I.M.F. release report on Belize
The International Monetary Fund today released the public information notice, a bulletin that goes along with the report on the country’s Article Four consultation. While it wasn’t exactly a glowing assessment of the country’s fiscal health, the government?s spin-doctors and officials of the Ministry of Finance and Central Bank worked overtime this afternoon to gain maximum mileage from the report. According to the I.M.F., Belize needs to re-establish a viable economic and financial position in order to relieve pressure on the exchange rate peg.
The report notes that Belize’s net international reserves fell by a third last year, while public and publicly guaranteed debt has reached ninety-two percent of G.D.P., largely the result of external debts on commercial terms. This, the directors agreed, is putting tremendous pressure on the exchange rate peg.
The report also suggests that Belize’s ability to overcome economic hiccups it has no control over, has reached critical proportions and the government needs to shore up foreign reserves if it is to prevent a balance of payments crisis.
While Government has given its commitment to bringing the deficit to below three percent of G.D.P., the I.M.F. remedy for achieving this is tax reform and a reduction in capital expenditure.
But perhaps the most stinging rebuke was reserved for the Development Finance Corporation, which the I.M.F. categorized as insolvent, and a complete burden to the public treasury.
Financial Secretary Hugh McSweeney vigorously defended the D.F.C. as an important tool in the government’s economic plans.
Hugh McSweeney, Financial Secretary
“And that is because D.F.C. fits a particular economic strategy for the government of Belize. If you relate the other positive elements of the report, Belize has been reporting phenomenal growth, near to fifty percent since 1998.”
“Of course, economics not being an exact science, it causes some strains some stress on the resource base of DFC. But then on the other hand, D.F.C.’s portfolio value increased from like under a hundred million dollars to over three hundred dollars today. So there are very good things about D.F.C. D.F.C. is not de facto insolvent. D.F.C. played a major economic role and the government?s program now is to restructure D.F.C. to bring it back to its original mandate and to take off the stressful loans that would create further stress in there and to stop it from further contributing to operating deficits for the government of Belize.”
“Belize’s economy, as stated by the I.M.F. and as agreed in there as they see it by the government, is that we have generated deficits and balance of payments stresses that are not sustainable. But you just have to look at last year’s report to see we’ve improved against last year. So as far as I’m concerned, the government’s position is a matter of positioning. We want to bring these two weak areas down so that we can have a stronger economy and stronger to fight against these shocks.”
The full report of the I.M.F.’s Article Four consultation on Belize is available online at the funds webpage.
