If anyone knows the IMF - it's former Prime Minister Rt. Hon. Manuel Esquivel.
In his first term as Prime Minister in 1984 Esquivel had to work with an IMF team which was basically running the country's finances after the financially crippled Price administration was forced to enter into a standby agreement.
And after he shook off the meddlesome IMF money minders in mid 1986, ten years later in 1996 - Esquivel and the IMF reunited to give Belize the deathless term "retrenchment". That's when he took the IMF's advice and laid off 800 public servants one week before Christmas. History proved it as a massive political error, but Esquivel still believes that fiscally it was the right decision.
So what does the man who's twice bitten the IMF's bullets think of the latest report - which gives a grim review of Belize's finances, and offers a dim prognosis for recovery? He gave us his review and then some in an interview today.
Rt. Hon. Manuel Esquivel, Former Prime Minister
"I think this one is very harsh. It talks about a crisis, it talks about the need for corrective action, it talks about strong action of re-addressing the situation so it uses some very strong language which usually try to avoid if they can help it."
"Basically, what they have said in several paragraphs is that if the government would accept what they are ordering them to do, then the economic situation would be manageable over the next few years. But if they do not accept, then they run the very grave risk of loosing the exchange rate peg. They say the debt to GDP which is now at 92%, could be at 137% by the next elections and that is a staggering prediction they are making. So those underscore the basis of much of what else they had to say."
Jules Vasquez,
"If you were the Minister of Finance, what is the most urgent area that needs to be addressed?"
Rt. Hon. Manuel Esquivel,
"Well obviously it is a government deficit and so they are right on about that - it is very unpleasant but it is reality and the government needs to cut back on its spending."
"The report says, and government has never said this publicly, but several banks have cut off their line of credit - already and it is going to get worst and soon become impossible to access the foreign capital markets. So those are issues the government has to do something about, the deficit, and you can only do that by cutting down its capital expenditure which will have a tremendous effect on business in general Belize."
"And it goes on to say that they will have to do something also even about the recurrent budget. I think what is alarming, which is something the government won't comply with because its political suicide, is to cancel the wage increase promised over the next two years because they say it is not going to work."
Jules Vasquez,
"So then if they are unable to address these priority areas as effective as the IMF recommends, what are we looking at in the medium term?"
Rt. Hon. Manuel Esquivel,
"Well I am telling you that the IMF says explicitly that we will not be able to maintain the exchange rate peg and secondly that the debt to GDP ratio will rise to 137%."
Jules Vasquez,
"The financial secretary has said the debt to GDP is at 92% because of the burden of the DFC portfolio which is not insolvent and they are divesting themselves of that portfolio. So they are saying it's a one off and distorted figure that we are seeing there, it's not a chronic imbalance. In fact its only 59% as Minister Fonseca said and it's only distorted because of the DFC they are getting rid of."
Rt. Hon. Manuel Esquivel,
"But who distorted it? They distorted it with all of the non-performing loans. The report says that non=performing loans represent 32% of the DFC portfolio. That is an amazing number when you look at the commercial banks who have about 4% or 5% non-performing loans."
Jules Vasquez,
"However they argue the DFC was the engine of growth and if you are running a 12 cylinder engine and you miss fire one or two, you will still be driving record growth."
Rt. Hon. Manuel Esquivel,
"Well, the engine of growth in so far as Los Lagos? The IMF report says that something like about 30% of the DFC balance sheet is invested in unoccupied houses. So that is not growth, building houses yes shows up as part of GDP but the houses are empty; it is the same thing with Mahogany Heights, the houses are empty. So a lot of money was spent by the DFC, which put them in this huge terrible non-performing position along with the loans to Novelo's and others who are not repaying. They would argue its part of the engine of growth, well it's the engine of increase expenditure but with no income."
Jules Vasquez,
"Looking at the PINs from 1997/1998, you hear a lot of the same language from when you were Minister of Finance."
Rt. Hon. Manuel Esquivel,
"Well it's a little bit different. They talked about the exchange rate peg but they did not say that you will lose it."
Jules Vasquez,
"But even in 1998, and I am trying to look at the history in terms of the IMF always having a grim outlook, and in 1998 they said that the collective measures were not sustained when the fiscal deficit widened and there was absence of a determined fiscal adjustment. They said the policies could again 'undermine the exchange rate peg.' This is the language of the IMF, they are gloom and doom prognosticators."
Rt. Hon. Manuel Esquivel,
"Not really, I think they have issued warnings but they have gone beyond that now. They have said we are going to lose it, they aren't saying its endangered."
Jules Vasquez,
"Seeing language like this, what's next?"
Rt. Hon. Manuel Esquivel,
"Unfortunately, we are a small country and there limited options. We have to the find the least painful but at the end we have to try to somehow find a way that is going to work. But those are the realities and that is why the IMF is conservative, it is harsh etc. yes but that is what you got yourself into."
Many of Esquivel's comments are based on what is disclosed in the IMF's directors' report - a less sanitized, more comprehensive 50-page review that annexes the widely circulated public information notice. You can read the report on theIMF Website.