6 May, 2000 - Belmopan
The Executive Board of the International Monetary Fund considered the
Staff Report on the recent Belize Article IV Consultation.
Under Article IV of the IMF Articles of Agreement, member Governments
agree to meet with the IMF on a regular basis to discuss current
economic policies and to make projections on growth for the medium term.
In this regard Fund staff visited Belize in late November 1999 and again
in mid- April 2000 to hold discussions with Belizean authorities and
officials.
The Staff reported that the current Government has designed its economic
polices with the intention of achieving high rates of economic growth
and reducing poverty. The Government has opted for a policy mix of
initially boosting public sector spending on infrastructure and housing,
reducing taxes, and promoting tourism and foreign direct investment. To
limit the growth in public external debt, the Government has begun to
privatize the remaining public enterprises to help finance the
additional public spending and raise economic efficiency. The Staff also
reported that the Belize Government is committed to maintaining the
exchange rate peg at BZ$2 per US$1 to limit inflation and to preserve
confidence.
The Executive Directors noted that the Belize economy has performed well
in 1999, with strong economic growth (estimated at more than 6 percent),
little inflation, a narrowing of the fiscal deficit (to 2.6 percent of
GDP), an increase in the accumulation of net international reserves (by
about US$28 million) and a slowdown in the expansion of the external
public debt.
They considered that the prospects for 2000 appeared favorable, with the
authorities projecting growth to remain at the 6 percent level, but
underscored the importance of reducing the public sector-borrowing
requirement.
The Executive Directors expressed concern over the sustainability of the
Government fiscal approach noting that the privatization process will
come to an end in one or two years. The Directors encouraged the
authorities to base their medium term fiscal projections on more
cautious assumptions about real GDP growth, and to aim for stronger
public savings position.
In response, the Director speaking for Belize indicated that the Fund
staff is by nature more conservative in their views and that the
Government of Belize must be ambitious about growth if poverty is to be
seriously tackled and acceptable standards of living are to be
achieved.
He indicated that the strong pick-up in economic growth gives the
Belizean authorities confidence that the basic orientation of polices is
correct. All the core activities - agriculture, fishing, construction
and tourism registered strong growth and there is plenty of future
potential, if both the micro and macro economic policies are correct.
Inflation is not a problem nor is it likely to become so. While fiscal
policy is to some extent dependent on privatization receipts and capital
transfers, the debt ratio, at 37% of GDP is both stable and manageable.
The basic economic environment is good and the needs of a relatively
poor population mandate an ambitious growth strategy.
The Executive Director advised that the Government of Belize is fully
aware that privatization receipts are finite and that it must avoid
excessive borrowing for future capital expenditure.
The Report should be viewed in a positive light in the International
Capital Markets and within the Multi-lateral Financial Institutions.
Government therefore is confident that it will be able to obtain quick
and sufficient financing to implement its entire Public Sector
Investment Program.
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