total Assets (percent): 2019 24.3; 2020 28.1; 2021 33.8.
- Staff recommendations:
  - Any exceptional bank support should be time-bound and targeted.
  - Resume regular loan classification and restructuring; intensify on-site supervision.
  - Strengthen AML/CFT supervision ahead of the 2023 mutual evaluation by the Caribbean FATF.
  - Centralize beneficial ownership information; increase FSC capacity; implement legal reforms for virtual assets based on risk assessment.

---

### Debt Sustainability Analysis — key findings and stress tests
- Background:
  - Public debt rose from 96 percent of GDP in 2019 to 133 percent of GDP in 2020; fell to 111 percent of GDP in 2021.
  - Public debt projected to fall to 85 percent of GDP by 2032 in the passive scenario.
- Staff assessment:
  - Public debt remains unsustainable in the absence of additional measures because it would stay above the 70 percent of GDP threshold for sustainability over the next decade.
- Stress-test sensitivities (selected):
  - One standard deviation fall in real GDP growth for two years increases debt-to-GDP by 32 percentage points by 2032.
  - Real exchange rate depreciation of 12 percent increases public debt by 7 percentage points of GDP by 2032 (65 percent of debt denominated in foreign currency).
  - Financial sector contingent liability shock equal to 10 percent of banking sector’s assets would raise public debt by 9 percentage points of GDP by 2032.
  - Natural disaster scenario (6 percent of GDP damages; government cost 4 percent of GDP) shifts public debt up by around 7 percentage points of GDP above baseline, with debt reaching 91 percent of GDP by 2031.
  - Fan charts show a 10 percent probability that public debt could exceed 120 percent of GDP by 2032.

---

### External debt developments and vulnerabilities
- External debt declined from 92 percent of GDP in 2020 to 74 percent of GDP in 2021.
- Projections:
  - External debt projected to decline further to 51 percent of GDP by 2032.
- Stress-test results:
  - A 30 percent currency depreciation in 2022 raises external debt to 79 percent of GDP in 2032.
  - A widening of the non-interest current account balance increases external debt to 64 percent of GDP by 2032.
  - A combined one-quarter standard deviation shock would increase external debt to 63 percent of GDP in 2032.
- Policy implications:
  - Maintain commitment to restoring debt sustainability by raising the primary balance to 2.5 percent of GDP in FY2025.
  - Strengthen preparedness for exchange rate and current account shocks.
  - Continue monitoring data gaps on private external debt.

---

### Staff appraisal — key conclusions and recommended policy package
- Recent record:
  - Real GDP contracted by 16.7 percent in 2020; grew by 9.8 percent in 2021.
  - Noninterest expenditure declined by 5.4 percent of GDP in FY2021.
  - Debt for marine protection swap reduced public debt by 12 percent of GDP in 2021.
  - End of year inflation rose to 4.9 percent in 2021; projected at 5.2 percent in 2022.
- Recommended policy package:
  - Preserve FY2021 fiscal savings and ensure fuel price mitigation measures are temporary.
  - Implement additional fiscal consolidation and growth-enhancing structural reforms to increase the primary balance to 2.5 percent of GDP in FY2025 and reduce public debt to 60 percent of GDP by 2031.
  - Anchor strategy on a medium-term fiscal strategy with clear targets and specific measures; prepare contingency plans if public debt does not fall as planned.
  - Rely on both revenue and expenditure measures: broaden tax base, enhance revenue administration, contain current expenditure, expand targeted social and resilience spending.
  - Adopt a DRS focused on structural, financial, and post-disaster resilience based on a consistent multi-year macro-fiscal framework.
  - Reduce central bank financing to the government and strengthen central bank independence.
  - Continue seeking financing from donors and bilateral and multilateral creditors for climate mitigation and adaptation.
  - Strengthen AML/CFT supervision and enforce sanctions; safeguard financial stability by ensuring bank support is time-bound and targeted.

---

*Source: BELIZE — STAFF REPORT FOR THE 2022 ARTICLE IV CONSULTATION (INTERNATIONAL MONETARY FUND). (Document id: 1blzea2022001)*

### 5.2 percent for 2022 as the war in Ukraine and related economic sanctions keep global energy

### 1blzea2022001 - 5.2 percent for 2022 as the war in Ukraine and related economic sanctions keep global energy

### Recent developments, outlook, and risks
- Real GDP growth:
  - 2020: -16.7 percent
  - 2021: 9.8 percent
  - 2022 (projected): 5.7 percent
  - 2023 (projected): 3.4 percent
- Inflation (consumer prices):
  - End of period: 2020: 0.3 percent; 2021: 4.9 percent; 2022 (projected): 5.2 percent
  - Average: 2021: 3.2 percent; 2022 (projected): 4.8 percent
- Unemployment:
  - 2020: 13.7 percent
  - 2021: 10.2 percent
  - 2022 (projected): 8.2 percent
- External sector:
  - External current account (percent of GDP): 2019: -9.5; 2020: -8.1; 2021: -8.9; 2022 (projected): -9.3
  - Gross international reserves (US$ millions): 2019: 278; 2020: 348; 2021: 420; 2022 (projected): 409
  - Reserves in months of imports: 2019: 3.7; 2020: 3.8; 2021: 4.0; 2022 (projected): 3.7
- Outlook risks:
  - Downside risks include escalation of the pandemic, tighter global financial conditions, natural disasters, and higher commodity prices.
  - Impact of the war in Ukraine expected to be modest for tourism but inflationary via higher global energy and food prices.

### Fiscal position and public debt dynamics
- Fiscal outcomes:
  - Primary balance: 2019: -1.3 percent of GDP; 2020: -8.5 percent of GDP; 2021: 1.7 percent of GDP; 2022 (projected): -0.1 percent of GDP
  - Overall balance: 2019: -4.7 percent of GDP; 2020: -10.3 percent of GDP; 2021: -0.7 percent of GDP; 2022 (projected): -2.8 percent of GDP
  - Revenue and grants: 2019: 31.5 percent of fiscal year GDP; 2020: 27.5; 2021: 32.3; 2022 (projected): 30.8
  - Current non-interest expenditure: 2019: 25.9 percent of GDP; 2020: 27.0; 2021: 24.0; 2022 (projected): 24.2
  - Capital expenditure: 2019: 6.5 percent of GDP; 2020: 8.7; 2021: 6.5; 2022 (projected): 6.7
- Public debt:
  - Public debt (percent of calendar year GDP): 2019: 96.3; 2020: 133.1; 2021: 111.0; 2022 (projected): 102.5; 2023: 97.7; 2024: 95.9; 2025: 94.2; 2026: 92.8; 2027: 91.4
  - Domestic debt: 2019: 28.4; 2020: 41.4; 2021: 36.6; 2022 (projected): 32.0
  - External debt: 2019: 68.0; 2020: 91.7; 2021: 74.4; 2022 (projected): 70.5
  - Principal payment (percent of GDP): 2019: 5.9; 2020: 8.3; 2021: 9.9; 2022 (projected): 6.7
- Key projection and assessment:
  - Primary balance projected to stabilize near 0.6 percent of GDP during FY2023-32 in a passive scenario with no additional measures.
  - Public debt projected to continue falling to 85 percent of GDP by 2032 under the passive scenario, but would remain above the 70 percent of GDP threshold for sustainability and thus be assessed as unsustainable absent additional measures.

### Executive Board assessment and policy priorities
- Central objective:
  - Restore debt sustainability and strengthen the currency peg.
- Fiscal strategy targets:
  - Increase the primary balance to 2.5 percent of GDP in FY2025.
  - Reduce public debt to 60 percent of GDP by 2031.
  - Implement 1.9 percent of GDP of additional fiscal consolidation over three years (to reach the 2.5 percent primary balance objective).
- Recommended fiscal approach:
  - Preserve the fiscal savings achieved in FY2021.
  - Ensure that measures adopted to mitigate fuel price increases are temporary.
  - Rely on both revenue and expenditure measures: broaden the tax base, enhance revenue administration, contain current expenditure, and expand targeted social and resilience spending.
  - Prepare contingency plans including additional revenue and expenditure measures and debt operations if public debt does not fall as planned.

### Structural reforms, climate agenda, and financial stability
- Growth-enhancing structural reforms recommended:
  - Strengthen the business climate by improving access to credit for SMEs and reducing entry barriers for new businesses.
  - Enhance human capital and infrastructure.
  - Reduce crime by providing adequate resources to law enforcement and social programs.
  - Build resilience to climate change and natural disasters via a DRS focused on structural, financial, and post-disaster resilience based on a consistent multi-year macro-fiscal framework.
- Climate change financing:
  - Authorities should continue seeking financing from donors and bilateral and multilateral creditors to implement Belize’s updated Nationally Determined Contribution for 2021-30, which includes large reductions in greenhouse gas emissions, restoring ecosystems, expanding renewable energy, and adaptation actions in agriculture, tourism, and fisheries.
- Financial sector and AML/CFT priorities:
  - Safeguard financial stability by ensuring pandemic-related forbearance measures are time-bound and targeted, and resume regular classification and restructuring procedures for banks and credit unions.
  - Continue strengthening AML/CFT supervision of banks and enforce sanctions for non-compliance.
  - Prioritize reforms to mitigate ML/TF risks from the IFS sector to protect correspondent banking relationships.
  - Reduce central bank financing to the government and strengthen central bank independence to improve reserve adequacy and support the currency peg.

### Notable achievements and past measures
- FY2021 consolidation:
  - Fiscal consolidation in FY2021 included a 3 percent of GDP reduction in noninterest current expenditure and a 2.4 percent of GDP cut to capital expenditure.
- Debt for marine protection swap:
  - Swap reduced public debt by 12 percent of GDP.
  - A subsidiary of The Nature Conservancy lent funds to Belize to buy back the superbond (US$553 million or 30 percent of GDP) at 55 cents per dollar.
  - Belize committed to spend US$4.2 million per year on marine conservation until 2041 and expand Biodiversity Protection Zones from 16 percent to 30 percent of ocean area by 2026.
  - Established an endowment fund of US$23.5 million to fund marine conservation after 2041.

### Key social and economic indicators (selected)
- Population (thousands), 2021: 432.5
- GDP per capita (current US$), 2021: 4,177
- Poverty (percent of total population), 2018: 52.0
- Life expectancy at birth (years), 2019: 74.6
- Human development index (rank), 2020: 110
- Area (sq.km.): 22,860
- Under-five mortality rate (per thousand), 2020: 11.7

*Source: BELIZE — STAFF REPORT FOR THE 2022 ARTICLE IV CONSULTATION (INTERNATIONAL MONETARY FUND).*

### 6.      The fiscal position improved significantly in FY2021 due to the strong economic

### 6.      The fiscal position improved significantly in FY2021 due to the strong economic

### Fiscal position and projections
- Primary balance rose from –8.5 percent of GDP in FY2020 to 1.7 percent of GDP in FY2021.
- FY2021 improvement drivers:
  - 4.8 percent of GDP cyclical recovery of revenues plus grants.
  - 5.4 percent of GDP fall in noninterest expenditure due to fiscal consolidation.
- Primary balance projections:
  - Projected to decline to –0.1 percent of GDP in FY2022, partly due to:
    - 0.7 percent of GDP cut in specific taxes on fuel.
    - 0.1 percent of GDP subsidy to public transportation to limit tariff rises.
    - 0.2 percent of GDP fall in revenue due to the reopening of borders.
    - 0.5 percent of GDP drop in grants.
    - 0.2 percent of GDP rise in the wage bill, partly driven by restitution of last year’s 10 percent cut to public sector wages from July 2022.
  - Projected to increase to 0.7 percent of GDP in FY2023 as fuel-price measures expire.
  - Projected to decline gradually to 0.4 percent of GDP in FY2032 as grants continue to decline and assuming no additional fiscal consolidation during FY2022-32.

### Debt dynamics and financing needs
- Public debt path:
  - Declined from 133 percent of GDP in 2020 to 111 percent of GDP in 2021.
  - Projected to fall to 85 percent of GDP by 2032 in line with continued primary surpluses.
- Gross financing needs (GFN):
  - Projected to fall from 13.2 percent of GDP in 2021 to below 10 percent during 2022-32.
- Sustainability assessment:
  - Staff would continue to assess Belize’s public debt as unsustainable in the absence of additional measures because it would remain above the 70 percent of GDP threshold for sustainability over the next 10 years even in the baseline scenario.
  - Debt dynamics remain highly vulnerable to shocks to growth, interest rates, and the fiscal position.

### External position and reserves
- Current account and reserves:
  - Current account deficit widened in 2021 due to strong import growth and higher commodity prices.
  - International reserves increased from US$348 million (3.8 months of imports) in 2020 to US$420 million (4 months of imports) in 2021.
    - Increase partly due to the IMF’s SDR25.6 million (US$36 million) allocation, which the authorities are keeping as reserves.
- Outlook:
  - Current account deficit projected to remain elevated during 2022-23 in line with high global energy and food prices, moderating over the medium term.
  - Reserve adequacy is expected to worsen over time given this deficit and potentially scarcer external financing due to debt sustainability concerns.

### Risks to the outlook
- Risks are substantial and tilted to the downside:
  - Intensification of the pandemic domestically and abroad, including emergence of vaccine resistant variants, could derail tourism recovery and hurt contact-intensive sectors.
  - De-anchoring of US inflation expectations could tighten global financial conditions and increase Belize’s external financing costs (risk of capital outflows mitigated by limited access to external capital markets).
  - Natural disasters and climate-change-related weather shocks given Belize’s high vulnerability.
  - Inflation could rise further from second-round effects and higher global energy and food prices stemming from the war in Ukraine and related sanctions.
- Upside risk:
  - Further vaccination may strengthen immunity and growth.

### Authorities’ views (summary)
- Authorities agreed with staff on outlook, risks, and that public debt would remain elevated without additional measures.
- They noted the marked FY2021 improvement driven by economic recovery, fiscal consolidation, and the debt for marine protection swap.
- Authorities expect real GDP growth of 6 percent in 2022-23 led by tourism recovery.
- FY2022 budget targets:
  - Primary surplus of 0.4 percent of GDP in FY2022.
  - Projects primary surpluses of about 2 percent of GDP between FY2023 and FY2026.
  - With GDP rebasing (to be released in May 2022), these would lower public debt to below 85 percent of GDP in 2025 and below 70 percent of GDP in 2030.
- Authorities introduced temporary reduction in specific taxes for diesel and targeted fuel subsidies for eligible bus and tour operators to limit tariff rises.

### Policy discussions — overview
- Key policy priority: restore debt sustainability and strengthen the currency peg.
- Requirements to meet this priority:
  - Preserve fiscal savings achieved in FY2021.
  - Ensure FY2022 fuel-price mitigation measures are temporary.
  - Implement additional fiscal consolidation and growth-enhancing structural reforms to reduce public debt to 60 percent of GDP by 2031.
  - Prepare contingency plans in case public debt does not decline as expected.

A. Balanced and Sustained Fiscal Consolidation
- Staff recommendation: reduce public debt to 60 percent of GDP by 2031 (slightly more ambitious than MTRP target).
- Fiscal targets and path:
  - Gradually raise the primary fiscal balance to 2.5 percent of GDP by FY2025 and keep it at 2 percent of GDP afterwards.
  - Preserving FY2021 fiscal savings and ensuring temporary nature of FY2022 fuel-price measures would keep the primary balance at about 0.6 percent of GDP over the medium term.
  - Authorities will need to implement 1.9 percent of GDP of additional fiscal consolidation over three years to reach the FY2025 primary balance target.
  - Anchor in a credible medium-term fiscal strategy and prepare for a well-designed Fiscal Responsibility Law (FRL).
- Composition of consolidation:
  - Revenue-side:
    - Broadening tax base and strengthening tax administration could raise revenue by 2 percent of GDP over three years.
    - Taxing zero-rated GST items at standard 12.5 percent could raise 1.5 percent of GDP by FY2025.
    - Standardizing Personal Income Tax exemption thresholds at BZ$20,000 could add 0.2 percent of GDP.
    - Raising excise taxes and fees on vehicle registrations and driver licenses could add 0.1 percent of GDP.
    - Strengthening tax administration could add 0.2 percent of GDP (tax compliance plan, enhance audit capacity, increase arrears collection, build capacity at Belize Tax Services, implement integrated tax admin system).
  - Expenditure-side:
    - Contain noninterest current expenditure while raising social and resilience expenditure.
    - Consider capping increases in noninterest current expenditure to inflation during FY2023-25, which would reduce its ratio to GDP by 1.4 percent by FY2025.
    - Consider increasing social expenditure by 1 percent of GDP over four years (healthcare, education, targeted social programs such as BOOST, Food Pantry, and Conditional Cash Transfers).
    - Create a natural disaster contingency fund of 1 percent of GDP over four years with adequate safeguards, in line with 2018 CCPA recommendations.
- Pension reform:
  - Plan to reform the Pension Plan for Public Officials (PPPO) in FY2022:
    - Move from unfunded defined-benefit to a defined contribution system.
    - Raise PPPO retirement age to 60–65 years in line with GSSS.
    - Near-term government expenditure would increase due to contributions to individual accounts, but significant long-term savings expected.
- Contingency measures:
  - Prepare a menu including raising the GST rate, broadening the GST base, cutting nonpriority expenditure beyond recommendations, taxing property and capital gains, and restructuring public debt.
  - Required fiscal adjustment could be smaller if growth outperforms.

B. Public Financial Management and transparency
- Continue modernization of PFM systems: cash management, public debt, internal audit, technology, procurement.
- Strengthen multi-year budgeting, fiscal risk assessment, public investment management, coverage of government accounts, accounting and fiscal reporting.
- Publish procurement contracts and beneficial ownership information of awardees; publish audit reports of pandemic-related expenditures.

C. Growth-enhancing structural reforms and climate change
- Growth-enhancing reforms to reduce fiscal consolidation needs:
  - Ease access to credit for SMEs via credit bureau and collateral registry.
  - Reduce business entry barriers, enhance human capital (tourism and BPO skills), upgrade infrastructure (farm to market roads), contain crime, expand social programs for at-risk youth.
  - Reprioritize public expenditure given limited fiscal space.
- Rule of law:
  - Continued reforms in judiciary and property rights protection; digitalization of land registry planned (subject to external funding).
  - Address inefficiencies, corruption vulnerabilities, resource gaps, and uneven application of legal guarantees.
  - Improve public access to secondary legislation and judicial decisions.
- Climate change mitigation and adaptation:
  - Mitigation objectives:
    - Reduce cumulative GHG emissions by 5,647 KtCO2e between 2021 and 2030 via ecosystem protection/restoration, renewable energy expansion, reduced conventional transport fuel use, and energy efficiency.
    - Cumulative cost 2021-30 estimated at US$1390 million (75 percent of Belize’s GDP in 2021), of which US$150 million have been secured.
  - Adaptation objectives:
    - Increase resilience to natural disasters and climate change (coastal habitat and land loss reversal, early warning systems, drought-tolerant crops and livestock, fisheries/aquaculture capacity building, climate-resilient tourism infrastructure, forest and biodiversity protection, water catchment safeguarding, improved water supply management).
    - Cumulative cost 2021-30 estimated at US$318 million (17 percent of Belize’s GDP in 2021), of which US$172 million have been committed.

*Source: IMF staff estimates and projections, Belize country document.*

### 20.      Adoption of a Disaster Resilience Strategy (DRS) would enhance access to financing.

### 20.      Adoption of a Disaster Resilience Strategy (DRS) would enhance access to financing.

### DRS and access to financing
- Belize should continue seeking funding for mitigation and adaptation plans from bilateral and multilateral creditors, the Green Climate Fund, and The Conservation Fund.
- The institutional framework created as part of the government’s debt for marine protection swap with TNC can help enhance access to these sources of financing.
- Access to financing would be enhanced further with the swift adoption of a DRS that:
  - focuses on improving structural, financial, and post-disaster resilience; and
  - is based on a consistent multi-year macro-fiscal framework.

### Financial and post-disaster resilience (current status and needs)
- Progress:
  - Structural resilience strengthened through upgrading infrastructure and restoring natural habitats.
- Gaps:
  - Less progress on financial and post-disaster resilience due to limited fiscal space.
  - Legislation creating a natural disaster contingency fund for frequent low severity events has been passed, but no funds have been allocated to it.
  - The government has a contingent credit line with the IDB for more severe events, but it is insufficient.
- Recommended actions:
  - Expand the coverage of parametric insurance and other contingent financing.
  - Reform the social protection safety net to scale up quickly after a disaster.
  - Reprioritize expenditure to advance this agenda.

### Authorities’ views on structural reform and DRS
- Government priorities:
  - Boost economic growth and enhance private sector productivity.
  - Fast-tracked approval of key foreign direct investment projects in 2021.
  - Working with the IDB to operationalize a one-stop window for foreign and domestic investment approvals.
  - Modernizing laws on exchange controls, securities, and capital markets.
  - Advancing e-government infrastructure to facilitate tax payments and other transactions.
  - Improving road connectivity for farmers to raise agricultural production and link to tourism.
  - Crime reduction via expanded social programs and enhanced surveillance.
- On climate finance and DRS:
  - Authorities are optimistic they can secure external financing for mitigation and adaptation.
  - They agree that adoption of a DRS focused on improving structural, financial, and post-disaster resilience would facilitate financing and plan to move in that direction.

### Illustrative reform scenario and fiscal targets
- Scenario summary:
  - Implementation of fiscal consolidation measures and structural reforms, together with rebasing of GDP, would reduce public debt to 60 percent of GDP by 2031.
- Key fiscal arithmetic and assumptions:
  - Raise the primary balance to 2.5 percent of GDP by FY2025 and keep at 2 percent of GDP afterwards.
  - Implement structural reforms that raise growth by 0.5 percent over the medium term.
  - Using the current GDP series, public debt would be 72.3 percent of GDP by 2031 (Table 2, Active Scenario).
  - Using a preliminary estimate of the rebased GDP series (i.e., a 20 percent increase in nominal GDP relative to the current series), public debt would be around 60 percent of GDP by 2031.
- Active scenario operational assumptions (footnote):
  - Implementation of 1.9 percent of GDP in fiscal consolidation over three years.
  - Fiscal multiplier of -0.5.
  - Growth-enhancing structural reforms that lift growth by 0.25 percent in 2026 and 0.5 percent during 2027-32.

### Monetary and external position (selected projections and indicators)
- Recent developments:
  - Foreign reserves rose by US$61 million to US$409 million in 2021.
  - IMF’s SDR25.6 million (US$36 million) allocation contributed to reserves.
- Risks:
  - Reserve adequacy expected to weaken over time as the current account deficit remains elevated and external financing declines due to debt sustainability concerns.
  - EBA-lite indicates the current account deficit is larger than its estimated equilibrium level.
- Selected baseline projections (excerpted figures preserved exactly):
  - Growth (percent): 2020 -16.7; 2021 9.8; 2022 5.7; 2023 3.4; 2024 2.0; 2025 2.0; 2026–2032 mostly 2.0.
  - Overall fiscal balance (percent of GDP): 2020 -10.3; 2021 -0.7; 2022 -2.8; 2023 -2.0; 2024 -2.1; 2025 -2.1; 2026–2032 -2.2 (rounded series in table).
  - Primary fiscal balance (percent of GDP): 2020 -8.5; 2021 1.7; 2022 -0.1; 2023 0.7; 2024 0.7; 2025 0.6; 2026–2032 mostly 0.6 to 0.4.
  - Public debt (percent of GDP): 2020 133.1; 2021 111.0; 2022 102.5; 2023 97.7; 2024 95.9; 2025 94.2; 2026 92.8; 2027 91.4; 2028 90.0; 2029 88.7; 2030 87.4; 2031 86.2; 2032 85.0.
  - Current account balance (percent of GDP): 2020 -8.1; 2021 -8.9; 2022 -9.3; 2023 -8.9; 2024 -8.5; 2025 -8.1; 2026 -7.9; 2027 -7.7; 2028 -7.6; 2029 -7.5; 2030 -7.5; 2031 -7.4; 2032 -7.4.
  - International reserves (months of imports): 2020 3.8; 2021 4.0; 2022 3.7; 2023 3.5; 2024 3.3; 2025 3.1; 2026 2.9; 2027 2.7; 2028 2.6; 2029 2.5; 2030 2.4; 2031 2.3; 2032 2.1.
- Active scenario reserve trajectory (selected):
  - International reserves (percent of external GFN) rise across the projection under the Active Scenario (table shows values such as 153.9, 180.9, 180.0, 182.0, 196.3, 216.4, 250.5, 277.1, 304.5, 323.5, 343.4, 365.8, 342.8).
  - International reserves (months of imports) under Active Scenario: 3.8, 4.0, 4.0, 4.2, 4.4, 4.6, 4.8, 5.0, 5.3, 5.5, 5.8, 6.0, 5.8.

### Financial sector and AML/CFT priorities
- Banking sector:
  - Domestic banks appear well capitalized; regulatory capital well above minimum requirements.
  - Nonperforming loans (NPLs) manageable at 5 percent of loans, partly reflecting forbearance measures that expired on December 31, 2021.
  - Central Bank requested self-assessments of loan portfolios by February 2022; those self-assessments are being reviewed.
  - Government increased the Central Bank’s capital by 0.5 percent of GDP in FY2021 to support the process.
  - Recommendations: any exceptional measures should be time-bound and targeted; resume regular classification and restructuring procedures; intensify on-site supervision.
- AML/CFT:
  - Authorities finalized their first national assessment of ML/TF risks and developed an action plan; intend to update both.
  - Policy priorities include:
    - Centralizing information on beneficial ownership for domestic and international corporations.
    - Deepening understanding of ML/TF risks to inform a cost-benefit analysis of regulatory/supervisory framework.
    - Increasing resources and capacity of the Financial Services Commission (FSC) to license, regulate and supervise all IFS licensees, and imposing dissuasive and proportionate penalties when breaches are identified.
    - Introducing legal reforms to implement AML/CFT standards on virtual assets and virtual asset services informed by risk assessment and resource considerations.
    - Proactively identifying and sanctioning licensees falsely claiming to hold a license to provide virtual asset-related services.
  - These reforms will help protect correspondent banking relationships.
- Preparedness for evaluation:
  - Authorities must continue strengthening AML/CFT for the 2023 mutual evaluation by the Caribbean Financial Action Task Force.

### Staff appraisal — key conclusions and policy recommendations
- COVID-19 impact and policy response:
  - Real GDP contracted by 16.7 percent in 2020; public debt increased to 133 percent of GDP.
  - Government adopted a MTRP aiming to reduce public debt to 85 percent of GDP in 2025 and 70 percent of GDP in 2030.
- 2021 outcomes:
  - Noninterest expenditure declined by 5.4 percent of GDP.
  - Completed debt for marine protection swap with TNC that reduced public debt by 12 percent of GDP in 2021 and expanded marine protection financing.
  - Real GDP grew by 9.8 percent in 2021.
  - End of year inflation rose to 4.9 percent in 2021; projected at 5.2 percent in 2022.
  - Primary fiscal balance rose to 1.7 percent of GDP in FY2021; projected to decline to –0.1 percent of GDP in FY2022 due to temporary measures mitigating fuel price rises.
- Debt sustainability outlook:
  - Public debt declined from 133 percent of GDP in 2020 to 111 percent of GDP in 2021 and is projected to decline to 85 percent of GDP in 2032 in the passive scenario.
  - Public debt would remain above the 70 percent of GDP threshold for sustainability over the next decade without additional measures.
- Recommended policy package:
  - Preserve the fiscal savings achieved in FY2021.
  - Ensure fuel price mitigation measures are temporary.
  - Implement additional fiscal consolidation and growth-enhancing structural reforms to increase the primary balance to 2.5 percent of GDP in FY2025 and reduce public debt to 60 percent of GDP by 2031.
  - Anchor the strategy on a medium-term fiscal strategy with clear targets and specific measures.
  - Fiscal consolidation should rely on both revenue and expenditure measures: broaden the tax base, enhance revenue administration, contain current expenditure, and expand targeted social and resilience spending.
  - Prepare contingency plans if public debt does not fall as planned, including additional revenue and expenditure measures and debt operations.
  - Strengthen business climate to raise growth (improve SME access to credit; reduce entry barriers; enhance human capital and infrastructure; reduce crime).
  - Adopt a DRS focused on improving structural, financial, and post-disaster resilience and based on a consistent multi-year macro-fiscal framework.
  - Reduce central bank financing to the government and strengthen central bank independence.
  - Continue seeking financing from donors and bilateral and multilateral creditors for climate mitigation and adaptation.
  - Safeguard financial stability by ensuring any extended bank support is time-bound and targeted; resume regular loan classification and restructuring; strengthen AML/CFT supervision and enforce sanctions.

*Source: 1blzea2022001 - 20.      Adoption of a Disaster Resilience Strategy (DRS) would enhance access to financing.*

### 39.      It is recommended that the next Article IV consultation take place on the standard 12-

### 1blzea2022001 - 39. It is recommended that the next Article IV consultation take place on the standard 12-month cycle.

### Recommendation
- It is recommended that the next Article IV consultation take place on the standard 12-month cycle.

### Real sector indicators
- Real GDP Growth (year on year, quarterly): charted from Mar-10 to Sep-21 (values shown on figure axes: -30 to 30, percent).
- Real GDP Index (2019 = 100): series showing "Current projections" vs "Pre-pandemic projections" with 2019 level marked.
- Tourist activity:
  - Stay over visitor arrivals and Cruise ship disembarkations tracked 2010–2021 (visitor arrivals in thousands).
  - Composition of Overnight Tourist Arrivals by Origin, 2021: USA 85%, Europe 4%, Mexico 1%, South Other Markets 9%, South America 1%.
- Private Sector Credit Growth (percent, year on year, monthly series Jan-13 to Jan-22).
- Consumer Price Inflation (percent, year on year, monthly series Jan-13 to Jan-22).

### Public sector indicators (Figure 5 highlights)
- Government Balance (percent of GDP): percentile bands for other Caribbean vs Belize, series 2010–2021 (axis -14 to 2).
- Public Sector Debt (percent of GDP): percentile bands and Belize series, 2010–2021 (axis 0 to 140).
- Government Tax Revenue (percent of GDP): series 2010–2021 (axis 12 to 30).
- Government Current Expenditure (percent of GDP): series 2010–2021 (axis 10 to 35).
- Government Nontax Revenue plus Grants (percent of GDP): series 2010–2021 (axis 0.0 to 8.0).
- Government Capital Expenditure (percent of GDP): series 2010–2021 (axis 0 to 12).

### External sector indicators (Figure 6 highlights)
- Current account balance and International reserves (right scale) as percent of GDP, 2010–2021 (axes show current account -12 to 30 and reserves 5 to 30).
- Current account components (percent of GDP): Trade balance, Services balance, Primary income balance, Secondary income balance, 2010–2021.
- Destination of Domestic Merchandise Exports, 2021 (percent of total): USA 22%, UK 27%, Other EU 22%, Mexico and Central America 10%, Caribbean Community 16%, Other 3%.
- Financial account balance components (percent of GDP): Foreign direct investment, Portfolio investment, Other investment, Reserve assets, 2010–2021.
- Net International Investment Position (NIIP) and components (percent of GDP), 2010–2021.
- External Public Debt by Creditor (percent of GDP): Commercial, Multilateral, Bilateral, Total, 2010–2021.

### Selected social and economic indicators (Table 1)
- Area (sq.km.): 22,860
- Population (thousands), 2021: 432.5
- GDP per capita (current US$), 2021: 4,177
- Life expectancy at birth (years), 2019: 74.6
- Human development index (rank), 2020: 110
- Under-five mortality rate (per thousand), 2020: 11.7
- Unemployment rate (percent), 2021: 10.2
- Poverty (percent of total population), 2018: 52.0

### Economic indicators (selected annual and projection figures, Table 1)
- GDP at constant prices: 2019 2.0, 2020 -16.7, 2021 9.8, 2022 5.7, 2023 3.4, 2024 2.0, 2025 2.0, 2026 2.0, 2027 2.0
- Consumer prices (end of period): 2019 0.2, 2020 0.3, 2021 4.9, 2022 5.2, 2023 2.5, 2024 2.0, 2025 2.0, 2026 2.0, 2027 2.0
- Central government (percent of fiscal year GDP) — Revenue and grants: 2019 31.5, 2020 27.5, 2021 32.3, 2022 30.8, 2023 31.5, 2024 31.5, 2025 31.4, 2026 31.4, 2027 31.4
- Current non-interest expenditure (percent of GDP): 2019 25.9, 2020 27.0, 2021 24.0, 2022 24.0, 2023 24.1, 2024 24.1, 2025 24.1, 2026 24.1, 2027 24.1
- Interest payment (percent of GDP): 2019 3.4, 2020 1.7, 2021 2.4, 2022 2.4, 2023 2.7, 2024 2.8, 2025 2.7, 2026 2.8, 2027 2.8
- Capital expenditure and net lending (percent of GDP): 2019 6.8, 2020 9.0, 2021 6.6, 2022 6.7, 2023 6.7, 2024 6.7, 2025 6.7, 2026 6.7, 2027 6.7
- Primary balance (percent of GDP): 2019 -1.3, 2020 -8.5, 2021 1.7, 2022 -0.1, 2023 0.7, 2024 0.7, 2025 0.6, 2026 0.6, 2027 0.6
- Overall balance (percent of GDP): 2019 -4.7, 2020 -10.3, 2021 -0.7, 2022 -2.8, 2023 -2.0, 2024 -2.1, 2025 -2.1, 2026 -2.2, 2027 -2.2
- Public debt (percent of GDP): 2019 96.3, 2020 133.1, 2021 111.0, 2022 102.5, 2023 97.7, 2024 95.9, 2025 94.2, 2026 92.8, 2027 91.4
  - Domestic debt (percent of GDP): 2019 28.4, 2020 41.4, 2021 36.6, 2022 32.0, 2023 28.9, 2024 28.1, 2025 27.9, 2026 28.1, 2027 28.5
  - External debt (percent of GDP): 2019 68.0, 2020 91.7, 2021 74.4, 2022 70.5, 2023 68.8, 2024 67.8, 2025 66.3, 2026 64.7, 2027 62.9
- Principal payment (percent of GDP): 2019 5.9, 2020 8.3, 2021 9.9, 2022 6.7, 2023 5.6, 2024 5.5, 2025 4.9, 2026 4.5, 2027 4.5
  - Domestic principal payment: 2019 3.9, 2020 5.3, 2021 6.4, 2022 4.7, 2023 3.3, 2024 2.6, 2025 1.8, 2026 1.8, 2027 1.9
  - External principal payment: 2019 2.1, 2020 3.0, 2021 3.5, 2022 2.0, 2023 2.3, 2024 2.9, 2025 3.0, 2026 2.7, 2027 2.6
- Credit to the private sector (annual percent change): 2019 5.8, 2020 2.2, 2021 3.5, 2022 5.0, 2023 7.2, 2024 4.3, 2025 4.0, 2026 4.0, 2027 4.0
- External current account (percent of GDP), including official grants: 2019 -9.5, 2020 -8.1, 2021 -8.9, 2022 -9.3, 2023 -8.9, 2024 -8.5, 2025 -8.1, 2026 -7.9, 2027 -7.7
- Gross international reserves (US$ millions): 2019 278, 2020 348, 2021 420, 2022 409, 2023 404, 2024 395, 2025 385, 2026 373, 2027 368
- Reserves in months of imports: 2019 3.7, 2020 3.8, 2021 4.0, 2022 3.7, 2023 3.5, 2024 3.3, 2025 3.1, 2026 2.9, 2027 2.7
- Output gap (percent of potential output): 2019 2.0, 2020 -15.9, 2021 -8.6, 2022 -4.3, 2023 -2.1, 2024 -1.3, 2025 -0.7, 2026 -0.3, 2027 -0.1
- Nominal GDP (BZ$ millions): 2019 3,891, 2020 3,171, 2021 3,593, 2022 3,982, 2023 4,270, 2024 4,452, 2025 4,632, 2026 4,819, 2027 5,014

### Central government operations (Tables 2a and 2b, selected lines)
- Revenue and grants (BZ$ millions): 2019/20 1,168; 2020/21 900; 2021/22 1,192; 2022/23 1,249; 2023/24 1,359; 2024/25 1,415; 2025/26 1,470; 2026/27 1,528; 2027/28 1,588
- Revenue (BZ$ millions): 2019/20 1,148; 2020/21 869; 2021/22 1,142; 2022/23 1,214; 2023/24 1,324; 2024/25 1,380; 2025/26 1,435; 2026/27 1,493; 2027/28 1,553
- Tax revenue (BZ$ millions): 2019/20 1,046; 2020/21 775; 2021/22 1,049; 2022/23 1,112; 2023/24 1,216; 2024/25 1,267; 2025/26 1,319; 2026/27 1,372; 2027/28 1,427
- Goods and services (BZ$ millions): 2019/20 585; 2020/21 430; 2021/22 611; 2022/23 636; 2023/24 709; 2024/25 739; 2025/26 769; 2026/27 800; 2027/28 832
- General Sales Tax (BZ$ millions): 2019/20 320; 2020/21 235; 2021/22 334; 2022/23 364; 2023/24 387; 2024/25 404; 2025/26 420; 2026/27 437; 2027/28 454
- Grants (BZ$ millions): 2019/20 203; 2020/21 150; 2021/22 353; 2022/23 35; 2023/24 35; 2024/25 35; 2025/26 35; 2026/27 35; 2027/28 35
- Total expenditure (BZ$ millions): 2019/20 1,341; 2020/21 1,236; 2021/22 1,218; 2022/23 1,361; 2023/24 1,444; 2024/25 1,510; 2025/26 1,569; 2026/27 1,635; 2027/28 1,700
- Current expenditure (BZ$ millions): 2019/20 1,087; 2020/21 941; 2021/22 975; 2022/23 1,088; 2023/24 1,154; 2024/25 1,207; 2025/26 1,255; 2026/27 1,308; 2027/28 1,360
- Wages and salaries (BZ$ millions): 2019/20 457; 2020/21 464; 2021/22 415; 2022/23 462; 2023/24 492; 2024/25 512; 2025/26 533; 2026/27 555; 2027/28 577
- Interest payments (BZ$ millions): 2019/20 126; 2020/21 56; 2021/22 68; 2022/23 108; 2023/24 115; 2024/25 124; 2025/26 128; 2026/27 136; 2027/28 140
- Capital expenditure and net lending (BZ$ millions): 2019/20 254; 2020/21 295; 2021/22 243; 2022/23 273; 2023/24 291; 2024/25 302; 2025/26 315; 2026/27 327; 2027/28 340
- Primary balance (BZ$ millions): 2019/20 -48; 2020/21 -280; 2021/22 62; 2022/23 -429; 2023/24 292; 2024/25 292; 2025/26 292; 2026/27 292; 2027/28 292
- Overall balance (BZ$ millions): 2019/20 -173; 2020/21 -336; 2021/22 -26; 2022/23 -112; 2023/24 -86; 2024/25 -95; 2025/26 -99; 2026/27 -107; 2027/28 -111
- Financing (BZ$ millions): 2019/20 173; 2020/21 336; 2021/22 261; 2022/23 128; 2023/24 69; 2024/25 59; 2025/26 107; 2026/27 111; 2027/28 111
- Public sector debt (BZ$ millions, calendar year): 2019/20 3,710; 2020/21 4,183; 2021/22 3,950; 2022/23 4,043; 2023/24 4,133; 2024/25 4,228; 2025/26 4,325; 2026/27 4,433; 2027/28 4,544
  - Domestic: 2019/20 1,103; 2020/21 1,313; 2021/22 1,316; 2022/23 1,276; 2023/24 1,235; 2024/25 1,250; 2025/26 1,292; 2026/27 1,354; 2027/28 1,428
  - External: 2019/20 2,607; 2020/21 2,870; 2021/22 2,634; 2022/23 2,768; 2023/24 2,898; 2024/25 2,978; 2025/26 3,033; 2026/27 3,079; 2027/28 3,116

### Balance of payments (Tables 3a and 3b, selected items)
- Current account balance (US$ millions): 2019 -185, 2020 -128, 2021 -159, 2022 -186, 2023 -190, 2024 -189, 2025 -187, 2026 -190, 2027 -193
- Trade balance (US$ millions): 2019 -543, 2020 -442, 2021 -532, 2022 -583, 2023 -591, 2024 -607, 2025 -621, 2026 -642, 2027 -663
- Total exports, f.o.b. (US$ millions): 2019 425, 2020 289, 2021 366, 2022 458, 2023 496, 2024 515, 2025 536, 2026 558, 2027 580
  - Of which: Oil (US$ millions): 2019 10, 2020 4, 2021 21, 2022 0, 2023 0, 2024 0, 2025 0, 2026 0, 2027 0
- Total imports, f.o.b. (US$ millions): 2019 969, 2020 731, 2021 898, 2022 1,041, 2023 1,087, 2024 1,122, 2025 1,157, 2026 1,200, 2027 1,244
  - Of which: Fuel and lubricants (US$ millions): 2019 148, 2020 80, 2021 134, 2022 216, 2023 193, 2024 180, 2025 172, 2026 167, 2027 166
- Services (US$ millions): 2019 443, 2020 255, 2021 356, 2022 443, 2023 485, 2024 506, 2025 526, 2026 547, 2027 570
- Income (US$ millions): 2019 -164, 2020 -59, 2021 -90, 2022 -134, 2023 -179, 2024 -187, 2025 -195, 2026 -203, 2027 -211
  - Of which: Public sector interest payments (US$ millions): 2019 -26, 2020 -26, 2021 -27, 2022 -28, 2023 -28, 2024 -30, 2025 -31, 2026 -32, 2027 -33
- Current transfers (US$ millions): 2019 80, 2020 118, 2021 106, 2022 88, 2023 95, 2024 103, 2025 107, 2026 111, 2027 111
- Capital and financial account balance (US$ millions): 2019 146, 2020 183, 2021 231, 2022 174, 2023 186, 2024 180, 2025 177, 2026 179, 2027 188
- Gross international reserves (US$ millions): 2019 278, 2020 348, 2021 420, 2022 409, 2023 404, 2024 395, 2025 385, 2026 373, 2027 368
  - In percent of next year's gross external financing needs: 2019 157, 2020 154, 2021 181, 2022 166, 2023 155, 2024 149, 2025 146, 2026 141, 2027 134
  - In months of next year's imports: 2019 3.7, 2020 3.8, 2021 4.0, 2022 3.7, 2023 3.5, 2024 3.3, 2025 3.1, 2026 2.9, 2027 2.7

### Operations of the banking system (Table 4, selected items)
- Central Bank of Belize (CBB) Net foreign assets (BZ$ millions): 2019 411, 2020 536, 2021 680, 2022 657, 2023 648, 2024 629, 2025 609, 2026 586, 2027 575
  - Net international reserves (BZ$ millions): 2019 460, 2020 587, 2021 731, 2022 708, 2023 699, 2024 681, 2025 661, 2026 637, 2027 626
  - Medium-term foreign liabilities (CBB) (BZ$ millions): 2019 -49, 2020 -52, 2021 -52, 2022 -52, 2023 -52, 2024 -52, 2025 -52, 2026 -52, 2027 -52
- Base money (BZ$ millions): 2019 904, 2020 1,103, 2021 1,183, 2022 1,253, 2023 1,344, 2024 1,401, 2025 1,458, 2026 1,517, 2027 1,578
- Commercial banks: Credit to the private sector (BZ$ millions): 2019 2,448, 2020 2,503, 2021 2,591, 2022 2,720, 2023 2,917, 2024 3,041, 2025 3,164, 2026 3,292, 2027 3,425
- Monetary survey: Money and quasi-money (M2) (BZ$ millions): 2019 3,242, 2020 3,585, 2021 3,845, 2022 4,073, 2023 4,368, 2024 4,554, 2025 4,738, 2026 4,930, 2027 5,129
- Memorandum items (growth rates, percent): Private sector local currency deposits growth: 5.3, 9.8, 6.0, 4.7, 6.0, 3.0, 2.8, 2.8, 2.7 (years 2019–2027 respectively); Base money growth: 6.8, 22.0, 7.2, 5.9, 7.2, 4.3, 4.0, 4.0, 4.0; Money and quasi-money growth (M2): 5.7, 10.6, 7.2, 5.9, 7.2, 4.3, 4.0, 4.0, 4.0
- Required cash reserve ratio (percent): 8.5 for 2019–2027

### Baseline medium-term outlook (Table 5, selected projections)
- GDP at constant prices (annual percent change): 2020 -16.7, 2021 9.8, 2022 5.7, 2023 3.4, 2024 2.0, 2025 2.0, 2026 2.0, 2027 2.0, 2028 2.0, 2029 2.0, 2030 2.0, 2031 2.0, 2032 2.0
- GDP at current market prices (annual percent change): 2020 -18.5, 2021 13.3, 2022 10.8, 2023 7.2, 2024 4.3, 2025 4.0, 2026 4.0, 2027 4.0, 2028 4.0, 2029 4.0, 2030 4.0, 2031 4.0, 2032 4.0
- Current account balance (percent of GDP): 2020 -8.1, 2021 -8.9, 2022 -9.3, 2023 -8.9, 2024 -8.5, 2025 -8.1, 2026 -7.9, 2027 -7.7, 2028 -7.6, 2029 -7.5, 2030 -7.5, 2031 -7.4, 2032 -7.4
- Public debt (percent of GDP): 2020 133.1, 2021 111.0, 2022 102.5, 2023 97.7, 2024 95.9, 2025 94.2, 2026 92.8, 2027 91.4, 2028 90.0, 2029 88.7, 2030 87.4, 2031 86.2, 2032 85.0
- Gross official reserves (in months of imports): 2020 4.0, 2021 3.7, 2022 3.5, 2023 3.3, 2024 3.1, 2025 2.9, 2026 2.7, 2027 2.6, 2028 2.5, 2029 2.4, 2030 2.3, 2031 2.2, 2032 2.1

### Domestic banks: financial soundness indicators (Table 6)
- Regulatory Capital to Risk Weighted Assets (percent): 2016 24.0, 2017 24.2, 2018 24.6, 2019 22.8, 2020 19.8, 2021 19.2
- Non-Performing Loans to Total Gross Loans (percent): 2016 10.4, 2017 6.4, 2018 6.2, 2019 5.1, 2020 7.7, 2021 5.0
- Loan Loss Coverage (percent): 2016 79.8, 2017 77.6, 2018 72.3, 2019 71.9, 2020 57.3, 2021 69.7
- Return On Equity (Net Income to Average Capital, percent): 2016 4.8, 2017 9.2, 2018 19.8, 2019 13.3, 2020 3.2, 2021 6.3
- Liquid Assets to Total Assets (percent): 2016 32.7, 2017 27.3, 2018 25.8, 2019 24.3, 2020 28.1, 2021 33.8
- Customer Deposits to total (Non-Interbank) Loans (percent): 2016 132.3, 2017 130.4, 2018 127.8, 2019 128.4, 2020 138.1, 2021 155.2

*Source: IMF staff compilation of material contained in the referenced IMF Belize country chapter.*

### Annex I. Implementation of 2021 Article IV Consultation

### Annex I. Implementation of 2021 Article IV Consultation

### Fiscal consolidation and debt restructuring
- Recommendation:
  - Implement a medium-term fiscal strategy aimed at reducing public debt to 60 percent of GDP by 2031, including a multiyear fiscal consolidation plan, growth enhancing structural reforms, and debt restructuring.
  - Gradually raise the primary balance to 3 percent of GDP from FY2024 onwards to enable a large reduction of debt over the medium term, using both revenue and expenditure measures.
  - On expenditure: limit the growth of noninterest current expenditure to inflation, and raise social and resilience spending.
  - On revenue: broaden the GST base and increase the GST rate, reduce PIT exemptions, raise fees, and strengthen revenue administration.
- Implementation (Significant progress):
  - FY2021: implemented a sizable fiscal consolidation including a 3 percent of GDP cut in current expenditure and a 2.4 percent of GDP cut in capital expenditure.
  - Recovery of revenue and consolidation increased the primary balance by 10 percentage points of GDP.
  - Completed a debt for marine protection swap with TNC, which reduced public debt by 12 percent of GDP in 2021 (see Annex II).
  - Government aims to increase the primary balance to near 2 percent of GDP starting in FY2023, targeting public debt of 85percent of GDP in FY2025 and 70 percent of GDP in FY2030.

### Growth enhancing structural reforms
- Recommendation:
  - Enhance the business climate by improving access to credit, easing business registration, enhancing human capital, upgrading infrastructure, and reducing crime.
  - Build resilience to natural disasters and climate change by elaborating a comprehensive Disaster Resilience Strategy focusing on structural, financial, and post-disaster resilience.
- Implementation (Some progress):
  - Land and business registration processes expedited with digital technologies; some key FDI projects fast tracked in 2021.
  - Limited progress in other reform priority areas.
  - Structural resilience advanced by restoring habitats and upgrading infrastructure; limited progress on financial and post-disaster resilience.

### Financial sector reform
- Recommendation:
  - Phase out forbearance measures and loan deferrals introduced in 2020 and appraise banks’ potential credit losses.
  - Continue to restrict dividend payments to strengthen capital positions and conduct a third-party led asset quality review.
- Implementation (Some progress):
  - Central Bank allowed regulatory forbearance measures to expire by end-2021.
  - Domestic banks and credit unions asked to classify loans into viable, viable with restructuring, and unviable; Central Bank reviewing self-assessments and will agree on institution-specific plans.

### AML/CFT reforms
- Recommendation:
  - Strengthen AML/CFT supervision, enforce sanctions for non-compliance, centralize beneficial ownership information ahead of the 2023 comprehensive evaluation by the Caribbean FATF.
  - Implement legal reforms to capture virtual assets based on risks and sanction unauthorized virtual asset service providers.
- Implementation (Some progress):
  - National ML/TF risk assessment concluded and published; action plan developed to address identified weaknesses.
  - More progress needed on centralizing beneficial ownership information and enforcing sanctions.
  - Authorities discussing regulatory approach to virtual assets; technical recommendations for policy makers expected in April 2022.

### Key implementation summary (Annex I)
- FY2021 consolidation measures and revenue recovery increased primary balance from –8.5 percent of GDP in FY2020 to 1.7 percent of GDP in FY2021 (see Annex III).
- Debt for marine protection swap reduced public debt by 12 percent of GDP in 2021 (details in Annex II).

### Annex II. Debt for Marine Protection Swap — main facts and terms
- Summary:
  - Swap finalized on November 5, 2021, between Belize and The Nature Conservancy (TNC) to restructure debt and enhance marine protection.
  - Result: reduced Belize’s public debt by 12 percent of GDP in 2021 and promoted marine conservation commitments.
- Transaction mechanics and amounts:
  - TNC subsidiary Belize Blue Investment Company issued a Blue Bond of US$364 million and loaned (Blue Loan) proceeds to Belize; US International Development Finance Corporation insured the loan against political risk.
  - Uses of US$364 million:
    - US$301 million used to buy back the superbond with face value of US$553 million (30 percent of GDP) at 55 cents per dollar, including the US$27 million superbond coupon payment due in FY2021.
    - US$24 million to establish a marine conservation endowment fund administered by an affiliate of TNC.
    - US$18 million as an original issue discount to facilitate lower interest rates in early years.
    - US$10 million to a debt service reserve account for arbitration coverage.
    - US$10 million to cover closing costs.
  - Result: public debt stock declined by US$216 million or 12 percent of GDP in 2021.
- Blue Loan characteristics:
  - Maturity: 19 years.
  - Grace period: 10 years.
  - Interest: 3 percent in the first year, gradually rises to 6 percent over the medium term.
  - Additional outlays:
    - Marine conservation payments: US$4.2 million per year for 20 years.
    - Management fees: US$0.6 million per year for 20 years.
    - Insurance against natural disasters: US$0.8 million per year on average for 19 years.
    - Trust payments: US$15,000 per year for 19 years.
  - Debt service profile:
    - Debt service for the Blue Loan lower than superbond during FY2022-34, higher thereafter.
    - Excluding principal payments, Blue Loan interest and fees are lower than superbond during FY2022-25, the same during FY2026-30, and higher thereafter.
  - Impact on near-term fiscal pressures:
    - Focusing on the next 10 years, Belize’s interests and fees decline by 0.1 percent of GDP per year on average.
    - Some fees to be paid in Belizean dollars instead of US dollars, reducing pressure on the currency peg.
- Conservation commitments and milestones:
  - Belize committed to allocate US$4.2 million per year for marine conservation until 2041 and to expand Biodiversity Protection Zones from 15.9 percent of ocean area to 30 percent by 2026.
  - Created an endowment fund of US$23.5 million to finance marine conservation after 2041.
  - Conservation Funding Agreement includes milestones with deadlines and penalties if missed.
  - Three clauses of conservation commitments:
    - Marine Spatial Plan (MSP): complete legally enforceable MSP and designate 30 percent of Ocean in Biodiversity Protection Zones (milestones 1, 3, 4, 6, and 8).
    - Other Conservation Milestones: designate Public Lands within BBRRS as Mangrove Reserves; implement an Integrated Coastal Zone Management Plan; apply to have at least three marine protected areas listed as Green List Areas by IUCN (milestones 2, 5, 7).
    - General Conservation Undertaking (non-milestone, non-penalized initiatives): aquaculture regulation; fisheries governance framework; blue carbon regulatory framework; Managed Access Program Evaluation; Environmental Impact Assessment Regulation revisions; World Heritage Sites development standards; watershed management plan for at least two major watersheds.
- Annex Table II.1 (annual amounts, as reported):
  - Interest at 3.00 percent: First payment 4/20/2022, Last payment 10/20/2022, Frequency biannual, Total payments 2, Annual Amount (In US$ Millions) 10.5
  - Interest at 3.55 percent: First payment 4/20/2023, Last payment 10/20/2023, Frequency biannual, Total payments 2, Annual Amount (In US$ Millions) 12.9
  - Interest at 5.15 percent: First payment 4/20/2024, Last payment 10/20/2025, Frequency biannual, Total payments 4, Annual Amount (In US$ Millions) 18.7
  - Interest at 6.04 percent: First payment 4/20/2026, Last payment 10/20/2040, Frequency biannual, Total payments 30, Annual Amount (In US$ Millions) 22.0 to 301.8
  - Principal: First payment 4/20/2032, Last payment 10/20/2040, Frequency biannual, Total payments 18, Annual Amount (In US$ Millions) 40.4
  - Conservation: First payment 1/20/2022, Last payment 10/20/2041, Frequency Quarterly, Total payments 80, Annual Amount (In US$ Millions) 4.2
  - Management: First payment 1/20/2022, Last payment 10/20/2041, Frequency Quarterly, Total payments 80, Annual Amount (In US$ Millions) 0.6
  - Insurance: First payment 1/20/2022, Last payment 1/20/1940, Frequency Annual, Total payments 19, Annual Amount (In US$ Millions) 0.8
  - Trust: First payment 7/20/2022, Last payment 7/20/1940, Frequency Annual, Total payments 19, Annual Amount (In US$ Millions) 0.015

### Annex III. Debt Sustainability Analysis — key findings and scenarios
- Background and recent trajectory:
  - Public debt rose from 96 percent of GDP in 2019 to 133 percent of GDP in 2020 due to an 18.5 percent fall in nominal GDP and pandemic-related fiscal pressures.
  - Staff assessed public debt as unsustainable in the 2021 Article IV Consultation because debt was projected to remain above the 70 percent of GDP threshold for sustainability and public sector gross financing needs (GFN) were projected to surpass the 15 percent of GDP threshold in some years.
- Improvements in 2021:
  - FY2021 measures (3 percent of GDP cut to current expenditure; 2.4 percent of GDP cut to capital expenditure) and revenue recovery increased the primary balance from –8.5 percent of GDP in FY2020 to 1.7 percent in FY2021.
  - Debt for marine protection swap reduced public debt by 12 percent of GDP in 2021.
  - Public debt fell from 133 percent of GDP in 2020 to 111 percent in 2021 and is projected to fall to 85 percent in 2032.
  - Public external debt projected to fall from 92 percent of GDP in 2020 to 51 percent in 2032.
  - Public domestic debt projected to fall from 41 percent of GDP in 2020 to 34 percent in 2032.
  - GFN projected to fall to between 6.5 and 10 percent of GDP over the next 10 years due to lower interest rates and long Blue Loan repayment period.
- Staff assessment and required actions:
  - Staff would continue to assess Belize’s public debt as unsustainable in the absence of additional measures: without additional measures, public debt remains above the 70 percent of GDP sustainability threshold in staff’s baseline.
  - Restoring debt sustainability requires preserving FY2021 fiscal savings and implementing additional fiscal consolidation and growth-enhancing structural reforms.
- Stress test results and vulnerabilities:
  - Sensitivities:
    - One standard deviation fall in real GDP growth for two years increases debt-to-GDP by 32 percentage points by 2032.
    - Real exchange rate depreciation of 12 percent increases public debt by 7 percentage points of GDP by 2032 (65 percent of debt denominated in foreign currency).
    - Financial sector contingent liability shock: an increase in public spending equal to 10 percent of banking sector’s assets associated with recapitalization needs would raise public debt by 9 percentage points of GDP by 2032.
  - Natural disaster scenario (illustrative):
    - Assumed natural disaster causes 6 percent of GDP in economic damages; real GDP growth declines by 3 percent in year of disaster, by 1 percent in next year, then increases by 0.5 percent in each of the following two years.
    - Assumed government cost: 4 percent of GDP (two-thirds of economic damage).
    - Recovery and reconstruction spending spread over three years: 2 percent of GDP in first year, 1 percent of GDP in each of next two years.
    - Impact: shifts public debt trajectory up by around 7 percentage points of GDP above baseline, with debt reaching 91 percent of GDP by 2031.
  - Overall: debt dynamics remain vulnerable to shocks to growth, interest rates, fiscal position, natural disasters, and climate change; fan charts show a 10 percent probability that public debt could exceed 120 percent of GDP by 2032.

*International Monetary Fund — Annex I. Implementation of 2021 Article IV Consultation (excerpts).*

### 6.      External debt declined in 2021 but remains high and vulnerable to shocks.

### 6.      External debt declined in 2021 but remains high and vulnerable to shocks.

### Key developments and drivers
- External debt declined from 92 percent of GDP in 2020 to 74 percent of GDP in 2021.
- The decline was driven by both the debt for marine protection swap with TNC and a strong pick in economic activity.
- Note: Given the lack of data on private external debt, the external DSA covers only external public debt.

### Projections (baseline)
- External debt is projected to decline further to 51 percent of GDP by 2032 reflecting lower fiscal deficits and a more limited access to bilateral and multilateral financing.

### Stress-test results and vulnerability assessment
- Stress tests indicate external debt is highly sensitive to exchange rate and current account shocks.
- A 30 percent currency depreciation in 2022 raises external debt to 79 percent of GDP in 2032.
- A widening of the non-interest current account balance increases external debt to 64 percent of GDP (year implied: 2032).
- Half standard deviation shocks to real GDP growth or interest rates have smaller effects on external debt (no aggregate percentage change stated).
- A combined one-quarter standard deviation shock would increase external debt to 63 percent of GDP in 2032.

### Additional relevant indicators and dynamics (selected)
- Gross external financing need (in percent of GDP) reported in Annex Table III.1: 10.1, 11.6, 11.0, 12.3 (selected historical/projection entries as shown).
- External debt-to-exports ratio (in percent) examples: 119.9, 119.9, 203.4, 145.5, 124.3 (selected historical entries as shown).
- Identified external debt-creating flows and automatic debt dynamics contributed to the 2020–2021 changes shown in the DSA tables and figures.

### Policy recommendations and risk responses
- Maintain commitment to restoring debt sustainability by raising the primary balance to 2.5 percent of GDP in FY2025.
- Strengthen preparedness for exchange rate and current account shocks given their outsized impact on external debt dynamics.
- Continue monitoring data gaps on private external debt; external DSA currently limited to public external debt.

*Source: IMF staff (Belize Country Report Annexes and DSA tables and figures).*

### Annex V. Updated Nationally Determined Contribution

### Annex V. Updated Nationally Determined Contribution

### Overview
- Belize released its updated Nationally Determined Contribution (NDC) in August 2021. Its first NDC under the Paris Climate Change Agreement was submitted in 2016.
- The update benefits from more robust data on land use trends and emission factors, including Belize's first Forestry and Other Land Use (FOLU) sector Greenhouse Gas Inventory showing trends in emissions and removals since 2001.
- The updated NDC considers national capacity and circumstances, and technological advancements, improving planning and projections over the previous NDC.
- The updated NDC includes actions on both mitigation and adaptation, as well as their costs and financing gaps.
- Although Belize contributes a small share of global emissions, the NDC prioritizes protection and restoration of natural habitats that serve as carbon sinks: mangrove forests, seagrass and terrestrial forests.
- The updated NDC prioritizes management of further development of the coastline to reverse net coastal habitat and land loss and initiatives to strengthen adaptive capacity in agriculture, fisheries, aquaculture, health, tourism, and water resources.

### Mitigation: Emissions Profile and Opportunities
- The energy sector (including transport) is the largest greenhouse gas (GHG) emitter followed by the international bunkers (ships and aircraft), industry, and waste (Annex Table 4.1).
- In agriculture, the primary GHG emissions sources are livestock and forest fires. Mitigation opportunities for livestock are limited but preventing forest fires is feasible.
- Due to significant carbon storage in the Forestry and Other Land Use (FOLU) sector, Belize is a net sink of GHG emissions. Emissions in the FOLU sector stem from the conversion of forest land to grasslands or croplands.
- Reducing deforestation and forest degradation provide significant mitigation opportunities in the sector.
- Blue carbon ecosystems (mangroves and seagrass) sequester and store significant amounts of carbon, safeguard frontline communities by offsetting sea level rise and coastal erosion, and support a more resilient tourism and aquaculture industry.

### Mitigation: Targets, Actions, and Expected Reductions
- Mitigation targets in the updated NDC are estimated to avoid 5,647 KtCO2e in cumulative emissions during 2021-30.
- Key sector targets and actions include:
  - Reduce GHG emissions and raise GHG removals related to land use change by 2,053 KtCO2e cumulative over 2021-30 by:
    - Reforesting protected areas;
    - Restoring degraded and deforested riparian forests;
    - Mitigating forest degradation by reducing fire incidence and improving logging practices;
    - Reducing emissions related to fuelwood use;
    - Planting shade trees in agricultural lands.
  - Remove 381 KtCO2e of emissions through mangrove restoration by:
    - Doubling the mangrove protected area (currently at 12,827 hectares);
    - Restoring at least 4,000 hectares of mangroves;
    - Developing a national seagrass management policy.
  - Reduce methane emissions from livestock by 10 percent by 2030 and avoid emissions of at least 4.5 KtCO2e related to agriculturally driven land use change.
  - Avoid emissions from the power sector equivalent to 19 KtCO2e per year through system and consumption efficiency measures.
  - Avoid 44 KtCO2e of GHG emissions in the national electricity supply through the introduction of expanded capacity from renewable energy sources.
  - Avoid 117 KtCO2e/year of GHG emissions from the transport sector through a 15 percent reduction in conventional transportation fuel use and achieve 15 percent efficiency gain per passenger and ton per kilometer.
  - Improve waste management processes to avoid emissions of up to 18 KtCO2e per year, in line with the national waste management strategy.

### Mitigation: Costs, Financing Needs, and Conditionalities
- The cost of the mitigation targets and actions listed for 2021-30 is estimated at US$1.39 billion.
- Recognizing funding already committed, the funding gap is estimated at US$1.24 billion.
- Considering recoverable costs in renewable energy and waste, this gap could fall to US$607 million.
- Belize is approaching donors as well as bilateral and multilateral creditors to fill this gap.
- Selected entries from Annex Table V.2 (costs and financing status, preserved exactly as in source):
  - Total mitigation cost: 1,394,237,332 (in U.S.$)
  - Funded/Committed: 67,920,292 (in U.S.$)
  - Total Unfunded/Gap: 1,236,808,340 (in U.S.$)
  - Examples of activity-specific figures:
    - Reforestation, forest protection and sustainable forest management — Total: 67,749,000; Funded: 30,865,128; Unfunded: 7,000,000; Gap/Other: 29,883,872
    - Mangrove protection and reforestation — Total: 330,798,801; Funded: 10,000,000; Unfunded: 5,000,000; Gap/Other: 315,798,801
    - Renewables (system and consumption efficiency measures amounting to at least 100 GWh/year by 2030) — Total: 460,050,610; Funded: 274,500; Unfunded/Gap: 459,036,410
    - Power sector efficiency (avoid 44 KtCO2e by 2030 through expanded renewable capacity) — Total: 93,068,247; Funded: 274,500; Unfunded: 5,731,000; Gap/Other: 87,062,747
    - Transport (avoid 117 KtCO2e/year by 2030 through 15% reduction in fuel use and 15% efficiency gains) — Total: 71,000,000; Funded: 0; Unfunded: 56,038,000; Gap/Other: 14,962,000
    - Waste Management (avoid up to 18 KtCO2e per year by 2030) — Total: 327,400,000; Funded: 10,200,000; Unfunded/Gap: 317,200,000
  - Conditionality notes preserved from source include references to TA (technical assistance), CD (capacity development), and financial support for pilot, scaling, and market design activities.

### Adaptation: Impacts and Sectoral Priorities
- Climate change is already impacting Belize’s population and key economic sectors:
  - Agriculture is sensitive to changes in precipitation, temperature, and extreme weather.
  - Tourism is impacted by sea level rise, coral bleaching, and loss of biodiversity.
  - Water resources, health and energy are impacted by the increasingly variable climate.
- Belize hosts globally significant ecological resources including rainforest, mangrove forests, wetlands and coral reefs which are under threat from global warming.
- The updated NDC includes sector-level adaptation and resilience targets (Annex Table 4.2), with main sectoral targets including:
  - Coastal zone and marine resources: manage further coastline development to reverse net coastal habitat and land loss and develop an early warning system for storm surges.
  - Agriculture: reduce post-harvest losses via the national adaptation strategy, invest in climate smart agriculture, increase access to drought tolerant crops and livestock breeds, better soil and water management, and implement an early warning system for drought and extreme weather events.
  - Fisheries and aquaculture: build capacity through research, diversification and retraining to support livelihoods while protecting coastal ecosystems.
  - Human health: assess vulnerabilities and invest in capacity to respond to climate-related threats, including new diseases and high temperatures.
  - Tourism: increase adaptive capacity by developing climate resilient planning frameworks and infrastructure (assess coastal tourism vulnerability and carrying capacity; install roads, bathroom facilities, buoys, renovate docks, wayfinding).
  - Forestry and biodiversity: implement protection targets of the National Biodiversity Strategy Action Plan including increased effectiveness of the National Protected Areas System.
  - Land use, human settlements, and infrastructure: protect communities from flooding and sea level rise through implementation of the Land Use Policy and supporting green and grey infrastructure.
  - Water resources: enhance protection of water catchment (including groundwater) areas and improve management and maintenance of existing water supply systems via the National Water Sector Adaptation Strategy and Action Plan.

### Adaptation: Costs and Financing Gap
- The adaptation targets and actions are estimated to cost US$318 million between 2021-30.
- Recognizing funding already committed, the funding gap is estimated at US$146 million.
- Selected entries from Annex Table V.3 (costs and financing status, preserved exactly as in source):
  - Total adaptation cost: 318,128,111 (in U.S.$)
  - Funded/Requested: 172,351,429 (in U.S.$)
  - Unfunded/Gap: 145,776,687 (in U.S.$)
  - Examples of activity-specific figures:
    - Increase resilience to climate impacts for coastal communities and habitats by managing further development of the coastline to reverse net coastal habitat and land loss by 2025 — Total: 35,684,740; Funded: 23,934,740; Unfunded: 11,750,000
    - Strengthen the resilience of coastal communities by developing an early warning system for storm surges by 2025 — Total: 113,474,000; Funded: 41,474,000; Unfunded: 72,000,000
    - Reduce post-harvest losses through implementation of the National Adaptation Strategy in Agriculture — Total: 12,978,000; Funded: 12,228,000; Unfunded: 750,000
    - Build adaptive capacity in the health sector by assessing vulnerability and investing in capacity to respond — Total: 35,554,715; Funded: 18,604,715; Unfunded: 16,950,000
    - Implement protection targets of the National Biodiversity Strategy Action Plan by 2024 — Total: 82,747,969; Funded: 57,697,969; Unfunded: 25,050,000
    - Protect communities from damage caused by flooding and sea level rise through implementation of the Land Use Policy and supporting green and grey infrastructure — Total: 25,117,112; Funded: 14,112,000; Unfunded: 11,005,112
  - Conditionality notes preserved from source include references to TA (technical assistance), CD (capacity development), piloting, and financing support for implementation, research, and infrastructure.

*Source: Belize 2021 Updated Nationally Determined Contribution (Annex V, as reproduced in the provided IMF document).*

### 4.      The materialization of large downside risks to the outlook could further weaken the

### 1blzea2022001 - 4.      The materialization of large downside risks to the outlook could further weaken the

### Risks to the outlook and external position
- Key downside risks identified:
  - Intensification of the pandemic.
  - Climate related natural disasters.
  - Further increase in global energy and food prices due to the war in Ukraine and related economic sanctions.
- Projected effects of these shocks:
  - Weaken the recovery of tourism.
  - Widen the current account deficit.
  - Reduce international reserves.
- Without exchange rate flexibility, strengthening the external position will require restoring debt sustainability and preserving the exchange rate peg as a key anchor.

### Model estimates for 2021 (Belize) — current account and REER diagnostics (In percent of GDP)
- CA-Actual-8.9
- Cyclical contributions (from model) (-)1.0
- COVID-19 adjustor (+) 2/3.9
- Additional temporary/statistical factors (+)0.0
- Natural disasters and conflicts (-)-0.1
- Adjusted CA-5.9
- CA Norm (from model) 3/-5.9
- External financing constraint adjustment (+) 4/2.4
- Adjusted CA Norm-3.5
- CA Gap-2.4-3.0-3.1
  - o/w Relative policy gap4.6
- Elasticity-0.42
- REER Gap (in percent)5.67.17.4
- Note: 1/ The ES model estimates the needed change in the current account balance and the REER to lower the NIIP by 32 percentage points of GDP by 2032.
- Note: 2/ Additional cyclical adjustment to account for the temporary impact of the pandemic on tourism (4.3 percent of GDP) and remittances (-0.4 percent of GDP).
- Note: 3/ Cyclically adjusted, including multilateral consistency adjustments.
- Note: 4/ Adjustment to account for a reduced access to external financing over the medium term, which lowers the current account deficit that can be sustained without depleting reserves.

### Policy implications and recommendations
- Preserve the exchange rate peg (conventional peg) as a key anchor for macroeconomic stability.
- Restore and preserve debt sustainability by:
  - Preserving the fiscal savings achieved in FY2021.
  - Implementing additional fiscal consolidation.
  - Implementing structural reforms to boost growth, enhance competitiveness, and strengthen resilience to natural disasters and climate change.
- Expected outcomes from these measures:
  - Reduce the fiscal deficit and public debt.
  - Lower the current account deficit.
  - Enhance access to external financing.
  - Improve reserve adequacy.

### Fund relations, key financial positions, and arrangements (as of March 31, 2022 / April 20, 2022)
- Membership Status: Joined: March 16, 1982; Article VIII
- Exchange Rate Arrangement: The exchange rate arrangement is a conventional peg. Since 1976, the Belize dollar has been pegged to the U.S. dollar, the intervention currency, at the rate of BZ$ 2 per U.S. dollar.
- General Resources Account:
  - Quota 26.70100.00
  - IMF's Holdings of Currency (Holdings Rate) 20.4976.73
  - Reserve Tranche Position 6.2123.27
- SDR Department:
  - Net cumulative allocation 43.49100.00
  - Holdings 45.95105.67
- Outstanding Purchases and Loans: None
- Latest Financial Commitments — Arrangements:
  - Stand-By   Dec 03, 1984   Jun 01, 1986   7.13   7.13
- Overdue Obligations and Projected Payments to Fund:
  - Principal and Charges/Interest reported as 0.000.000.00 0.00
- Implementation of HIPC, MDRI, PCDR: Not Applicable

### Technical assistance and collaborations (selected)
- Recent technical assistance (selected items and dates):
  - FAD advised on developing regulations and treasury instructions to support the Public Financial Management (PFM) law in June 2017.
  - MCM-LEG advised on jurisdictional review of the foreign exchange system in December 2017.
  - FAD conducted a public investment management assessment (PIMA) in January 2020.
  - MCM advised on improving the FX Regulatory Framework in February- June 2022.
  - MCM advised on FX reserve management in March 2022.
- CARTAC Technical Assistance to Belize in FY2020 - FY2022:
  - In FY2020 and FY2021, CARTAC delivered approximately 37 field person weeks of TA to Belize in customs and tax administration, public financial management, statistics, and financial markets.
  - Selected activity examples with dates (as given): HR and Manpower Planning for Tax Administration Reform 06/17/2019–06/21/2019; Strengthening audit capacity (training) 01/11/2021–01/23/2021; Drafting regulations supporting the new Securities Act 2/14/2022–3/25/2022.

### Statistical issues and data adequacy (As of April 22, 2022)
- General: Data provision has some shortcomings but is broadly adequate for surveillance.
- Real sector:
  - SIB publishes GDP, CPI, population and labor force/employment statistics, social indicators.
  - Labor force statistics released twice a year; poverty and literacy-related social indicators have large lags.
  - Room to strengthen compilation of GDP on an expenditure basis; available at annual frequency with significant lag.
  - SIB rebasing and updating national accounts methodology; authorities expect to release the new series on May 25, 2022.
- Fiscal accounts:
  - Data on the consolidated operations of the public sector are unavailable.
  - Priorities include preparing comprehensive lists of institutions comprising central government, general government, and public sector.
  - Social Security Board is not treated as part of general government in current classification; accounting practices follow neither a cash nor accrual basis.
  - Data on domestic debt and domestic debt service needs improvement.
- Monetary and financial statistics:
  - MFS reported by CBB in SRFs with a one-month lag.
  - Individual banks’ FSIs available quarterly; limited data on non-bank financial institutions, especially the offshore sector.
- Balance of payments:
  - SIB publishes monthly trade data (one-month lag) that do not cover services; tourism revenues represent a large share of total exports.
  - Central Bank compiles the Balance of Payments quarterly and annually in BPM6 format; timelines should be improved.
- Participation in IMF data initiatives:
  - Belize began participating in the IMF’s GDDS (enhanced GDDS) in 2006 providing only metadata; it has not implemented the e-GDDS.

### Table of Common Indicators Required for Surveillance (selected latest observations and frequencies; as of April 22, 2022)
- Exchange Rates: Date of Latest Observation 3/31/2022; Date Received 3/31/2022; Frequency of Data D; Frequency of Reporting D; Frequency of Publication D
- International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Date of Latest Observation 3/10/2022; Date Received 3/19/2022; Frequency W W W
- Reserve/Base Money: Date of Latest Observation 3/10/2022; Date Received 3/19/2022; Frequency W W W
- Broad Money: Date of Latest Observation 3/10/2022; Date Received 3/19/2022; Frequency W W W
- Central Bank Balance Sheet: Date of Latest Observation 2/28/2022; Date Received 3/11/2022; Frequency M M M
- Consolidated Balance Sheet of the Banking System: Date of Latest Observation 2/28/2022; Date Received 4/1/2022; Frequency M M M
- Consumer Price Index: 2022M3; Date Received 4/1/2022; Frequency M M M
- GDP/GNP: 2021Q4; Date Received 2/24/2022; Frequency Q Q Q
- External Current Account Balance: 2021Q3; Date Received 3/1/2022; Frequency Q Q Q
- Stocks of Central Government and Central Government-Guaranteed Debt: 1/31/2022; Date Received 3/15/2022; Frequency M M M
- Gross External Debt (Central Government only): 1/31/2022; Date Received 3/15/2022; Frequency A, M A, M A, M
- International Investment Position: 6/ NA NA NA NA NA

*Staff Report for the 2022 Article IV Consultation — Informational Annex (Belize), April 20, 2022*

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_Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1blzea2022001.pdf_