IMF Executive Board Concludes 2015 Article IV Consultation with Belize

March 28, 2016

On September 16, 2015, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV Consultation1 with Belize.

Real GDP growth reached 3.6 percent in 2014, up from 1.5 percent in 2013 and well above the five-year average of 2.9 percent. A rebound in agriculture, strong performances in tourism, electricity, construction and services offset the significant decline in oil-related activities. The fall in international oil and food prices pushed headline inflation (y/y) to -0.2 percent as of December 2014. Despite strong tourism receipts, falling exports and relatively strong imports widened the external current account deficit to 7.6 percent of GDP in 2014, up from 4.4 percent of GDP in 2013. PetroCaribe and other official disbursements continued to finance the current account deficit and help build international reserves (equivalent to 5 months of imports at end-December 2014).

The fiscal stance deteriorated significantly in FY 2014/15 (April–March). The primary fiscal balance recorded a deficit of 1.5 percent of GDP, down from a revised deficit of 0.2 percent of GDP in FY 2013/14 and well below the surplus of 1 percent of GDP envisaged in the FY 2014/15 budget. Revenue collection remained in line with budget targets. Spending continued to grow well above budget targets. Financing of the fiscal deficit essentially came from a drawdown of PetroCaribe deposits and official external loans. Relatively strong GDP growth helped maintain public debt around 76 percent of GDP.

Private credit growth recovered and reached 4.7 percent in 2014, up from 3.5 percent in 2013, supported by strong real estate credit and loans to the sugar sector, while broad money grew by 7.9 percent. The banking system remained highly liquid. Non-performing loans (NPLs) declined to 15.7 percent at end-December 2014, down from 17.6 percent at end-2013. The banking system’s reported capital adequacy ratio (CAR) stayed above 21 percent. The termination of major correspondent banking relationships with Belizean banks has so far had a limited impact on the financial system and economic activity.

Growth over the short-to-medium term would hover around 2.5 percent, in line with the assessment made during the 2014 Article IV Consultation. Inflation would remain subdued owing to the exchange rate peg and moderate inflation in trading partners. However, the fiscal outlook could be worse due to excess spending. The primary fiscal balance would remain in deficit for a while as the political climate further exacerbates spending pressures and hinders revenue-enhancing reforms. Expansionary fiscal policies would increase imports in the context of modest growth of exports, widening the external current account deficit. International reserves could decline to uncomfortable levels, especially if compensation for the nationalized utilities is paid and repatriated.

Executive Board Assessment2

Executive Directors noted the recent improvement in economic activity, despite the significant deterioration in the fiscal stance and the widening external current account deficit. Belize’s economic outlook is characterized by sluggish growth, weak fiscal stance, and external and financial sector vulnerabilities. They welcomed the settlement reached on one of the two nationalized companies but noted that significant contingent liabilities from these nationalizations remain, which could further raise the already elevated debt levels. Against this backdrop, Directors called for a concerted effort to reduce vulnerabilities, rebuild policy buffers, and accelerate medium-to-long term growth.

Directors underscored the importance of prompt and credible fiscal efforts that would boost investor confidence and private investment. In this context, they urged the authorities to begin to progressively raise the primary balance to levels consistent with debt sustainability. This could be achieved by removing exemptions and zero-ratings from GST, building a stronger revenue administration that contains leakages, and limiting current spending, including through reform of the public officers’ pension scheme. Directors agreed that public sector reforms and stronger public financial management, especially internal controls, audits and procurement practices, would reduce low-quality spending and should not be delayed.

Directors welcomed the authorities new Growth and Sustainable Development Strategy (GSDS). In order to ensure credible implementation of the GSDS, Directors recommended that the authorities seek to tap into all available resources, domestic and external. Domestic resources can be mobilized through enhanced domestic revenue collection and spending rationalization, which would create the fiscal space needed for greater investment in human capital. External resources can be mobilized through international partners and well-designed public private partnerships. Directors stressed that the success of any growth strategy would require well functioning financial markets, supporting infrastructure and regulation for key economic sectors such as agriculture and tourism, an attractive business environment, greater liberalization of domestic markets, including labor markets, and greater diversification of export markets.

Directors welcomed continued progress in financial sector reforms, including preparation of a financial crisis management plan and bank resolution templates with technical assistance from the Fund. Directors also welcomed the recent strengthening of banks’ balance sheets, but noted that significant vulnerabilities remain and were heightened by the recent termination of some corresponding banking relationships. Directors are encouraged by the authorities’ determination to keep the banking system under tight supervision, and reiterated the call for an asset quality review of all banks to fully assess their true strength. Directors noted the challenges in collateral valuation and their weak loss absorption capacity in the context of illiquid markets. Therefore, Directors recommended a gradual increase in provisioning to fully cover all loan losses, secured and unsecured. It is also important to continue preparing financial stability reports, including bank stress tests that fully take shortfalls in provisioning into account.

Directors noted that the deficiencies identified by the Caribbean Financial Action Task Force (CFATF) have been mostly addressed, allowing Belize to recently exit the CFATF follow-up and monitoring process. Important reforms are still needed to ensure effective implementation of Belize’s AML/CFT regime in line with recent Financial Action Task Force (FATF) standards. Directors concurred that the recent termination of corresponding banking relationships with Belizean banks and banks in many other countries could have a significant impact on financial stability and economic activity in the affected countries. They urged the authorities regulating international banks that are terminating correspondent banking relationships to better clarify their expectations of how these international banks should deal with local banks they perceive as “high risk.”

Belize: Selected Economic Indicators
  2011 2012 2013 2014 2015
(Annual percentage change, unless otherwise indicated)

National income and prices


GDP at constant prices

2.1 3.8 1.5 3.6 2.2

Nominal GDP (US$ millions)

1,488.9 1,573.9 1,624.3 1,699.2 1,762.8

Gross domestic investment 1/ 2/

13.7 13.7 15.9 16.1 15.8

Gross national savings 1/

12.6 12.5 11.0 8.5 9.6

Consumer prices (end of period)

2.3 0.8 1.6 -0.2 0.7

Consumer prices (average)

1.7 1.2 0.5 1.2 0.1

Real effective exchange rate

-10.0 1.9 -1.0 0.4

Money and credit


Credit to the private sector

-1.2 1.1 3.5 4.7 3.2

Money and quasi-money (M2)

5.6 11.0 1.4 7.9 3.7
(In percent of GDP, unless otherwise indicated)

Central government 3/


Revenue and grants

27.7 26.4 27.7 29.2 27.5

Current expenditure

24.0 22.3 23.7 24.6 25.6

Capital expenditure and net lending

4.7 4.6 7.4 8.5 7.0

Primary balance

2.3 1.3 -0.2 -1.2 -2.6

Overall balance

-1.1 -0.5 -3.5 -3.9 -5.2

External sector


External current account 4/

-1.1 -1.2 -4.4 -7.6 -6.3

Overall balance of payments (US$ millions)

35.1 35.9 116.0 81.8 17.8

Public and publicly guaranteed debt

80.5 75.6 76.1 76.0 78.1

Domestic debt

11.1 10.6 10.2 10.1 12.7

External debt

69.4 65.0 65.9 65.9 65.4

Gross international reserves (US$ millions)

253.1 289.0 405.0 486.8 504.5

In months of imports

3.0 3.2 4.2 5.2 5.2

Sources: Belize authorities; and IMF staff estimates and projections.

1/ In percent of GDP.


2/ Including inventory accumulation.


3/ Fiscal year ends in March.


4/ Including official grants.


1 Under the Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

2 At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here:

Last edited by Marty; 03/31/16 05:33 AM.