An International Monetary Fund team visited Belize from June 6th to the 15th and met with Prime Minister Dean Barrow, Minister of State at the Ministry of Finance, Dr. Carla Barnett,; Governor of the Central Bank of Belize Joy Grant, and Financial Secretary Joseph Waight. According to the Concluding Statement published at the end of the visit, the IMF says that while the economy is expected to return to positive growth in 2017, the medium term outlook remains weak. It says that public debt remains elevated, despite the cash flow relief and NPV gain from the recent debt restructuring agreement with private external bondholders; and the current account deficit, it says, is sizable. It says,
“While the tightening of the fiscal stance in the context of the 2017-18 budget is welcome, in the view of the team, further fiscal consolidation is necessary to mitigate risks and put public debt on a clear downward path, and to facilitate external adjustment. Withdrawal of Correspondent Banking Relationships (CBRs) and low capital buffers in a major bank remain key risks to financial stability”.
The report indicates that the overall level of public debt remains very high, at about 100 percent of GDP. Moreover, the repeated efforts to restructure debt could undermine Belize’s credibility and risks a loss of access to capital markets for an extended period of time, in turn hurting prospects for strong and sustainable growth. On the revenue side, it says that even though the last budget indicated belt tightening measures, there is more that needs to be done. It suggests reform options such as increasing the GST rate from 12.5 percent to the regional average of 15 percent. It also suggests that retrenchment might be another way to curb expenditure, saying,
“On the expenditure side, a civil service reform could help stabilize the number of public employees and contain the wage bill. Moreover, the public sector pension plan could become contributory and pensions adjusted to be in line with inflation.”