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The International Monetary Fund (IMF) in its Article IV consultation with Belize has commended the authorities on progress made towards their fiscal goals, while maintaining stronger than the regional-average economic growth. The territory's banking sector however was of concern to the agency.
The IMF said Belize has weathered the financial crisis relatively well when compared with Caribbean Community peers. Output expanded by 2.7% in 2010, and the territory can expect growth of 2.5% in 2011, the Fund said.
In fiscal year 2010/11, the overall fiscal deficit widened nominally by 0.3% to 1.5% of gross domestic product, reflecting an increase in expenditure. This outturn, however, was better than envisaged in the budget, the IMF said.
The IMF Executive Board commended the authorities for their macroeconomic management, which it said enabled Belize to weather the financial crisis relatively well. However, it went on to observe that: “While the near-term outlook is positive, challenges arise from the uncertain global environment, vulnerabilities in the banking system, rising gross financing needs of the public sector, and the weak investment climate.”
On fiscal policy, the IMF welcomed the authorities' intention to strengthen tax administration yet stressed that extra measures are necessary to improve overall tax collection. This should include a reduction in tax concessions, the IMF advised.
As regards the banking sector, the IMF warned in particular that while bank liquidity remains ample, bank prudential indicators have remained weak, and the level of non-performing loans (NPLs) is high. The Board stressed the importance of issuing revised loan classification and provisioning guidelines by year-end as planned to combat NPLs, and to closely monitor bank’s capital adequacy.
The IMF also emphasized the need to improve the business climate, by, among other things, reforming the tax system to boost incentives to work and to encourage skilled job creation.
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