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IMF researchers say Belize’s Superbond problem not solved

Posted: Sunday, May 27, 2018. 7:46 p.m. CST.

By BBN Staff:  A working paper prepared by researchers from the International Monetary Fund (IMF) about Belize’s “Superbond” titled ‘Sovereign Debt Restructuring – Third Time Lucky?’ compared the country’s unprecedented third restructuring of the bond and noted that the IMF concluded the new measures were still not enough to put national debt on a sustainable downward trajectory.

The report recounted the history of the bond saga, including the first two restructurings. Researchers noted that the IMF had previously recommended to the government of Belize that to secure durable gains, the 2016-2017 debt restructuring needed to be supported by medium-term strategy combined with more ambitious fiscal consolidation and austerity measures to boost growth.

According to the researchers, although the latest restructuring provided meaningful cash flow relief and some fiscal tightening, it was just one component of what should have been a more comprehensive public debt restructuring. The report compared Belize’s restructuring of the commercial bond and compared it with efforts by other countries in the region, including Jamaica, Grenada and Antigua and Barbuda.

The report noted that Jamaica’s debt restructuring in 2013 and Grenada’s restructuring 2013-15 were underpinned by debt relief with strong economic reform programs that combined fiscal consolidation with growth supporting measures. It noted that Belize, instead of opting for a comprehensive debt relief package, even though public debt stood at almost 100 percent of GDP at the time of the third restructuring, chose a selective restructuring focusing only on the bond.

“In both Grenada and Jamaica, debt restructurings combined with strong reform efforts supported by IMF programs succeeded in putting public debt-to-GDP ratios on a clear downward trajectory from 2013 onward,” the report added.

The researchers also noted that Belize needed to do more in order to cut its spending, including on the wage bill (the highest in the region), and pensions and other areas of high spending. They added that unless Belize’s economic fortunes change by the time Belize is scheduled to make a series of bullet payments to clear the over $500 million principal of the Superbond debt, the country is likely to experience “debt distress”.

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