The International Monetary Fund has continued to express serious concerns about Belize’s economic state in its 2016 Article IV Consultation Report which was released yesterday. The IMF report first provides a review of economic activity in 2015 and the first half of 2016.
The following is highlighted: Gross Domestic Product growth slowed to 1 per cent in 2015, A decline in oil and commodity prices led to deflation in 2015, Overall fiscal deficit expanded to 8 percent of GDP in 2015, GDP growth was -1.5 percent in first quarter of 2015 and 2016, Decline in exports in the first half of 2016 and a reduction in the international reserves to 4.4 months of imports in late August 2016.
On the positive side, the report indicates that: The tourism sector grew in the first half of 2016 and unemployment rate declined from 10.1 percent in April 2015 to 8 percent in April 2016.
The report also looked at areas which are under tremendous stress, such as the public debt and the banking sector.
It indicates that the public debt worsened in 2015, due to partial compensation payments by the Government for the 2009 and 2010 expropriation of Belize Telemedia Limited and Belize Electricity Limited. While the Government used public moneys to clear some of those burdens, it put their financial state into risk by also pushed the debt to GDP ratio to 82%.
On the banking system, the report noted that the loss of correspondent banking continues to pose significant challenges for the economy. It recommends that Belize requires stronger implementation of the anti-money laundering/counter financing of terrorism frameworks and transparency regulations in the offshore sector to improve compliance with international standards and help address the withdrawal of correspondent banks.
The report indicated that due to damages by Hurricane Earl, declining productivity, competitiveness and public investment, GDP is projected to decline by 1.5 percent in 2016. The IMF warns that the deficit combined with the remaining outstanding payments to BTL could reduce the Central Bank’s international reserves to “uncomfortable levels”.
And as every IMF report does, it recommends a number of measures, some which are like bitter pills to swallow. They include raising the GST rate, reducing the public wage with retrenchment, placing the public debt on a downward path and improving public financial management.
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