IMF Executive Board Concludes 2021 Article IV Consultation with Belize

IMF News, June 7, 2021

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IMF Executive Board Concludes 2021 Article IV Consultation with Belize

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Bibliographic details

• Published: June 7, 2021

Pandemic impact and near-term economic shock

• The COVID-19 pandemic hit Belize hard, with a second wave starting in June 2020 that "left Belize with one of the highest numbers of cases and deaths per capita in the Caribbean."
• Tourist arrivals fell by 72 percent in 2020.
• Real GDP contracted by 14.1 percent in 2020.
• The fiscal position deteriorated: the primary deficit widened from 1.3 percent of GDP in FY2019/20 to 8.4 percent in FY2020/21.
• Public debt increased from 97.5 percent of GDP in 2019 to 127.4 percent in 2020.

Recovery prospects and macroeconomic projections

• Recovery is projected to be protracted; tourist arrivals expected to pick up in late-2021 as vaccines become more widely available in advanced countries.
• Real GDP projections (calendar year, annual percentage changes):
  • 2020: -14.1
  • 2021: 1.5
  • 2022: 6.2
  • 2023: 4.2
  • 2024: 2.0
• Consumer prices (average): 2018: 0.3, 2019: 0.2, 2020: 0.1.
• Nominal GDP (BZ$ millions) projections:
  • 2020: 3,302
  • 2021: 3,419
  • 2022: 3,703
  • 2023: 3,936
  • 2024: 4,095
  • 2025: 4,260
  • 2026: 4,432

Fiscal outlook and public debt trajectory

• Fiscal projections (central government, percent of fiscal year GDP):
  • Revenue and grants: 2018: 31.4, 2019: 31.5, 2020: 27.0, 2021: 28.2, 2022: 29.9, 2023: 31.3
  • Current non-interest expenditure: 2018: 24.8, 2019: 26.0, 2020: 26.6, 2021: 24.1
  • Interest payment: 2018: 3.3, 2019: 3.4, 2020: 1.7, 2021: 4.1, 2022: 4.0, 2023: 3.9, 2024: 3.7
  • Capital expenditure and net lending: 2018: 4.3, 2019: 6.9, 2020: 8.9, 2021: 8.6, 2022: 7.2, 2023: 6.3
  • Primary balance: 2018: 2.4, 2019: -1.3, 2020: -8.4, 2021: -4.5, 2022: -1.5, 2023: 0.8
  • Overall balance: 2018: -0.9, 2019: -4.7, 2020: -10.1, 2021: -8.7, 2022: -5.6, 2023: -3.2, 2024: -3.1, 2025: -3.0, 2026: -2.9
• Public debt projections (percent of calendar year GDP):
  • Public debt: 2018: 96.0, 2019: 97.5, 2020: 127.4, 2021: 132.4, 2022: 128.6, 2023: 124.9, 2024: 123.2, 2025: 121.4, 2026: 119.7
  • Domestic debt: 2018: 27.8, 2019: 28.7, 2020: 39.8, 2021: 43.7, 2022: 44.5, 2023: 44.4, 2024: 44.9, 2025: 45.8, 2026: 47.0
  • External debt: 2018: 68.2, 2019: 68.8, 2020: 87.6, 2021: 88.7, 2022: 84.1, 2023: 80.4, 2024: 78.3, 2025: 75.7, 2026: 72.7
  • Principal payment (percent of GDP): 2018: 7.7, 2019: 10.3, 2020: 10.1, 2021: 9.7, 2022: 9.8
  • Domestic principal payments: 4.9, 5.1, 6.8, 6.7, 5.9, 5.8
  • External principal payments: 2.2, 2.3, 2.6, 3.6, 3.8

External sector and reserves

• External current account (percent of GDP): 2018: -8.1, 2019: -9.2, 2020: -8.0, 2021: -7.7, 2022: -7.6, 2023: -6.8
• Gross international reserves (US$ millions): 2018: 294, 2019: 278, 2020: 348, 2021: 360, 2022: 345, 2023: 321, 2024: 276, 2025: 237, 2026: 193
• Reserves adequacy is expected to worsen over time as external financing gradually declines, threatening the sustainability of the currency peg.

Executive Board assessment and policy recommendations

• Key assessments:
  • The pandemic produced a high number of deaths and a deep recession.
  • The recovery is projected to be protracted and subject to large risks.
  • Belize faces unsustainable public debt, widening external imbalances, and vulnerability to natural disasters and climate change.
• Policy recommendations to restore debt sustainability while protecting the vulnerable:
  • Undertake sufficient debt restructuring and ambitious fiscal consolidation anchored in a credible medium-term strategy.
  • Rely on both revenue and expenditure measures to gradually increase the primary balance.
  • Broaden the tax base, strengthen revenue administration, and reprioritize expenditures.
  • Strengthen the social safety net and develop contingency plans in case downside risks materialize.
• Structural and resilience-enhancing reforms:
  • Implement growth-enhancing structural reforms to improve access to credit, reduce entry barriers for firms, and enhance infrastructure.
  • Strengthen law enforcement and social programs to reduce crime.
  • Further strengthen resilience to climate change and natural disasters, including developing a Disaster Resilience Strategy.
• Financial sector and AML/CFT:
  • Limit central bank financing of the government to help reduce the current account deficit, improve access to external financing, and boost reserves.
  • Safeguard financial stability by maintaining appropriate loan classification and provisioning rules, phasing out forbearance measures and loan deferrals by banks, and strengthening prudential standards as the pandemic recedes.
  • Strengthen the AML/CFT framework, enforce sanctions for non-compliance, and reform to mitigate risks associated with the international financial services sector.

Selected social and economic indicators (highlights)

• Area (sq.km.): 22,860
• Population (thousands), September 2020: 421.5
• GDP per capita, (current US$), 2020: 3,917
• Unemployment rate (percent), September, 2020: 13.7
• Poverty (percent of total population), 2009: 42.0
• Life expectancy at birth (years), 2017: 70.6
• Human development index (rank), 2017: 106
• Under-five mortality rate (per thousand), 2017: 14.2

IMF Executive Board conclusion, June 7, 2021.

References

• https://www.imf.org/-/media/images/imf/bios/imfboard.jpg
• The Executive Board
• IMF COVID-19 Hub
• Policy Tracker
• Financial Assistance
• Questions & Answers
• Belize and the IMF
• IMF Policy Advice -- A Factsheet
• Press Releases
• PRESS CENTER
• http://www.IMF.org/external/np/sec/misc/qualifiers.htm
• https://www.imf.org/en/home