There’s a global economic crisis and Belize has not been spared. From record high inflation to record drops in tourism arrivals the hurting has been felt all over. But with the end of the fiscal year at the end of March, government says that it will still pull out a 2.8% growth in GDP. But that doesn’t mean that all is fine and well with government’s finances. It still has to finance a sizeable deficit and at his quarterly press conference today – the Prime Minister said his government has to turn to Taiwan.
Hon. Dean Barrow, Prime Minister
“The overall fiscal deficit, the EIU notwithstanding, is projected to be 0.7% of GDP, almost identical to that of the previous fiscal year.”

And in the previous fiscal year, Taiwan provided deficit financing, $50 million worth. Where will that come from this year?

Jules Vasquez,
Have you discussed financing for the deficit?

Hon. Dean Barrow,
“To some extent. There are no secrets here, again our go-to-guy is Taiwan. Last year we got $50 million; we’re certainly not going to get that this year and what we got last year, we got by way of a grant. There’s basically a 4-year loan programme for budget support that we are looking at with them. What we want to do initially is working out at $25 million per year, but we’re proposing to front end that. Because there’s a particular hurdle to be overcome next year, we will take some of the monies for the succeeding years upfront this year, so that as of now we are looking at not less than $40 million. It looks as though it would have to be by way of a loan, as opposed to the $50 million in grant last year but it beats nothing to hell. What I have set out, I have indicated to the Ambassador, represents for us a minimum position. Now, understand that we can’t really leverage these people because it is their money.”

Still Barrow was upbeat about economic performance with a projected overall 2.6% GDP growth.

Hon. Dean Barrow,
“All in all, comparatively speaking, I think Belize did well in 2008. Now of course there are serious problems facing us in 2009. Food prices are moderating and oil prices are certainly not expected to go back to anything like the highs of 2008. Thus inflation will fall by about half. For the current year it is 6. odd %. Inflation over the next year, we expect it will fall by about half.”

But there has also been a fall in revenue from taxes on petroleum, a $17 million shortfall. Government will borrow its way out of trouble.

Hon. Dean Barrow,
“The great economist John Maynard Keyes preached a doctrine that suggested government could avoid or deal with recessions by running deficits and borrowing when the economy slows because the private sector investment then will simply not be enough. Well as Richard Nixon I believe once famously said, we are all Keynesians now. That Keynesian playbook especially includes accelerated spending programs and other economic stimuli.”

And that stimuli will come from $200 million in concessionary loans that the government will access.

Hon. Dean Barrow,
“In order to get us through the externally imposed constraints, we can and certainly will borrow concessionally from the international financial institutions, the multi-lateral financial institutions. And when I calculate it, we’re looking at around $200 million to be accessed by us from the international community in this current year. That then is our version of the Stimulus Package that of course so many very countries in the world are resorting to. This will increase employment, pump money into the economy, and create the rising tide designed to float all boats even at time of recession.”

That stimulus package of concessionary loans will include US$60 million from the IDB for tourism development and solid waste management; $30 million from the CDB for the restructured DFC; $10 million for upgrading of drainage in Belama and the adjoining sections of the Northern Highway; $10 million as well for the flood affected Western Highway; $30 million for urban renewal in Belize’s towns; $20 million from the CARICOM Petroleum Fund, $10 million from the IMF for unconditional balance of payments support related to flood damages; and $10 million from the Commonwealth Debt Initiative.

Channel 7