I.M.F. urges G.O.B. to continue fiscal tightening

The International Monetary Fund is recommending a stronger adjustment policy for Belize. News Five has obtained a leaked draft of what appears to be an authentic copy of an I.M.F. Staff Report for the Article IV Consultation. That document, being circulated to Executive Directors this week, says that while the Belizean economy grew at a relatively robust pace in 2004, the fiscal and external current account deficits remained at unsustainable levels and public debt reached one hundred percent of Gross Domestic Product. It continues that Belizean authorities failed to achieve the fiscal policy they envisioned, which included reducing the public debt to only three percent of G.D.P., even with fiscal tightening in 2005. According to the I.M.F. experts, the magnitude of adjustment necessary, delay in policy implementation, and new spending commitments mean the fiscal year 2005-06 target will not be achieved. In addition, the substantial external financing gap likely to emerge in 2006 means additional and sustained fiscal measures will be required. But Belize’s authorities, according to the report, have indicated there is only limited room for more adjustment given the severity of measures already taken and the “tenuous political support.” The I.M.F. says there is still need to deal with the D.F.C. because the assets continue to deteriorate and budget support is required to sustain its operations and key policy elements are yet to be defined. The Fund acknowledges that G.O.B. is approaching external creditors seeking debt relief and notes that this is most likely to be successful if undertaken on a medium term framework aimed at restoring debt sustainability and resilience to shocks. The I.M.F. staff report on the Article Four consultations is expected to form the basis for meetings in late September.