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Jul 26, 2001

Cabinet meets to examine I.M.F. Report

This morning Cabinet convened a special session to consider among other things the I.M.F. Belize Staff Report 2001. The report noted the Belize Government’s economic policy, which seeks to sustain strong economic growth mainly through low taxes, public investment, and provision of credit to the private sector through the Development Finance Corporation. It also noted that Government’s expectation that the resulting high rate of economic growth would generate sufficient fiscal resources to reduce the deficit and provide for all external debt service obligations. The report confirmed that real G.D.P. growth increased to an impressive ten point four percent in 2000, while prices rose by only one percent. However, due to the rapid growth in public sector investment and the impact of Hurricane Keith, the total public and publicly guaranteed debt rose to sixty-seven percent G.D.P., of which Central Government external debt accounted for only thirty-nine percent of G.D.P., with government savings held at year’s end at over six percent of G.D.P. The current account deficit widened to sixteen point one percent of G.D.P., but overall balance of payments performance increased foreign reserves by fifty million dollars. During the consultation, the Belizean authorities acknowledged the risks associated with the high growth strategy, but at the same time stated its conviction that sustained and balanced economic growth is the only path to achieving permanent poverty reduction and a better quality of life for all Belizeans. The authorities pointed out that there were a number of one-time factors such as the hurricane reconstruction expenditure and the hurricane’s dampening effect on exports and tourism, which together contributed to the fiscal and current account imbalance in the last fiscal year. The Government commented that although the public guaranteed debt appeared to be growing rapidly, much of this arose from securitization operations, which have dedicated streams of income attached to them. The Central Government debt service was still only ten point four percent of exports of goods and services. Executive directors noted the staff concerns and also welcomed Government’s commitments to address them. These were seen to be key to maintaining sustainable fiscal and external positions. The Government press release no doubt puts the best spin possible on the report, but in the absence of seeing the full text of the report it is difficult to analyse the real situation. The full I.M.F. report should be made public shortly. At this morning’s meeting Cabinet also agreed to the nomination of Elizabeth Zabaneh, president of the Senate, to be the Speaker of the House of Representatives. If elected as new speaker on August third, she would succeed Sylvia Flores, who resigned to contest the 2003 general elections for the ruling People’s United Party.

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