Posted: Friday, March 12, 2021. 1:59 pm CST.
By Aaron Humes: The 2020 Article IV Mission Report Concluding Statement finds conservative to neutral optimism on the part of the International Monetary Fund (IMF) team which met with Prime Minister John Briceño; Governor of the Central Bank of Belize, Joy Grant; Minister of State for Finance, Christopher Coye; Financial Secretary Joseph Waight; and other senior government officials, representatives of the opposition, private sector, and public sector unions from February 24 to March 10.
The Fund believes it will take the best half of this decade to recover, with real GDP returning to 2019 levels by 2025. The COVID-19 pandemic is expected to have continued negative effect on tourism, with arrivals to remain subdued in 2021 and pick up again in 2022 as a result of high levels of cases among Belize’s main partners and in the case of the United States, stringent requirements for returning passengers dissuading them from traveling. Belize itself is also not out of the woods yet concerning the pandemic, with vaccination lagging behind countries of similar size and stature.
The IMF projects growth of just under 2 percent for 2021, triple that at 6.4 percent in 2022, and an average of 2 percent thereafter.
More concerning are the weakened fiscal and external positions, with the primary budget deficit falling from 8.3 percent in 2021 to 0.9 percent in 2024; public debt officially calculated at 133 percent of GDP in 2021 and to fall by only five percent in the following decade, an expected limit of external financing and subsequent falls in international reserves to below the standard three month of imports and 100 percent of gross external financing needs starting in 2024.
The IMF says, “Public debt is assessed as unsustainable in staff’s baseline scenario. Public debt is projected to remain well above the thresholds for sustainability in the debt sustainability analysis (DSA) framework. Public sector gross financing needs are also projected to remain above the DSA thresholds for sustainability over the next 10 years. Moreover, public debt and gross financing needs could increase further if prominent downside risks to the outlook materialize.”
Belize continues to face risks due to the pandemic, with the IMF explaining that any intensification of the COVID-19 pandemic in the U.S. and Europe would hurt tourism, while an intensification in Belize would lead to more stringent social distancing and hurt activity in contact intensive sectors. Belize also remains highly vulnerable to natural disasters. Materialization of these shocks would reduce economic activity, weaken the recovery of revenues, delay the unwinding of COVID-19-related expenditures, and accelerate the decline in international reserves.
The findings are preliminary and part of the annual consultations under Article Four of the IMF Articles of Agreement, in the context of a request to use IMF resources (borrow from the IMF), as part of discussions of staff monitored programs, or as part of other staff monitoring of economic developments. The statement is that of the IMF staff and not its Executive Board, which will receive and discuss its report by May, 2021.
In any event, Belize has rejected a formal IMF assistance program, preferring, as Prime Minister Briceno said this week, a “home-grown” program that will bring the least amount of hurt to the populace while setting the foundation for a comeback.
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