In an exclusive interview today with the International Monetary Fund (IMF) we can report that the organization has given its approval for Belize’s proposed home-grown economic recovery plan that the Briceno administration has drafted. Speaking with our News Director, the IMF’s Western Hemisphere Department Deputy Chief, Dr Jaime Guajardo, explained that the plan Belize has put together is similar to what the IMF would have proposed in its economic programme. The concern, however, is the country’s ability to commit and follow thru with the plan.
Dr. Jamie Guajardo, IMF: “The authorities told us that they’re not considering an IMF program at this juncture and I think the Prime Minister Has been very open about that when he has addressed the press in Belize. Instead they want to do what government has called a home grown recovery plan which has definitely the same pillars that I just discussed with you that we discussed during the articles of consultation. And the has a pillar that is the fiscal consolidation effort, the second pillar which is the growth enhancement reforms and the third pillar which is the restructuring of all the debt. In fact the government has already moved by introducing significant fiscal consolidation measures in the budget for fiscal year 2022. The relax on private sector wages is one of the measures and the other one is reduction of purchase of goods and services and also moved very quickly for an early engagement with the creditors to try to restructure the superbond. So in a way if there was a problem with Belize I don’t think that the problem will be very different from what the government is proposing in their recovery plan. The plan is not very different from what we would recommend but the implementation is gonna different and we want to see this succeed and we really hope that it’s gonna succeed but we understand that there are various risks of implementation and we need to keep a close eye because something may happen along the way.”
The IMF recently concluded its Article Four Consultation final report indicating that it would take Belize ten years to see its debt to GDP ratio decline to one hundred and eleven percent after its peak at one hundred and thirty two percent. According to Dr Guajardo, Belize would have to push for the collection of revenues without raising taxes, while building its roads and infrastructure to encourage international investments.
Jamie Guajardo, IMF: “I think the key takeaway from the article of consultation were three from my perspective. The first one is that the authorities and us we have a similar view of the economy situation in Belize. What do I mean by this ? Is that we both see that Belize has been hit very had by the pandemic and I don’t have to tell you the data shows it but you had a very deep contraction in your economic activity, your GDP contacted by 14% in 2020. The fiscal position deteriorated significantly partly because revenues collapsed but also because the pandemic created some other expenditure pressure for example to provide support to those people affected by the pandemic. As a result public debt which was about 98% of GDP in 2019 jumped up to almost 130% GDP in 2020. So both the authorities and us agree on that assessment. Now going forward we also agree that the recovery is likely to be protracted. That means that Belize is not gonna recover the level of activity that it had in 2019 until a few years from now. In addition to that we also expect that in the absence of significant policy changes public debt is gonna remain elevated and actually we have assessed public debt as unsustainable at this time around which was also shared by the authorities who also had the same view. The second takeaway is that we agreed with the authorities as well on what are the key policy priorities in Belize and those are two; one is to restore debt sustainability and the second one is to strengthen the currency peg while at the same time providing support to those affected by the pandemic in the near term. Finally the third takeaway is that we also agree how this should be addressed and here we need a study that has three elements. The first one is that Belize needs to do an ambitious but realistic fiscal consolidation effort. The second one is that Belize needs to implement what we call growth enhancing sector reforms that are going to lift growth over the medium term. And lastly there’s also need for debt restructure. So there is broad agreement between the authorities and us on what the situation is and what the policy priorities are going forward.”
While Belize has decided not to subscribe to the IMF Economic Recovery Plan, the IMF has offered to assist Belize by way of technical support and capacity building.
Jamie Guajardo, IMF: “When we met with authorities we mentioned to them that we want to to be helpful to them in any way they think we can be helpful. Besides saying they didn’t want an IMF program they did show interest in keeping close collaboration with us and that’s gonna be in terms of maybe designing this medium term strategy. There are still elements in the air, some elements have been enacted for 2022 but there are still new measures that need to be enacted for 2023 and 2024 and that’s the dialogue that we want to have and we want to contribute ideas to those policies. We are also gonna continue to be doing the surveillance work that we do so we go twice to the country once in an article of commission and once on a staff visit in which we exchange views but we also present our view of what the situation on the economy is. So we’re gonna be saying the strategy of the government is proceeding according to plan and maybe it’s lagging behind or maybe it’s going ahead of it’s schedule but that type of assessment we’re gonna be doing it as part of our job as doing surveillance that we do to all our member countries. I think the last area through which we’re gonna be interacting a lot with the authorities is what we call on technical assistance or capacity building and I think this is a very important aspect of all of this. Many of the measures that the government wants to implement will require changes in legislation or maybe creating new expertise, training people. Just to give you an example the government wants to increase revenue by improving revenue administration. What does it mean ? Basically we want to make sure that everyone pays their fair share. We’re not tweaking taxes, we’re not making changes to the tax law we’re just making sure that people actually pay what they’re supposed to pay. To do that you need to have people that are well trained. Maybe you need to redesign and recognize your department like Belize has done in this year. To go through that process many times you need to bring external expertise , someone that did in their own country who knows how these things are usually done so Belize can be effective in actually achieving those goals and that is done through what we call technical assistance which basically is bringing an expert from the IMF or maybe from another country if it is a consultant, that can help Belize to reorganize their systems to achieve the goals that they want to do so that is going to be a key pillar going forward.”