Belize: Staff Concluding Statement of the 2024 Article IV Mission
IMF News, February 27, 2024
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- Published: February 27, 2024
Recent developments, outlook, and risks
- Real GDP growth
- Grew by 17.9 percent in 2021 and 8.7 percent in 2022.
- Estimated to have grown by 4.5 percent in 2023.
- Real GDP was 16 percent above pre-pandemic levels in 2023.
- Labor market
- Unemployment rate declined from 14 percent in 2020 to 3.4 percent in 2023.
- Unemployment rate projected to stay at 3.4 percent over the medium term.
- Inflation
- Fell to 4.4 percent in 2023.
- Projected to decline to 3.1 percent in 2024 and 1.3 percent over the medium term.
- Public debt and fiscal position
- Public debt fell from 103 percent of GDP in 2020 to 66 percent in 2023.
- Drivers: strong nominal GDP growth, improvement in the primary fiscal balance, a debt for marine protection swap with The Nature Conservancy, and a discount in Belize's Petrocaribe debt with Venezuela.
- Primary balance projected: 1.2 percent of GDP in FY2022; 0.8 percent in FY2023; projected to increase to 1.0 percent of GDP from FY2024 onwards.
- Overall fiscal deficit projected to rise from 0.6 percent of GDP in FY2022 to 1.4 percent of GDP in FY2023-25.
- Public debt projected to decline more slowly and remain above 50 percent of GDP over the next decade.
- Growth outlook
- Growth projected at 3.5 percent in 2024 and 2.5 percent from 2025 onwards.
- Medium-term growth projected at 2.5 percent, just above population growth (2 percent).
- Financial sector
- Domestic banks' regulatory capital rose from 15.1 percent of risk weighted assets in 2022 to 16.1 percent in 2023.
- Nonperforming loans fell from 6.9 percent of total loans in 2022 to 5.2 percent in 2023.
- Returns on assets rose from 0.3 percent in 2022 to 1.5 percent in 2023.
- Constraints: still high nonperforming loans, low capital buffers, tight liquidity in some banks relative to the pre-pandemic period; constraining private sector credit growth.
- Key risks
- Elevated risk of higher global food and fuel prices due to armed conflicts in Ukraine and the Middle East.
- Global interest rates could stay high for longer, complicating debt dynamics.
- Vulnerability to climate-related disasters affecting agriculture, energy, and tourism.
- Potential economic slowdown could exacerbate banking sector vulnerabilities.
Policy priorities and recommendations
- Overarching targets
- Reduce public debt to 50 percent of GDP by FY2030.
- Raise the primary fiscal balance to 2.0 percent of GDP from FY2025 onwards.
- Increase priority spending on logistics, utilities and energy infrastructure, targeted social programs, and crime prevention.
- Implement structural reforms to boost inclusive growth and climate resilience.
- Remain vigilant to financial stability risks.
- Fiscal policy — consolidation and reallocation
- Implement 1 percent of GDP of fiscal consolidation over two years to reach a 2 percent of GDP primary balance from FY2025 onwards.
- Anchor consolidation in a medium-term fiscal strategy and prepare for a Fiscal Responsibility Law (FRL) with specific fiscal rules.
- Expand infrastructure spending in logistics, utilities, and energy by 0.8 percent of GDP from FY2025 onwards (road connectivity, water and sewer systems, renewable energy generation and storage, social housing, climate resilience).
- Expand targeted transfers to protect vulnerable households against food insecurity by 0.3 percent of GDP from FY2025 onwards (temporary, conditional on training and job search).
- Introduce 0.2 percent of GDP in subsidies for childcare, after-school programs, and training for vulnerable women from FY2025 onwards (female labor force participation stood at 45.2 percent in 2023; male rate 71.5 percent).
- Raise spending to prevent and address crime by 0.1 percent of GDP starting in FY2025.
- Finance consolidation and priority spending through revenue mobilization and expenditure reprioritization.
- Revenue measures
- Tax policy measures could raise 2.0 percent of GDP by FY2025:
- Tax some non-first necessity zero-rated GST items at the 12.5 percent GST rate to raise 1.6 percent of GDP.
- Standardize personal income tax exemption thresholds to raise 0.2 percent of GDP.
- Raise excise taxes on fuel and fees on vehicle registrations and driver licenses to raise 0.2 percent of GDP.
- Strengthen revenue administration to raise 0.2 percent of GDP:
- Create a unified tax department and incorporate stamp duties and land taxes in the Belize Tax Service Department (BTSD).
- Increase tax arrears collection, ensure greater HR autonomy for BTSD, implement risk-based audit selection, and enact the draft customs law.
- Expenditure-side measures
- Reform the Pension Plan for Public Officials (PPPO) to lower government spending by 0.1 percent of GDP over two years and cut the PPPO's long-run deficit by two-thirds. Suggested measures: gradually introduce a contribution rate of 10 percent; raise retirement age from 55 to 65; reduce replacement rate from 67.5 percent to 50 percent.
- Continue securing concessional external financing to keep the interest bill manageable.
- Adopt contingency measures if debt does not decline as expected, including taxing a larger share of zero-rated items at the 12.5 percent GST rate, raising the GST rate, and reducing nonpriority expenditure.
- Public Financial Management (PFM)
- Strengthen multi-year budget preparations, fiscal risk assessment, public investment management, coverage of government accounts, accounting and fiscal reporting, and internal audit.
- Prepare for FRL implementation; publish procurement contracts and beneficial ownership information of awardees for transparency and accountability.
Structural reforms and climate change
- Growth constraints and priorities
- Pre-pandemic constraints: fiscal and debt risks, human capital deficiencies, crime, high cost of finance, infrastructure gaps, natural disasters.
- Closing the gender participation gap and improving education can raise long-run output:
- Female participation gap was 26.3 percentage points in 2023; closing the gap could increase real GDP by over 20 percent in the long run.
- Authorities piloting subsidized daycare and training in the Cayo district.
- Education reforms: expand conditional cash transfers, improve curriculums, retrain teachers, expand technical and "soft skill" vocational programs.
- Crime reduction
- Homicide rates fell from 37.2 per 100,000 people in 2016-19 to 31.2 in 2021 and 21.2 in 2023.
- Reducing crime to the Caribbean average could increase annual real GDP growth between 0.04 and 0.3 percent.
- Priorities: enhance capacity of personnel, use technology, expand social and educational programs for at-risk youth.
- Access to finance for MSMEs
- High lending rates persist due to lack of competition and high operational costs.
- Measures: incentivize formalization, help MSMEs prepare business plans, set up a credit bureau and a collateral registry.
- Climate resilience
- Implement a Disaster Resilience Strategy focused on structural, financial, and post-disaster resilience with a multi-year macro-fiscal framework that incorporates climate change.
- Authorities investing in climate resilient crops and infrastructure, protecting the marine environment under the blue loan, investing in renewable energy generation, and electrifying public transportation.
- Significant financing gaps for mitigation initiatives remain.
Monetary and financial policies
- International reserves and the peg
- International reserves projected to remain above three months of imports and short-term external debt, but below the IMF's ARA metric.
- Additional pressures on reserves likely from 2032 onwards, when repayment of the blue loan starts.
- Increasing reserves requires fiscal consolidation, growth-enhancing structural reforms, and gradually reducing Central Bank financing of the government.
- Central Bank financing and domestic capital market development
- Central Bank holds more than half of the government's domestic public debt.
- Gradually reducing Central Bank holdings would provide investment opportunities to banks and the social security fund and reduce excess liquidity.
- Recommend introducing a market-based auction for Treasury Notes alongside outreach to domestic investors to develop a market-oriented government securities yield curve and benchmark domestic-currency securities.
- Transition may raise domestic interest rates; fiscal consolidation would mitigate adverse public finance impacts.
- Financial stability
- Central Bank should keep vulnerable institutions under enhanced supervision and request pre-emptive actions when necessary (including preemptive recapitalizations).
- Central Bank tools: provision of liquidity, imposition of limits on the distribution of dividends, and an adequate bank resolution framework.
Key statistics (select)
- Population and social indicators
- Area (sq.km.): 22,860
- Human development index (rank), 2021: 123
- Population (thousands), 2022: 444.8
- Under-five mortality rate (per thousand), 2021: 11.2
- GDP per capita, (current US$), 2023: 6,855
- Unemployment rate (percent), October 2023: 3.4
- Life expectancy at birth (years), 2021: 70.5
- Poverty (percent of total population), 2022: 35.7
- Selected economic indicators — GDP and prices (annual percentage changes)
- GDP at constant prices: 17.9 (2021), 8.7 (2022), 4.5 (2023), 3.5 (2024), 2.5 (2025)
- Consumer prices (end of period): 4.9 (2021), 6.7 (2022), 3.7 (2023), 2.6 (2024), 1.3 (2025)
- Consumer prices (average): 3.2 (2021), 6.3 (2022), 4.4 (2023), 3.1 (2024), 2.3 (2025)
- Central government (percent of fiscal year GDP)
- Revenue and grants: 22.5 (2021), 23.5 (2022), 23.2 (2023)
- Current non-interest expenditure: 17.3 (2021), 16.0 (2022), 16.3 (2023)
- Interest payment: 1.8 (2021), 2.4 (2022), 2.2 (2023)
- Capital expenditure and net lending: 5.2 (2021), 6.2 (2022), 6.1 (2023)
- Primary balance: 1.2 (FY2022), 0.8 (FY2023), 1.0 (from FY2024 projected)
- Overall balance: -1.3 (FY2022), -0.6 (FY2023), -1.5 (2024), -1.4 (2025), -1.2 (2026)
- Public debt (percent of calendar year GDP)
- Public debt: 82.3 (2021), 67.1 (2022), 66.3 (2023), 63.6 (2024), 61.9 (2025), 61.0 (2026), 60.1 (2027), 59.1 (2028), 58.2 (2029)
- Domestic debt: 27.1 (2021), 24.4 (2022), 22.8 (2023), 22.6 (2024)
- External debt: 55.2 (2021), 43.8 (2022), 41.8 (2023), 40.3 (2024), 39.2 (2025), 38.4 (2026), 37.5 (2027), 36.3 (2028), 34.8 (2029)
- Principal payment: 8.6 (2021), 6.6 (2022), 6.5 (2023), 7.2 (2024), 5.7 (2025)
- Domestic principal payments: 6.4 (2021), 4.6 (2022), 5.0 (2023), 4.7 (2024), 5.3 (2025), 4.8 (2026), 4.0 (2027)
- External principal payments: 2.1 (2021), 1.6 (2022), 2.0 (2023), 1.9 (2024), 1.7 (2025)
- Money and credit
- Private sector credit by commercial banks: 4.2 (2021), 3.0 (2022)
- Money and quasi-money (M2): 12.3 (2021), 7.1 (2022), 4.1 (2023), 3.8 (2024)
- External sector
- External current account (percent of GDP): -6.5 (2021), -8.3 (2022), -3.6 (2023), -1.9 (2024), -2.0 (2025), - (2026 onward as in source projections)
- Gross international reserves (US$ millions): 420 (2021), 482 (2022), 474 (2023), 514 (2024), 540 (2025), 553 (2026), 574 (2027), 595 (2028), 615 (2029)
- Output gap (percent of potential output): -7.3 (2021), -0.3 (2022)
- Nominal GDP (BZ$ millions): 4,849 (2021), 5,661 (2022), 6,178 (2023), 6,592 (2024), 6,912 (2025), 7,177 (2026), 7,453 (2027), 7,738 (2028), 8,035 (2029)
Source: IMF Communications Department, "Belize: Staff Concluding Statement of the 2024 Article IV Mission", February 27, 2024.