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Jun 5, 2015

Belize’s Fiscal Future Limited

Diminished petroleum revenues and increased public spending is expected to result in only limited fiscal strengthening in Belize in the months ahead, despite rising non-oil government inflows.  Consequently, the country’s debt dynamics will remain unstable, with a looming threat that Belize will struggle to access capital markets or even face a credit crisis.  The foreboding news is from a BMI Research indicating that the high public sector wage bill will lessen fiscal consolidation.  The research goes on to say that Belize will gradually reduce its fiscal deficit in the coming years, after announcing its largest underperformance in ten years in the first three quarters of the 2014/2015 financial year.  Notwithstanding a spike in tourist arrivals and robust agricultural sector growth which will boost revenues, income growth will be tempered by declining oil prices.  Furthermore, given Belize’s increased debt burden, and low level of foreign reserves, BMI recognizes the risk that any significant external blows could hasten a credit crunch.  A major factor in the reduced spending growth will be a decline in capital expenditure as the economic crisis in Venezuela encourages Belize to withdraw from major capital spending projects.  In truth, Belize is supported substantially through Petrocaribe, with almost twenty-five percent of total capital outlays in the last two years funded by Venezuela.  However, as the Venezuelan government faces increasing financial pressure, BMI expects that it will abandon the oil alliance. BMI is a member of the Fitch Group and a leader in financial information services.

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