Posted: Wednesday, March 17, 2021. 10:51 am CST.
By Aaron Humes: The International Monetary Fund (IMF) in its preliminary consultation report on Belize has declared Belize’s trajectory with regard to the national debt “unsustainable,” after the mid-2020 wave of COVID-19 resulted in an overall loss of 14.1 percent in GDP and a worsened fiscal position.
Belize lost 72 percent of tourism’s contribution to the gross domestic product, which usually accounts for 40 percent overall; before the crisis it accounted for sixty percent of foreign exchange earnings.
The IMF cited an increase of more than seven percent year over year in primary deficit and a massive increase in public debt tied to borrowing for social support and health needs for COVID-19 as well as infrastructure works.
The current account deficit narrowed as a result of falling imports and lower profits, offsetting the fall in tourism receipts, but the IMF predicts reserve adequacy will worsen.
The agency provided a cautious outlook on a tourism rebound, citing pandemic-related travel restrictions in the US and Belize’s inability to vaccinate more than a third of its population to date. The IMF projects a 1.9% increase in real GDP in 2021 and 6.4% in 2022.
Public debt is expected to rise to 133% of GDP this year and reach 128% by 2031, levels that are “unsustainable,” the IMF wrote.
Natural disasters represent another risk to reconstruction efforts by Prime Minister Johnny Briceño who, some observers believe, was elected because he proposed the best approach to deal with the aftermath of Hurricanes Eta and Iota as well as COVID-19.
The IMF advocated a 10-year plan to reduce debt to 60% of GDP. The entity recommended creating a credit bureau and registry and lowering barriers to enter and exit the market, investments in resilient infrastructure, a natural disaster fund and social protection programs.
In response to the report, the government blamed previous ruling party “[the United Democratic Party] “for borrowing” for years to meet government’s operating costs, including salaries. Those borrowings have reached 130% of annual GDP or about 4.2bn Belize dollar (US$2bn). The economy is sputtering. Unemployment is widespread. These conditions are clearly unsustainable.”
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