BELMOPAN, Belize, CMC- A new study by the World Bank has found that Belize could reduce government debt to below 50 percent of Gross Domestic Product (GDP) by undertaking reforms in targeted areas.
The World Bank’s Public Expenditure Review (PER) report shows that for Belize to maintain the current positive trend in the quality of its fiscal policies, the country needs to increase its ability to respond to external shocks, improve value for money in critical social and investment programs, manage growth in public sector wages, and optimize spending related to climate change.
The PER provides a comprehensive analysis of the country’s fiscal policies and spending patterns over the last decade and offers a road map for policymakers to achieve more sustainable and equitable development outcomes and enhance the performance of public institutions.
The review highlights Belize’s significant progress in recent years, particularly in terms of fiscal consolidation and debt management. It also identifies several challenges that need to be addressed, including deficiencies in the public financial management framework and high expenditure rigidity, primarily related to the public sector wage bill.
The Washington-based financial institution said that while Belize has significantly reduced public debt and strengthened fiscal management, constraints remain.
The report found that budget credibility and fiscal discipline remain challenges. Inconsistencies in budget reporting and strategic planning make it difficult to use resources more efficiently, and a high public sector wage bill continues to limit fiscal space. As of 2022, the wage bill accounted for 41 percent of total public spending.
“The compounding challenges of high debt, global financial conditions, and low growth rates intensify the strain on public budgets. This review takes a close look at the core of Belize’s fiscal challenges and identifies steps toward establishing a sustainable fiscal framework for public expenditure in Belize and maximizing value for money in important sectors such as health and education,” said Lilia Burunciuc, World Bank Country Director for the Caribbean.
The PER said to address these challenges, it recommends various policy measures.
Specific recommendations include the adoption of a Fiscal Responsibility Law with explicit rules to guide transparent and predictable debt reduction. The report also emphasized the need to establish an Independent Fiscal Council that will produce unbiased projections and evaluate compliance with fiscal rules.
Belize’s climate change mitigation and adaptation spending, which poses significant risks to its economy, was also found to be limited and in need of reprioritization. The PER further recommends creating a Natural Disaster Reserve Fund, a fund of approximately one percent of gross domestic product (GDP) replenished annually, to help expedite the financing of immediate recovery and response expenses arising from floods and hurricanes.
The study identified opportunities to improve education and health services, which could convert spending into better results. The report also suggests developing effective policy strategies to improve the productivity of schools and hospitals, retain health workers in the country, and strengthen accountability in the health and education sectors.
The report’s publication is the culmination of four rounds of consultations between the World Bank and the Ministry of Education, Culture, Science and Technology, the Ministry of Health and Wellness, and the Ministry of Finance, Economic Development and Investment.
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