Press Release: IMF Executive Board Concludes 2013 Article IV Consultation with Belize
IMF News, July 16, 2013
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- Published: July 16, 2013
Overview
- Date: July 16, 2013
- Press Release No.: 13/261
- On June 21, 2013, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Belize.
- The Belize government completed the exchange of its “super-bond” for new U.S. dollar denominated bonds due to expire in 2038, providing about US$130 million of cash-flow relief over the next 5 years.
- Legal disputes persist over nationalization of Belize Telemedia Limited (BTL) and Belize Electricity Limited (BEL); no compensation agreement has been reached and litigation may take a few years.
Economic performance and outlook
- 2012 output growth estimated at 5.3 percent, driven by recovery from 2011 weather-related damages in commodity exports.
- Inflation averaged 1.4 percent in 2012.
- External current account deficit widened to about 1.7 percent of GDP in 2012 due to a steep drop in oil exports and higher imports of fuel and electricity.
- International reserve coverage estimated at 3.4 months of imports in 2012, up from 3 months in 2011, aided by strong FDI inflows in the sugar sector.
- Unemployment remains high at 16 percent.
- Medium-term projections:
- Output growth expected to moderate to about 2.5 percent.
- Primary surplus projected at 1 percent of GDP in FY13/14.
- Public debt expected to decline to about 75 percent of GDP at end-2013 (reflecting a net face value haircut of 3 percent from the recent debt exchange).
- External current account deficit projected to widen to about 1.9 percent of GDP owing to continued deterioration in crude oil exports and rising imports.
- Reserve coverage projected to remain around 3 months of imports by end-2013.
- Government may face large medium-term financing needs related to compensation to former shareholders of nationalized companies, pending legal rulings.
Fiscal outcomes and public debt
- Fiscal primary surplus for FY2012/13 expected to deteriorate to 1.3 percent of GDP compared to 2.3 percent of GDP in 2011; deterioration reflects decline in oil-related revenues and an increase in the wage bill despite robust GST revenue growth.
- Key fiscal and debt numbers (from projections and historicals):
- Primary balance: 2.4 (2009), 1.8 (2010), 2.3 (2011), 1.3 (2012), 1.0 (2013 proj.)
- Overall balance: -1.7 (2009), -1.1 (2010), -0.6 (2011)
- Public and publicly guaranteed debt: 84.9 (2009), 85.3 (2010), 83.0 (2011), 78.6 (2012), 75.1 (2013 proj.)
- Domestic debt: 7.5 (2009), 12.1 (2010), 11.2 (2011), 12.2 (2012), 12.0 (2013 proj.)
- External debt: 77.3 (2009), 73.2 (2010), 71.8 (2011), 66.4 (2012), 63.1 (2013 proj.)
Financial sector and monetary conditions
- Credit to the private sector recovered modestly in 2012 after two years of decline; growth estimated at 1.1 percent in 2012.
- High non-performing loans (NPLs) at 20 percent of total loans at end-2012 and loan write-offs constrain private sector credit growth and erode banks’ net earnings.
- Broad money grew by 5 percent in 2012, mostly driven by expansion in net foreign assets.
- New provisioning and loan classification standards implemented by the central bank at end-2011 have resulted in declining NPLs and improving provisioning.
- Directors urged continued vigilance, close monitoring of individual institutions, intensified implementation of remaining 2011 FSAP recommendations, updating the crisis management plan, and strengthening the bank restructuring and resolution framework.
- Need identified to further strengthen the Anti Money Laundering/Combating the Financing of Terrorism framework.
Executive Board assessment and policy recommendations
- Directors congratulated authorities on strong economic performance and the successful external debt exchange.
- Key recommendations and assessments:
- Use the existing breathing space to rebuild policy buffers, pursue active debt management, accelerate financial sector reform, and bolster resilience to external shocks.
- Sustain fiscal consolidation momentum while protecting priority spending on infrastructure, internal security, and social programs.
- Raising the primary surplus to debt-sustainability-consistent levels will require strong adjustment efforts, including moderating wage increases and broadening the base for the general sales tax.
- Strengthen public financial management and implement tax reform that promotes growth and fairness.
- Avoid earmarking of funds and establish appropriate safeguards for public resources if used for creation of a specialized mortgage bank.
- Given uncertainties about liabilities from nationalizations and other contingent liabilities, take additional measures as necessary to ensure fiscal sustainability.
- Revamp the debt management framework: develop a more robust debt management institutional framework, build capacity for a medium-term debt management strategy, and explore options to develop the domestic debt market to mobilize domestic financing.
- Advance structural reforms to remove impediments to private investment, boost competitiveness and jobs, promote inclusiveness, and diversify exports and energy sources.
- Continue work on financial sector reform and crisis preparedness with IMF technical assistance as needed.
Selected economic indicators (annual / percent or levels as presented)
- GDP at constant prices: 0.0 (2009), 2.7 (2010), 1.9 (2011), 5.3 (2012), 2.5 (2013 proj.)
- Nominal GDP (US$ millions): 1,339.2 (2009), 1,392.0 (2010), 1,480.8 (2011), 1,579.4 (2012), 1,636.9 (2013 proj.)
- Gross domestic investment 1/ 2/: 22.0 (2009), 18.0 (2010), 19.0 (2011), 19.5 (2012)
- Gross national savings 1/: 16.3 (2009), 15.2 (2010), 17.9 (2011), 17.3 (2012), 17.6 (2013 proj.)
- Consumer prices (end of period): -0.4 (2009), 0.6 (2010), 2.0 (2011), 1.4 (2012 average reported)
- Real effective exchange rate: 4.5 (2009), -2.8 (2010), -9.4 (2011)
- Credit to the private sector: 4.8 (2009), -3.6 (2010), -1.2 (2011), 1.1 (2012), 2.1 (2013 proj.)
- Money and quasi-money (M2): 5.8 (2009), -2.1 (2010), 4.7 (2011), 5.1 (2012), 3.8 (2013 proj.)
- Central government revenue and grants (% of GDP): 27.2 (2009), 27.5 (2010), 27.8 (2011), 26.0 (2012), 26.4 (2013 proj.)
- Central government current expenditure (% of GDP): 24.7 (2009), 24.1 (2010), 22.7 (2011)
- Central government capital expenditure and net lending (% of GDP): 3.7 (2009), 4.6 (2010)
- External current account (percent of GDP): -4.9 (2009), -1.9 (2010), -1.7 (2012 reported), -1.9 (2013 proj.)
- Overall balance of payments (US$ millions): 47.3 (2009), 5.2 (2010), 18.1 (2011), 52.8 (2012), -10.0 (2013 proj.)
- Gross international reserves (US$ millions) 5/: 213.7 (2009), 218.0 (2010), 236.1 (2011), 288.9 (2012), 272.5 (2013 proj.)
- Reserves in months of imports: 3.3 (2009), 3.2 (2010), 3.0 (2011), 3.4 (2012), 3.1 (2013 proj.)
Press Release No. 13/261, July 16, 2013, IMF Communications Department.