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IMF says Belize’s Economy has Gone from Bad to Worse

Belize is in the red and it is looking at a possible devaluation of the dollar; that is if the government does not rectify its economic strategy. 

Belize is in the red and it is looking at a possible devaluation of the dollar; that is if the government does not rectify its economic strategy.  This conclusion was drawn by the International Monetary Fund (IMF) which noted in its annual review that if the Briceno Administration fails to restore debt sustainability it will put the fiscal position and the currency peg at risk of disorderly adjustment; in order words the Belize dollar would be at risk of being devalued.  The IMF published its concluding statement, describing the preliminary findings of its mission to Belize, and the details on recent developments, outlook and risks. For instance, the IMF says Belize’s fiscal and external positions worsened from already weak levels. The COVID-19 pandemic has left Belize with one of the highest numbers of cases and deaths per capita in the Caribbean. The pandemic also led to a 72 percent decline in tourist arrivals in 2020. Social distancing and lockdowns also hurt activity in contact-intensive sectors of the economy. As a result, the real GDP contracted by 14.1 percent in 2020. The IMF is predicting that the country will recover from the pandemic with real GDP regaining its 2019 level, only, by 2025. Tourist arrivals are expected to remain subdued in 2021 given still high levels of COVID-19 cases in Belize’s main trading partners and stringent requirements on passengers returning to the US. Tourist arrivals are expected to pick up in 2022 when vaccines are more widely available in advanced countries. As a result, real GDP is projected to grow by 1.9 percent in 2021, 6.4 percent in 2022, and return to potential growth of 2 percent over the medium-term. However, Public debt is projected to rise to 133 percent of GDP in 2021, and to fall gradually thereafter to 128 percent ten years later, in 2031. The IMF says that public debt is projected to remain well above the thresholds for sustainability. According to the IMF, Belize needs to tackle long-standing structural barriers to growth and diversification. It says that Belize also needs to reduce crime to promote entrepreneurship. As for Monetary and financial policies, the IMF says that Belize’s external position is assessed as substantially weaker than warranted by medium-term fundamentals and desirable policies. The current account deficit remains higher than its estimated level of equilibrium. Failure to address these imbalances increase the risk of disorderly external adjustment over the medium term. In response to the IMF report, the Briceno Administration says that The IMF has now confirmed the grim assessment which Prime Minister John Briceño outlined to the House of Representatives and the public during his report in January: that the economy was in a prolonged recession starting well before COVID-19; that the previous government had borrowed some $700 million in the pre-election period of 2019/2020; and that the UDP left behind an economic and fiscal wasteland.  The release says that GOB’s Recovery Plan is just such a fine balancing act that will inspire confidence and provide relief for the poor, stimulate jobs and growth, restore health to the public finances and preserve the peg.