G.O.B. releases I.M.F. recommendations
The Ministry of Finance has released what it calls a preliminary report on the recently concluded I.M.F. Article Four Consultation. The document comes on the heels of a leaked version that surfaced this week in various sectors in the media. While the official version goes into greater detail than the unofficial one, the message of both is unequivocal: the government’s finances are in dire straits and if substantial corrective measures are not taken soon, Belize will run out of foreign reserves and face the prospect of devaluation in 2006.
According to the report, among the measures being recommended by the I.M.F. are increases in sales tax, excise taxes, and other levies, while at the same time heavily pruning both recurrent and capital expenditure. On the monetary side, they suggest a further tightening of domestic credit by raising the reserve requirement at the commercial banks and shifting deposits by the Social Security Board and other government bodies out of these banks and into the Central Bank, where the funds cannot be re-loaned.
The end result of these measures is supposed to be a reduced demand for foreign exchange accompanied by a narrowing of the budget deficit by eighty-five million dollars.
To anyone even remotely acquainted with public finance, the report holds few surprises; it is standard I.M.F. medicine, administered straight out of the economics 101 textbook. The real question is not whether G.O.B. will follow the advice–no government would; it is how few of the suggestions they can adopt and still keep the economy from falling over the edge.
Normally that kind of balancing act comes as second nature to most seasoned politicians. What makes our situation more serious is that the present government, through the public exposure of its failed policies of excess borrowing and indiscriminate spending, has exhausted virtually all of its political capital with the Belizean people. So while in normal times a cash strapped government would simply raise taxes and fire a bunch of excess employees–all the while blaming it on four hurricanes, greedy oil companies and the amorphous spectre of globalisation–the Musa administration faces a mass revolt if it enacts even minor new revenue measures.
It’s a dangerous situation and while Opposition Leader Dean Barrow has suggested–with some reason–that a new government will have sufficient political capital and international credibility to set things right, there is no escaping the fact that Belizeans are soon going to have to bite a very hard bullet. The trick–for whomever sits in Belmopan–will be to spread the pain in such a way that no one sector suffers unfairly…and the economy itself is not pronounced dead on arrival.
