noimageIn a recent release issued by the International Monetary Fund, it indicates that the economic outlook for Belize has worsened since last year’s Article Four Consultation. In order to shed some light with regards to this issue that is of grave concern for our country, the IMF team, spearheaded by Jacques Bougha-Hagbe visited Belize from the 11th of May to the 25th with the purpose of hosting conferences based on the country’s Article Four Consultation for this year 2016.

The team met with Prime Minister Rt. Hon. Dean Barrow, financial secretary, Joseph Waight, Central Bank Governor, Glenford Ysaguirre, private sector representatives along with other government and central bank officials for the meetings. After the entire visit concluded, it was established that Belize’s economy is slowing at this point in time while both fiscal and external vulnerabilities are increasing.

Figures that were recorded in 2015 show that there was a decrease in oil production and numerous shocks in the primary sector caused a reduction in the growth of GDP landing it at one percent.  The fall in energy rates and other commodities added to last year’s deflation rate.

The current account deficit for 2015 landed at 9.8 percent of GDP due to a fall in exports of oil and marine products by 9 percent. The fiscal deficit broadened to a total of 8 percent of GDP as a result of a one-off payment linked to a loan made by BTL and an increase in public sector wages to name a few.

On the other hand, this year’s growth is expected to experience a decline of 0.5 percent along with an average that is less than 2 percent in the medium term. In the absence of fiscal measures, rigid current spending is more than likely to result in high fiscal deficits as well as an increase of public debt burden. And while the current account deficit can see an improvement at a slow rate due to the repossession of exports, it would still remain high affecting the international reserves.

The report highlighted that, open quote “These vulnerabilities could be exacerbated by both domestic and external risks, such as a the end of Petro Caribe financing, protracted period of weak growth in trading partners, and challenges posed by withdrawal of correspondent banking relationships”. End of quote.

It was proposed that by having a sustained fiscal consolidation which is of course supported by strong structural reforms, can possibly allow public finances to be placed in a better position. The main priority is to place public debt firmly on the downward path which includes the raising of primary fiscal surplus to 4-5 percent of GDP by the year 2021. This however, can be obtained by implementing strong revenue and expenditure measures.

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