WASH­ING­TON–The In­ter­na­tion­al Mon­e­tary Fund (IMF) says the com­ple­tion of the ex­change of the "su­per bond" for new Unit­ed States de­nom­i­nat­ed bonds has brought "sub­stan­tial cash-flow re­lief" to Be­lize.The IMF, which re­cent­ly con­clud­ed a re­view of the coun­try's econ­o­my, said that the new bonds, which will ex­pire in 2038, has re­sult­ed in a cash flow of US$130 mil­lion over the next five years.

Last De­cem­ber, the Dean Bar­row gov­ern­ment said it had reached an agree­ment with its cred­i­tors on re­struc­tur­ing the coun­try's US$544 mil­lion for­eign debt, al­so known as the su­per bond.Prime Min­is­ter Bar­row de­scribed the agree­ment as "com­pre­hen­sive" adding "it is sus­tain­able, and it will pro­vide well in ex­cess of US$150 mil­lion in re­lief to Be­lize".

Last year, bond­hold­ers had re­ject­ed an of­fer from the Caribbean Com­mu­ni­ty (CARI­COM) coun­try on re­struc­tur­ing the debt and said they had hired lawyers af­ter the ex­piry of a re­prieve on le­gal ac­tion.Be­lize, which said it could not af­ford to meet ris­ing in­ter­est pay­ments on the bond, shocked in­vestors with an ear­li­er sug­ges­tion that they take a hair­cut of up to 45 per cent.

The IMF said that the debt re­struc­tur­ing took place against pro­longed le­gal dis­putes over the na­tion­al­iza­tion of two util­i­ty com­pa­nies, Be­lize Tele­me­dia Lim­it­ed (BTL) and Be­lize Elec­tric­i­ty Lim­it­ed (BEL), and that no agree­ment has been reached yet over com­pen­sa­tion pay­ments.It said that the le­gal dis­pute may take a few years in court.The IMF said that the out­put growth for Be­lize is es­ti­mat­ed at 5.3 per cent in 2012, led by a re­cov­ery from the 2011 ef­fects of weath­er-re­lat­ed dam­ages in com­mod­i­ty ex­ports.

In­fla­tion av­er­aged 1.4 per cent, as com­mod­i­ty price pres­sures abat­ed, but the IMF said the ex­ter­nal cur­rent ac­count deficit widened to about 1.7 per cent of Gross Do­mes­tic Prod­uct (GDP) due to a steep drop in oil ex­ports and high­er im­ports of fu­el and elec­tric­i­ty."Notwith­stand­ing this de­te­ri­o­ra­tion, in­ter­na­tion­al re­serve cov­er­age is es­ti­mat­ed at 3.4 months of im­ports up from three months in 2011, thanks in part to strong for­eign di­rect in­vest­ment in­flows in the sug­ar sec­tor. Un­em­ploy­ment re­mains high at 16 per cent."

The Wash­ing­ton-based fi­nan­cial in­sti­tu­tion said that the fis­cal pri­ma­ry sur­plus for the fis­cal year 2012/13 is ex­pect­ed to de­te­ri­o­rate to 1.3 per cent of GDP com­pared to 2.3 per cent of GDP in 2011."This de­te­ri­o­ra­tion large­ly re­flects the con­tin­ued de­cline in oil-re­lat­ed rev­enues and an in­crease in the wage bill, de­spite ro­bust growth in Gen­er­al Sales Tax (GST) rev­enue."

But it said af­ter two years of de­cline, cred­it to the pri­vate sec­tor re­cov­ered mod­est­ly in 2012 and that high non-per­form­ing loans (NPLs) in the bank­ing sys­tem - 20 per cent of to­tal loans at end-2012 - and loan write-offs con­tin­ue to hold back pri­vate sec­tor cred­it growth, es­ti­mat­ed at 1.1 per cent, and are erod­ing banks' net earn­ings.The IMF said that de­spite the ac­cel­er­a­tion in eco­nom­ic ac­tiv­i­ty in 2012, out­put growth is ex­pect­ed to mod­er­ate to about 2.5 per cent in the medi­um term.

It said that the pri­ma­ry sur­plus is pro­ject­ed at one per cent of GDP in the next fis­cal year with pub­lic debt ex­pect­ed to de­cline to about 75 per cent of GDP at end-2013, re­flect­ing, in part, the net face val­ue hair­cut of three per cent from the re­cent debt ex­change.

"The gov­ern­ment may face large fi­nanc­ing needs over the medi­um term large­ly as­so­ci­at­ed with com­pen­sa­tion to the for­mer share­hold­ers of na­tion­al­ized com­pa­nies, pend­ing le­gal rul­ings. The ex­ter­nal cur­rent ac­count deficit is pro­ject­ed to widen to about 1.9 per cent of GDP ow­ing to the con­tin­ued de­te­ri­o­ra­tion in crude oil ex­ports and ris­ing im­ports. The re­serve cov­er­age would re­main at around 3 months of im­ports by end-2013," the IMF said.

The IMF said it was pleased nonethe­less with the eco­nom­ic per­for­mance of the Caribbean Com­mu­ni­ty (CARI­COM) coun­try based al­so on the suc­cess­ful com­ple­tion of the ex­ter­nal debt ex­change.

"These pos­i­tive de­vel­op­ments notwith­stand­ing," the IMF not­ed that Be­lize's econ­o­my still faces sub­stan­tial chal­lenges and vul­ner­a­bil­i­ties" and has en­cour­aged the au­thor­i­ties to take ad­van­tage of the ex­ist­ing breath­ing space to re­build pol­i­cy buffers, pur­sue ac­tive debt man­age­ment, ac­cel­er­ate fi­nan­cial sec­tor re­form, and but­tress the econ­o­my's re­silience to ex­ter­nal shocks.

The IMF wel­comed the au­thor­i­ties' plans to re­vamp the debt man­age­ment frame­work and en­cour­aged con­tin­ued ef­forts to de­vel­op a more ro­bust debt man­age­ment, strength­en the in­sti­tu­tion­al frame­work, and build ca­pac­i­ty to im­ple­ment a medi­um term debt man­age­ment strat­e­gy."Op­tions to de­vel­op the do­mes­tic debt mar­ket should al­so be ex­plored to mo­bi­lize do­mes­tic fi­nanc­ing," the IMF said.