I.M.F. and Briceño Administration Agree on Some Aspects of Belize’s Economic Situation, Differ on Others
In 2019, Belize owed ninety-seven percent of what it was producing. During the 2020 COVID-19 pandemic, Belize’s debt increased to one hundred and thirty percent of G.D.P. Prime Minister John Briceño in his April ninth budget presentation referred to the situation as Belize’s “most severe economic, fiscal and debt crisis.” The International Monetary Fund, a multilateral institution which fosters the macro-economic and financial sustainability of its member countries, recently completed its 2021 country report on Belize. And it too agrees that the economic situation in Belize is overly complex. Doctor Jaime Guajardo, I.M.F. Mission Chief was on Open Your Eyes morning show to discuss that report. Tonight, News Five’s Paul Lopez looks at the situation.
Prime Minister John Briceño [File: April 9th, 2021]
“The scale of just how much the Government owes today is breath-taking: the equivalent of ten thousand dollars for every man, woman and child; fifty thousand dollars in debt for each family of five; the inconceivable total sum of four point two billion -– that is the number four followed by nine digits.”
Paul Lopez, Reporting
Government revenue from tax collection and other services for 2020 fell by more than twenty eight percent of what was projected, according to the Prime Minister’s presentation. On the other hand, government spending increased.
John Briceño
Prime Minister John Briceño [File: April 9th, 2021]
“This is the crux of the exigency we face, and it cannot be over-emphasized. The amount we have been collecting fell by a significant amount — almost a third of what we used to collect. Notably, amidst the cuts and reductions in spending in various sectors, wages to public workers actually rose by eleven million dollars, or two point five percent.”
Government’s 2020 revenue was eight percent less than what was needed to meet expenses. Under Briceño’s administration the government of Belize decided that under its home-grown economic plan it would cut the wage bill, and other expenditures, with the intention of changing that deficit to a surplus over the next three years. The International Monetary Fund agrees this is feasible approach.
Jaime Guajardo
Dr. Jaime Guajardo, I.M.F. Mission Chief of Belize
“In the case of fiscal consolidation, we are recommending increasing the primary balance from a deficit of eight-point four percent of GDP in 2020 to a surplus of three precent in GDP in 2024. A big part of that we expect to come from a cyclical recovery of revenue. When you look at the revenue of the government you will see that revenue to GDP declined by more than twenty-five percent in2020, while GDP declines by fourteen percent. We expect those revenues to come back gradually and be back to pre-pandemic levels two or three years from now.”
While the IMF believes that Belize’s Government does in fact need to address its ballooning wage bill and expenditures, it also recommends the Government increases its revenues by broadening its tax base.
Dr. Jaime Guajardo
“Belize has a standard rate of the Gross Sale Tax of 12.5 percent. But it also has several items, a large group of items that they are taxed zero rate. We do not believe that all those items are a first necessity for poor households. So, some of them will also be moved from being taxed at zero rate to be taxed at the standard rate. That would bring revenue.”
A technical assistance report from 2012 estimated that Belize foregoes five percent of GDP on zero rated items. And, while the Government does not include this recommendation in its so-called home grown economic plan, it agrees with the IMF that there is a need to improve Belize’s business climate to promote private investment.
Prime Minister John Briceño [File: April 9th, 2021]
“Government and all stakeholders, especially the public service and the private sector, must together seed and reap higher, more equitable economic growth. Enabling investment, both domestic and foreign, is of the highest priority for this Administration. For this year, the IMF forecasts only a modest GDP rebound of one point nine percent, with a steep upswing of six-point four percent projected for 2022. Their prediction is that a return to pre-COVID economic activity will not occur until the FY 2024/2025 period. While we are more optimistic, contingency plans will be at the ready if the rebound is protracted.”
Reporting for News Five, I am Paul Lopez.
