## _cr0969 - 2008. At that time, Directors welcomed the improvement in Belize’s near-term macroeconomic

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### Background
- Belize suffered considerable destruction from floods resulting from tropical rain systems in May–June and October 2008 (Tropical Storm Arthur and Tropical Depression No. 16).
- Total rainfall in Belize reached nearly 30 inches in late May–early June 2008, causing extensive flooding in Corozal, Orange Walk, and Stann Creek Districts.
- Floods in October 2008 inundated over 100 communities in Eastern Cayo, Belize, Orange Walk, and Corozal Districts; flood waters began to recede only in November.
- The floods affected 50,000 people, or roughly one-sixth of Belize’s population.
- The government, via the National Emergency Management Organization (NEMO), distributed food, clean water, medical care, and other emergency relief supplies to about 16,500 people in affected areas.
- The authorities requested a purchase equivalent to 25 percent of quota (SDR 4.7 million) under the Fund’s Emergency Assistance for Natural Disasters (ENDA).
- International assistance:
  - CDB approved two infrastructure support loans of US$9 million.
  - Belize requested an additional US$10 million from CDB and US$5 million from IDB.
  - International Red Cross, PAHO, UNICEF, UNDP, and USAID provided emergency grants (US$0.5 million) and in-kind support.

### Economic performance prior to the floods
- Growth and inflation:
  - Economic growth was 1.2 percent in 2007.
  - Growth in 2008 is estimated at 2½ percent.
  - 12-month inflation rose to 9½ percent last summer and declined to 4½ percent by November 2008.
- Public finances and debt:
  - Primary surplus of the central government projected to increase from 3¾ percent of GDP in 2007/08 to 4¾ percent in FY2008/09.
  - Total public debt declined to about 80 percent of GDP by end-2008.
  - Recurrent expenditure has been growing rapidly; dependence on volatile revenue sources (petroleum and grants) has been rising.
- External sector:
  - External current account deficit widened to 13 percent of GDP in 2008, largely reflecting a surge in FDI-related imports.
  - Gross international reserves of the Central Bank of Belize (CBB) reached US$166 million (2 months of imports) by end-2008; part of the increase reflects external disbursements deposited by the government with the CBB to be spent during 2009.
- Structural reforms:
  - Tax administration being computerized; ASYCUDA to be rolled out in coming months.
  - A paper on monetary management reforms to be submitted shortly.
  - A public expenditure and financial accountability review (EU-supported) is being finalized.
  - Public sector program vulnerabilities noted: Social Security Board and civil servants’ pension plan require strengthening.

### Economic impact of the floods
- Overall losses:
  - Direct and economic losses estimated at about US$66 million (4.8 percent of GDP).
  - Balance of payments impact estimated at US$46 million (3.3 percent of GDP).
- Sectoral impacts:
  - Agriculture: ruined crops of bananas, corn, papaya, and sugarcane; significant secondary impacts on other sectors.
  - Tourism: many destinations (including cruise ship day-tour sites) flooded or inaccessible, temporarily closed.
  - Infrastructure: roads undermined; bridges destroyed or weakened; more than 1,700 buildings inundated.
- Fiscal impact:
  - Additional spending on emergency relief and reconstruction; government reallocated investment and additional spending estimated at US$30 million (2.2 percent of GDP) for infrastructure rehabilitation.
  - Significant share of rehabilitation spending will extend into FY 2009/10.
- Balance of payments dynamics:
  - External current account impact of the two floods estimated at US$46 million (3.3 percent of GDP).
  - Most export losses occurred in 2008 (mainly citrus and banana); sugar sector losses expected to lower exports principally in 2009.
  - About two thirds of import-side impact from higher imports of reconstruction materials; remainder mainly agricultural inputs expected in 2009.
  - Combined impact over 2008–09 equivalent to nearly one third of end-2008 external foreign reserves.
- Selected tabulated estimates for external current account and trade flows (figures as presented):
  - External current account balance: Before Floods 2007: -51.1; Before Floods 2008 Est.: -165.9; After Floods 2008 Est.: -179.2; Before Floods 2009 Proj.: -62.0; After Floods 2009 Proj.: -94.8.
  - Exports of goods and services (US$ millions): 2007: 823.7; 2008 Est.: 864.8; 2008 After Floods Est.: 851.5; 2009 Before Floods Proj.: 848.1; 2009 After Floods Proj.: 842.7.
  - Imports of goods and services (US$ millions): 2007: -810.2; 2008 Est.: -977.4; 2008 After Floods Est.: -977.4; 2009 Before Floods Proj.: -866.5; 2009 After Floods Proj.: -893.9.
  - Note: Estimates based on preliminary assessment by authorities; do not include possible additional current flows such as grants or insurance payments.

### The policy response
- Immediate actions:
  - Focus on emergency relief followed by infrastructure rehabilitation and measures to restart economic activity in affected areas.
  - Assessment of critical infrastructure repair needs conducted with CDB and IDB support.
  - Government allocated about US$6 million from its own resources for infrastructure rehabilitation during 2009.
- Fiscal strategy and commitments:
  - Government reaffirmed commitment to prudent fiscal policies aimed at reducing the debt ratio significantly over the medium term, maintaining price stability, and increasing external reserves.
  - Authorities recognize high public debt limits fiscal space and increased budget dependence on volatile revenues (petroleum and grants); intend to consider policy adjustments while broadly following the fiscal strategy from last year’s Article IV consultation.
  - Authorities welcome discussion of fiscal strategy and policy adjustments in the forthcoming 2009 Article IV consultation.
- Structural and social-financial reforms:
  - Priorities: further improvements in tax administration, more transparency and regular audits of oil taxation.
  - Need to develop a strategy for contingent public liabilities.
  - Pension plan for civil servants will require additional annual budget contributions for the next decade; Social Security Board needs reform to regain sound financial footing.
  - Benefits coverage and participant contributions under both plans may need adjustment to restore financial viability.
  - Roll-out of the National Health Insurance is being delayed pending agreement on sustainable funding.
  - The Development Finance Corporation will resume lending operations with CDB funding, with safeguards to ensure financial viability and avoid risks to the budget.

### Access and capacity to repay
- ENDA request:
  - Authorities requested a purchase equivalent to SDR 4.7 million (25 percent of quota) under ENDA.
  - The purchase represents approximately 0.5 percent of Belize’s 2008 GDP and would help meet immediate foreign exchange needs, reducing a decline in Belize’s external reserves.
- Debt dynamics and repayment capacity:
  - Belize’s public sector and external debt were on a declining trajectory before the 2008 tropical systems, reflecting improved fiscal primary balance since 2005.
  - Belize benefited from a cooperative private creditor debt restructuring in 2007 that resulted in a 21 percent NPV reduction in external debt owed to private creditors.
  - Debt-related risks increased due to the deteriorating global environment: external debt service obligations set to increase in two steps in 2010 and 2012 when the coupon rate on private restructured debt reaches 8.5 percent (up from 4.5 percent currently).
  - External reserves would remain low under unchanged policies; authorities’ commitment to increase reserves is noted.
  - Staff views risks to the Fund as mitigated by authorities’ commitment to prudent fiscal and monetary policies and maintaining macroeconomic stability.
- Fund repayment expectation:
  - It is expected that Belize will be able to discharge its obligations to the Fund in a timely manner.

### Staff appraisal
- Damage and outlook:
  - Floods in 2008 caused significant losses and reduced 2008 economic growth; imports will increase to provide agricultural inputs and repair damaged infrastructure.
  - Medium-term outlook remains positive but rebuilding productive capacity—particularly in agriculture—will require considerable efforts and resources.
  - Higher investment needs to repair public infrastructure coincide with tight budgetary resources and limited international reserves.
- Assessment of policy stance:
  - Staff believes policies in the letter of intent are adequate for sustaining fiscal consolidation and maintaining broad macroeconomic stability.
  - Staff supports authorities’ approach to finance reconstruction through multilateral assistance on favorable terms and reallocation of public investment, while being mindful of large public debt.
  - Staff looks forward to reviewing the fiscal strategy in the forthcoming Article IV consultation, taking into account potential significant deterioration in the global environment.
  - Fiscal strategy will need to target primary surpluses consistent with improving debt sustainability within a framework of sound macroeconomic policies and structural reforms aimed at achieving high and sustainable growth over the medium term.

### Staff recommendation and rationale (paragraph 21)
- Recommendation:
  - The staff supports the authorities’ request for a purchase under the Fund’s policy on emergency assistance for natural disasters.
- Rationale:
  - Considerable damage to the economy and associated balance of payment needs, in the context of low international reserves.
- Risks and mitigating factors:
  - Risks to Fund resources: large public and publicly guaranteed debt; relatively high vulnerability to exogenous shocks.
  - Mitigants: soundness of policies outlined in the letter of intent; expectation of continued support from the international community; authorities’ commitment to work closely with the Fund on a medium-term fiscal strategy.

### Authorities’ commitments and conditionalities welcomed by staff
- Commitment to stay current in all debt-service payments to creditors.
- Commitment not to impose or intensify:
  - Restrictions on the making of payments and transfers for current international transactions,
  - Multiple currency practices,
  - Import restrictions for balance of payments purposes,
  - Bilateral payments’ agreements that are inconsistent with Article VIII.

### Key macroeconomic and fiscal indicators (selected, exact figures from source)
- Overall balance (central government): -6.4, -5.4, -2.0, -1.1, 0.3, -1.1 (2004–2009)
- Public and publicly guaranteed debt (percent of GDP): 100.1, 98.4, 92.2, 88.6, 79.6, 77.3 (2004–2009)
- External current account (percent of GDP): -14.7, -13.6, -2.1, -4.0, -13.0, -6.6 (2004–2009)
- Gross usable official reserves (US$ millions): 48, 71, 104, 109, 166, 149 (2004–2009)
- Gross usable official reserves (months of imports): 0.9, 1.2, 1.6, 1.6, 2.0, 2.0 (2004–2009)
- Exports of goods and services (US$ millions): 544, 627, 790, 824, 852, 843 (2004–2009)
- Imports of goods and services (US$ millions): 628, 715, 764, 810, 977, 894 (2004–2009)

### Appendix I — Belize––Fund Relations (selected points)
- Membership: Joined: March 16, 1982; Article VIII.
- Quota and holdings (as presented): Quota: 18.80100.00; Fund holdings of currency: 14.5677.46; Reserve Position: 4.2422.55.
- SDR Department holdings: 1.84N/A.
- Outstanding Purchases and Loans: None.
- Latest Stand-by arrangement: Approval Date: Dec 03, 1984; Expiration Date: May 31, 1986; Amount Approved (SDR Million): 7.13; Amount Drawn (SDR Million): 7.13.
- Exchange rate regime: Since 1976, the Belize dollar has been pegged to the U.S. dollar at the rate of BZ$2 per U.S. dollar.
- Government assessment of 2008 storms:
  - Events: Late May: Tropical Storm Arthur; Mid-October to early November 2008: Tropical Depression 16 (TD 16).
  - Damage and economic impact (government estimates): Overall damage: US$66 million, 4.8 percent of GDP. Balance of payments impact: US$45 million, 3.3 percent of GDP.
  - Growth projection: Preliminary estimate: growth may slow to 1.5 percent in 2009.
  - Immediate fiscal response: Reallocation of previously budgeted capital expenditure of US$1.5 million; Additional expenditure of US$4 million to repair and rebuild critical infrastructure and assist displaced and severely affected persons.
- Donor and multilateral response:
  - CDB: Approved two loans totaling US $9.3 million; negotiations advanced for quick-disbursing loans (US $10 million).
  - IDB: Negotiations advanced for quick-disbursing loans (US $5 million).
- IMF Executive Board decision:
  - Approved SDR 4.7 million (about US$6.9 million) in financing under emergency assistance for natural disasters.
  - IMF Press Release highlighted overall direct and economic losses estimated at about US$66 million, or 4.8 percent of GDP; balance of payments impact estimated at about US$46 million.
- Authorities’ statements:
  - Authorities anticipated 1.5 percent real output growth in 2009; IMF staff projects 2.0 percent.
  - Staff figures for estimated impact on external current account: $13.3 million in 2008 and 32.8 million in 2009, or 3.3 percent of GDP over two years.
  - Authorities formally requested emergency assistance amounting to 25 percent of quota.

*Source: IMF staff report (2008) on Belize, including request for Emergency Assistance for Natural Disasters (ENDA) and attached letter of intent; APPENDIX I. Belize––Fund Relations (As of January 16, 2009) and IMF Press Release (February 18, 2009).*

### 2008. At that time, Directors welcomed the improvement in Belize’s near-term macroeconomic

### _cr0969 - 2008. At that time, Directors welcomed the improvement in Belize’s near-term macroeconomic

### Background
- Belize suffered considerable destruction from floods resulting from tropical rain systems in May–June and October 2008 (Tropical Storm Arthur and Tropical Depression No. 16).
- Total rainfall in Belize reached nearly 30 inches in late May–early June 2008, causing extensive flooding in Corozal, Orange Walk, and Stann Creek Districts.
- Floods in October 2008 inundated over 100 communities in Eastern Cayo, Belize, Orange Walk, and Corozal Districts; flood waters began to recede only in November.
- The floods affected 50,000 people, or roughly one-sixth of Belize’s population.
- The government, via the National Emergency Management Organization (NEMO), distributed food, clean water, medical care, and other emergency relief supplies to about 16,500 people in affected areas.
- The authorities requested a purchase equivalent to 25 percent of quota (SDR 4.7 million) under the Fund’s Emergency Assistance for Natural Disasters (ENDA).
- International assistance: CDB approved two infrastructure support loans of US$9 million; Belize requested an additional US$10 million from CDB and US$5 million from IDB; International Red Cross, PAHO, UNICEF, UNDP, and USAID provided emergency grants (US$0.5 million) and in-kind support.

### Economic performance prior to the floods
- Growth and inflation:
  - Economic growth was 1.2 percent in 2007.
  - Growth in 2008 is estimated at 2½ percent.
  - 12-month inflation rose to 9½ percent last summer and declined to 4½ percent by November 2008.
- Public finances and debt:
  - Primary surplus of the central government projected to increase from 3¾ percent of GDP in 2007/08 to 4¾ percent in FY2008/09.
  - Total public debt declined to about 80 percent of GDP by end-2008.
  - Recurrent expenditure has been growing rapidly; dependence on volatile revenue sources (petroleum and grants) has been rising.
- External sector:
  - External current account deficit widened to 13 percent of GDP in 2008, largely reflecting a surge in FDI-related imports.
  - Gross international reserves of the Central Bank of Belize (CBB) reached US$166 million (2 months of imports) by end-2008; part of the increase reflects external disbursements deposited by the government with the CBB to be spent during 2009.
- Structural reforms:
  - Tax administration being computerized; ASYCUDA to be rolled out in coming months.
  - A paper on monetary management reforms to be submitted shortly.
  - A public expenditure and financial accountability review (EU-supported) is being finalized.
  - Public sector program vulnerabilities noted: Social Security Board and civil servants’ pension plan require strengthening.

### Economic impact of the floods
- Overall losses:
  - Direct and economic losses estimated at about US$66 million (4.8 percent of GDP).
  - Balance of payments impact estimated at US$46 million (3.3 percent of GDP).
- Sectoral impacts:
  - Agriculture: substantial damage—ruined crops of bananas, corn, papaya, and sugarcane; significant secondary impacts on other sectors.
  - Tourism: many destinations (including cruise ship day-tour sites) flooded or inaccessible, temporarily closed.
  - Infrastructure: roads undermined; bridges destroyed or weakened; more than 1,700 buildings inundated.
- Fiscal impact:
  - Additional spending on emergency relief and reconstruction; government reallocated investment and additional spending estimated at US$30 million (2.2 percent of GDP) for infrastructure rehabilitation.
  - Significant share of rehabilitation spending will extend into FY 2009/10.
- Balance of payments dynamics:
  - External current account impact of the two floods estimated at US$46 million (3.3 percent of GDP).
  - Most export losses occurred in 2008 (mainly citrus and banana); sugar sector losses expected to lower exports principally in 2009.
  - About two thirds of import-side impact from higher imports of reconstruction materials; remainder mainly agricultural inputs expected in 2009.
  - Combined impact over 2008–09 equivalent to nearly one third of end-2008 external foreign reserves.
- Tabled estimates (selected figures from "Estimated Impact of 2008 Floods on External Current Accounts During 2008–09"):
  - External current account balance: Before Floods 2007: -51.1; Before Floods 2008 Est.: -165.9; After Floods 2008 Est.: -179.2; Before Floods 2009 Proj.: -62.0; After Floods 2009 Proj.: -94.8.
  - Exports of goods and services: 2007: 823.7; 2008 Est.: 864.8; 2008 After Floods Est.: 851.5; 2009 Before Floods Proj.: 848.1; 2009 After Floods Proj.: 842.7.
  - Imports of goods and services: 2007: -810.2; 2008 Est.: -977.4; 2008 After Floods Est.: -977.4; 2009 Before Floods Proj.: -866.5; 2009 After Floods Proj.: -893.9.
  - Note: Estimates based on preliminary assessment by authorities; do not include possible additional current flows such as grants or insurance payments.

### The policy response
- Immediate actions:
  - Focus on emergency relief followed by infrastructure rehabilitation and measures to restart economic activity in affected areas.
  - Assessment of critical infrastructure repair needs conducted with CDB and IDB support.
  - Government allocated about US$6 million from its own resources for infrastructure rehabilitation during 2009.
- Fiscal strategy and commitments:
  - Government reaffirmed commitment to prudent fiscal policies aimed at reducing the debt ratio significantly over the medium term, maintaining price stability, and increasing external reserves.
  - Authorities recognize high public debt limits fiscal space and increased budget dependence on volatile revenues (petroleum and grants); intend to consider policy adjustments while broadly following the fiscal strategy from last year’s Article IV consultation.
  - Authorities welcome discussion of fiscal strategy and policy adjustments in the forthcoming 2009 Article IV consultation.
- Structural and social-financial reforms:
  - Priorities: further improvements in tax administration, more transparency and regular audits of oil taxation.
  - Need to develop a strategy for contingent public liabilities.
  - Pension plan for civil servants will require additional annual budget contributions for the next decade; Social Security Board needs reform to regain sound financial footing.
  - Benefits coverage and participant contributions under both plans may need adjustment to restore financial viability.
  - Roll-out of the National Health Insurance is being delayed pending agreement on sustainable funding.
  - The Development Finance Corporation will resume lending operations with CDB funding, with safeguards to ensure financial viability and avoid risks to the budget.

### Access and capacity to repay
- ENDA request:
  - Authorities requested a purchase equivalent to SDR 4.7 million (25 percent of quota) under ENDA.
  - The purchase represents approximately 0.5 percent of Belize’s 2008 GDP and would help meet immediate foreign exchange needs, reducing a decline in Belize’s external reserves.
- Debt dynamics and repayment capacity:
  - Belize’s public sector and external debt were on a declining trajectory before the 2008 tropical systems, reflecting improved fiscal primary balance since 2005.
  - Belize benefited from a cooperative private creditor debt restructuring in 2007 that resulted in a 21 percent NPV reduction in external debt owed to private creditors.
  - Debt-related risks increased due to the deteriorating global environment: external debt service obligations set to increase in two steps in 2010 and 2012 when the coupon rate on private restructured debt reaches 8.5 percent (up from 4.5 percent currently).
  - External reserves would remain low under unchanged policies; authorities’ commitment to increase reserves is noted.
  - Staff views risks to the Fund as mitigated by authorities’ commitment to prudent fiscal and monetary policies and maintaining macroeconomic stability.
- Fund repayment expectation:
  - It is expected that Belize will be able to discharge its obligations to the Fund in a timely manner.

### Staff appraisal
- Damage and outlook:
  - Floods in 2008 caused significant losses and reduced 2008 economic growth; imports will increase to provide agricultural inputs and repair damaged infrastructure.
  - Medium-term outlook remains positive but rebuilding productive capacity—particularly in agriculture—will require considerable efforts and resources.
  - Higher investment needs to repair public infrastructure coincide with tight budgetary resources and limited international reserves.
- Assessment of policy stance:
  - Staff believes policies in the letter of intent are adequate for sustaining fiscal consolidation and maintaining broad macroeconomic stability.
  - Staff supports authorities’ approach to finance reconstruction through multilateral assistance on favorable terms and reallocation of public investment, while being mindful of large public debt.
  - Staff looks forward to reviewing the fiscal strategy in the forthcoming Article IV consultation, taking into account potential significant deterioration in the global environment.
  - Fiscal strategy will need to target primary surpluses consistent with improving debt sustainability within a framework of sound macroeconomic policies and structural reforms aimed at achieving high and sustainable growth over the medium term.

*Source: IMF staff report (2008) on Belize, including request for Emergency Assistance for Natural Disasters (ENDA) and attached letter of intent.*

### 21.      The staff supports the authorities’ request for a purchase under the Fund’s

### _cr0969 - 21.      The staff supports the authorities’ request for a purchase under the Fund’s

### Staff recommendation and rationale
- The staff supports the authorities’ request for a purchase under the Fund’s policy on emergency assistance for natural disasters.
- Justification: considerable damage to the economy and associated balance of payment needs, in the context of low international reserves.
- Identified concern: Belize’s large public debt and a relatively high vulnerability to exogenous shocks could pose some risks to the Fund’s resources.

### Risks and mitigating factors
- Risks to Fund resources:
  - Large public and publicly guaranteed debt.
  - Relatively high vulnerability to exogenous shocks.
- Mitigants identified by staff:
  - Soundness of policies outlined in the attached letter of intent.
  - Expectation of continued support from the international community.
  - Authorities’ commitment to work closely with the Fund in developing the medium-term fiscal strategy to improve debt sustainability.

### Authorities’ commitments and conditionalities welcomed by staff
- Commitment to stay current in all debt-service payments to creditors.
- Commitment not to impose or intensify:
  - Restrictions on the making of payments and transfers for current international transactions,
  - Multiple currency practices,
  - Import restrictions for balance of payments purposes,
  - Bilateral payments’ agreements that are inconsistent with Article VIII.

### Key macroeconomic and fiscal indicators (selected, exact figures from source)
- Overall balance (central government): -6.4, -5.4, -2.0, -1.1, 0.3, -1.1 (2004–2009)
- Public and publicly guaranteed debt (percent of GDP): 100.1, 98.4, 92.2, 88.6, 79.6, 77.3 (2004–2009)
- External current account (percent of GDP): -14.7, -13.6, -2.1, -4.0, -13.0, -6.6 (2004–2009)
- Gross usable official reserves (US$ millions): 48, 71, 104, 109, 166, 149 (2004–2009)
- Gross usable official reserves (months of imports): 0.9, 1.2, 1.6, 1.6, 2.0, 2.0 (2004–2009)
- Exports of goods and services (US$ millions): 544, 627, 790, 824, 852, 843 (2004–2009)
- Imports of goods and services (US$ millions): 628, 715, 764, 810, 977, 894 (2004–2009)

*Source: IMF staff report (text and tables as provided in content unit).*

### APPENDIX I.  Belize––Fund Relations

### APPENDIX I.  Belize––Fund Relations

### Membership and Fund Accounts
- Membership status: Joined: March 16, 1982; Article VIII
- General Resources Account (as presented):
  - Quota: 18.80100.00
  - Fund holdings of currency: 14.5677.46
  - Reserve Position: 4.2422.55
  - Holdings Exchange Rate
- SDR Department:
  - Holdings: 1.84N/A

### Outstanding Purchases, Loans, and Recent Arrangements
- Outstanding Purchases and Loans: None
- Latest Financial Arrangements:
  - Stand-by
    - Approval Date: Dec 03, 1984
    - Expiration Date: May 31, 1986
    - Amount Approved (SDR Million): 7.13
    - Amount Drawn (SDR Million): 7.13
- Projected Payments to Fund: None

### Exchange Rate and Nonfinancial Relations
- Since 1976, the Belize dollar has been pegged to the U.S. dollar at the rate of BZ$2 per U.S. dollar (intervention currency).
- Since the second quarter of 1995, the central bank has resorted to rationing of its sales of foreign exchange to commercial banks on an ad-hoc basis, except for some essential import items, giving rise to restrictions on the making of payments and transfers for current international transactions.

### Impact of 2008 Tropical Storms and Flooding — Government Assessment
- Events:
  - Late May: Tropical Storm Arthur damaged southern Belize.
  - Mid-October to early November 2008: Tropical Depression 16 (TD 16) caused severe flooding in western and northern Belize and the Belize River Valley.
- Damage and economic impact (government estimates):
  - Overall damage: US$66 million, 4.8 percent of GDP.
  - Balance of payments impact: US$45 million, 3.3 percent of GDP.
- Sectoral effects:
  - Agricultural sector: significant damage to sugar cane, corn, papayas, vegetables, rice and bananas.
  - Tourism: cancellations and poor access to primary destinations and ancillary facilities; cottage industries along the Belize River Valley partially or completely inundated.
  - Infrastructure: severe damage to transportation system, roads, bridges, drains, culverts, commercial and residential buildings.
- Growth projection and external balance:
  - Preliminary estimate: growth may slow to 1.5 percent in 2009 after 3 years of growth, due to natural disasters and the global economic slowdown.
  - External current account deficit expected to remain large as agricultural export earnings and tourism revenues fall while rehabilitation and reconstruction imports rise.
- Immediate government fiscal response:
  - Reallocation of previously budgeted capital expenditure of US$1.5 million.
  - Additional expenditure of US$4 million to repair and rebuild critical infrastructure and assist displaced and severely affected persons.

### Donor and Multilateral Response
- Caribbean Development Bank (CDB):
  - Approved two loans totaling US $9.3 million for reconstruction of two bridges destroyed by Tropical Storm Arthur and for clean-up and restoration to damaged infrastructure.
  - Negotiations well advanced to access quick-disbursing loans from the CDB (US $10 million) for major highway repairs.
- Inter-American Development Bank (IDB):
  - Negotiations well advanced to access quick-disbursing loans (US $5 million) for major highway repairs.
- Longer-term priorities:
  - Restore roads and bridges, replace housing stock, assist farmers in rehabilitation and replacement of livestock.

### Government Request to the IMF
- Request: a purchase equivalent to SDR 4.7 million (25 percent of quota) under the Fund’s Policy on Emergency Assistance for Natural Disasters.
- Purpose of purchase:
  - Meet foreign exchange needs related to disaster response.
  - Finance imports of food and replacement of damaged household items.
  - Ease pressure on external reserves and maintain confidence in the external position.
- Government policy commitments:
  - Continue prudent fiscal and monetary policies to reduce external public debt ratios over the medium term and regain market access.
  - Commit to fiscal structural reforms to boost revenue and strengthen public finances.
  - Monetary policy to aim at maintaining price stability and increasing international reserves.
  - Stay current in all debt-service payments to creditors.
  - Do not intend to impose or intensify restrictions on payments and transfers for current international transactions, introduce multiple currency practices, impose or intensify import restrictions for balance of payments purposes, or conclude bilateral payments agreements inconsistent with Article VIII.

### IMF Executive Board Decision and Statements
- IMF Executive Board approved SDR 4.7 million (about US$6.9 million) in financing under emergency assistance for natural disasters to support recovery from 2008 storm damage and flooding.
- IMF Press Release highlights:
  - Overall direct and economic losses estimated at about US$66 million, or 4.8 percent of GDP.
  - Balance of payments impact estimated at about US$46 million.
  - IMF support is part of wider international assistance including CDB, IDB, UN agencies, and international aid groups.
- Statement by Mr. Murilo Portugal, Deputy Managing Director and Acting Chair:
  - Expressed sympathy for loss of life and extensive damage.
  - Noted adverse balance of payments impact compounded by falling external demand due to a global downturn.
  - Observed that Belize has reduced fiscal imbalances in recent years, inflation has remained under control, and macroeconomic stability has been preserved.
  - Confirmed authorities’ commitment to prudent fiscal and monetary policies consistent with halving public debt ratios over the medium term.
  - Indicated the authorities’ medium-term strategy and structural reforms will be discussed in the next Article IV consultation in spring 2009.
  - Concluded that prudent policies plus international support should help Belize recover and restore growth potential.
- Additional factual note:
  - Belize’s IMF quota: SDR 18.80 million (about US$27.7 million).

### Statement by Belizean Authorities (Executive Director Michael Horgan and Advisor Shawn Ladd)
- Authorities’ view:
  - Appreciation for IMF assistance and alignment with staff appraisal and policy recommendations.
  - Economic context: recent improvement in medium-term outlook due to oil discovery, successful debt restructuring, and stronger medium-term fiscal strategy, but debt remains high and foreign exchange reserves low.
  - Banking system: stable and well-capitalized, not directly impacted by global financial market turmoil.
  - Growth outlook: authorities anticipate 1.5 percent real output growth in 2009; IMF staff projects 2.0 percent.
- Damage and balance of payments illustration (staff figures noted):
  - Overall damage: $66 million, or 4.8 percent of GDP.
  - Estimated impact on external current account (staff): $13.3 million in 2008 and 32.8 million in 2009, or 3.3 percent of GDP over two years.
- Policy stance and use of resources:
  - Reallocated planned capital spending to repair and rebuild critical infrastructure.
  - Grateful for early CDB response and seeking additional financing from CDB ($10 million) and IDB ($5 million).
  - Emergency assistance from the Fund would bolster international reserves to deal with significant but transitory balance of payments pressure.
  - Authorities formally requested emergency assistance amounting to 25 percent of quota.

*Source: APPENDIX I. Belize––Fund Relations (As of January 16, 2009) and accompanying letters and IMF Press Release (February 18, 2009).*

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