By Belize Live News Staff: Moody’s Investors Service has upgraded the Government of Belize’s foreign and local currency issuer ratings to Caa1 from Caa2, with a stable outlook. This move reflects a significant improvement in the country’s debt profile, following post-pandemic recovery efforts and a stronger-than-expected primary fiscal balance.
The credit rating, which evaluates the risk associated with a debtor’s ability to repay, highlights Belize’s improved financial standing after a series of economic reforms. According to Moody’s, the upgrade to Caa1 was driven by a notable reduction in Belize’s post-restructuring debt burden. The agency also cited the country’s shift from fiscal deficits to primary surpluses, a critical factor in ensuring debt sustainability even as growth moderates.
Moody’s commented, “The upgrade to Caa1 is driven by the significant reduction in the post-restructuring debt burden, aided by a stronger-than-expected post-pandemic recovery and an improvement in Belize’s primary balance. The shift to primary surpluses from deficits will ensure debt remains on a downward trend even as growth slows toward potential.”
The rating agency also acknowledged the build-up of Belize’s external foreign exchange buffers, which have been supported by a structural improvement in the country’s current account balance. However, the rating remains cautious due to Belize’s history of serial defaults and weak liquidity management.
Moody’s also noted Belize’s debt-to-GDP ratio had decreased from 103.1% at the end of fiscal 2020 to 70.6% by the end of 2023. This improvement was attributed to the government’s structural fiscal reforms, including pension and tax reforms. However, concerns were raised about the gradual step-up in interest payments on the commercial “blue loan,” which could strain the country’s debt affordability in the future.
“The step-up in interest payments on the commercial blue loan could weaken debt affordability, particularly if external shocks such as severe weather-related events coincide,” Moody’s warned.
In addition to the issuer rating upgrade, Moody’s raised Belize’s local currency ceiling to B2 from B3, reflecting moderate predictability and reliability of the government’s actions and institutions. The foreign currency ceiling was also raised to B3 from Caa1, a step below the local currency rating. This adjustment accounts for Belize’s moderate external indebtedness and potential capital account restrictions that might be imposed to protect the Belize dollar’s peg to the U.S. dollar during times of economic stress.
Moody’s economic forecast projects a growth rate of 3.4% in real GDP for 2024, which is expected to slow to 2.5% for 2025 and beyond. As of July 2024, Belize’s foreign exchange reserves stood at approximately USD 440 million, the highest level in a decade, sufficient to cover 3.3 months of imports.
The Belize government has initiated negotiations on reforms to the Pension Plan for Public Officials (PPPO) for both new hires and existing employees, in line with recommendations from the International Monetary Fund (IMF). Additionally, the government is reviewing zero-rated items under the Goods and Services Tax as a potential measure to increase revenue.
The latest upgrade from Moody’s follows Belize’s last rating from Standard & Poor’s, which issued a B- rating in November 2021.
This upgrade marks a positive shift in Belize’s economic trajectory, positioning the country on firmer financial ground as it continues to address both external and internal challenges.
