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#397611 - 01/18/11 06:25 PM IMF reviews Belize economy
Marty Online   happy
Key recommendations. Staff recommended a gradual increase in the primary surplus to 4½ percent of GDP, mainly through wage and pension reforms, to place the public debt on a firm downward path and reduce external financing needs. It also recommended continued actions to strengthen the financial system and welcomed improvements in the monetary policy framework. The authorities broadly agreed with the recommendations, particularly tostrengthen the banking system. They planned to seek consensus on needed fiscal reforms, but noted that, in the near term, social conditions strictly constrained the scope for fiscal consolidation.

The authorities seek to reinvigorate growth prospects and reduce the poverty rate to 35 percent by 2013. The development plan for 2010–13 focuses on job creation and identifies sources of growth in tourism, agro-industry, and fishing. It rests on five pillars: developing small enterprises; strengthening export trade capacity; enhancing human development; addressing social dislocations and reducing crime; and managing environmental and natural disaster risk. The plan seeks to strengthen competitiveness by addressing infrastructure bottlenecks, high costs of financing, and red tape. It contains investment and social plans that will be assessed and integrated into the multiyear budget and presented to donors later this year.

FULL REPORT




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#397673 - 01/19/11 03:21 PM Re: IMF reviews Belize economy [Re: Marty]
Marty Online   happy
Belize IMF report out - recommends more pain for Belizeans

The 2010 report on the annual International Monetary Fund (IMF) consultation with Belizean authorities was published on Friday, after a delay of almost six months due to challenges from the Government of Belize (GOB) to its contents.

The preliminary recommendations released in July 2010 asked GOB to restrain current spending, prioritize investment, place the pension system on a strong and sustainable footing, and improve tax and customs administration.

The IMF, in its full report, says it is recommending that in order for Belize to achieve a 3.5% growth in its Gross Domestic Product (GDP) in the medium-term, plus halve its public debt to 40% of GDP by 2019, the government should raise the General Sales Tax—increased last year from 10% to 12.5%, as had been recommended by the IMF—to the regional rate of 15%.

Another measure it says the government could use to raise revenue is to put back the excise taxes on fuel, which had been reduced in 2008.

The report also presents a proposal to the government to stop increases in the wage bill and review what it describes as “generous contributions” for pensions and Social Security benefits.

With respect to the 2010-2011 budget, which will be in effect until the end of March, the IMF says the government should be more selective in its investment plan and intensify tax administration efforts.

According to the report, the Government of Belize has advised the IMF that putting the recommended revenue generation measures in effect would be difficult, given political and social conditions; however, they indicated a willingness to look at improved tax compliance and spending control.

“They acknowledged the need for fiscal reforms (mainly on wages and pensions), but explained that such reforms were strongly opposed by labor unions and the business sector,” the report adds. “However, the authorities expressed their willingness to engage various stakeholders to develop consensus on these reforms.”

The report also discusses the recent problems faced by Belize’s banking sector, including the high rate of non-performing loans (NPLs) at the country’s largest bank, the Belize Bank.

“The authorities recognized that the situation of the three banks [two domestic banks and an offshore bank], if not addressed, could threaten the stability of the banking system,” said the report. “In response to staff’s recommendations, they noted that these banks recognize the potential capital shortfalls associated with their NPLs, and have agreed to submit recapitalization plans to the Central Bank.”

The report states that although Belize was adversely affected by the 2009 global recession, the Belize economy has modestly recovered in 2010.

“The authorities seek to reinvigorate growth prospects and reduce the poverty rate to 35 percent by 2013,” it added. “The development plan for 2010–13 focuses on job creation and identifies sources of growth in tourism, agro-industry, and fishing.”

The plan, said the IMF report, rests on five pillars: developing small enterprises; strengthening export trade capacity; enhancing human development; addressing social dislocations and reducing crime; and managing environmental and natural disaster risk.

“The plan seeks to strengthen competitiveness by addressing infrastructure bottlenecks, high costs of financing, and red tape,” it added.

Amandala

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#398097 - 01/22/11 03:50 PM Re: IMF reviews Belize economy [Re: Marty]
Marty Online   happy
IMF releases 2011 report

A report issued by the International Monetary Fund (IMF), based on a consultation completed in September last year, gives the Belize Government good grades for effort and for reaching a 2.4 growth rate of GDP in the second quarter of 2010 but recommends tough new measures that could end up costing Belizeans more.

The report expressed concern about the banking system with regard to overdue loans, stating that the equivalent of 20 percent of total loans in mid 2010 were non-performing.

After commending the Belize government for its prudent macroeconomic management in the face of the global crisis and the floods which struck Belize in 2009 and 2010, IMF examiners gave priority to protecting the stability of the banking system.

This protection, the report states “will require an agreement on recapitalization plans for a few banks and their early implementation.”

The report goes on to say: (The IMF) welcomed plans to upgrade the regulatory and bank regulation framework, bringing prudential rules in line with international best practices, with technical assistance from the (IMF) Fund.

It noted that Belize’s fixed exchange rate had provided an anchor for macro-economic policies and expectations. Long-term stability, the report said, depends on sustained fiscal consolidation, a disciplined monetary policy and strengthened financial stability.

On the flip side the report recommended that the government reverse “the upward trend in the wage bill” and streamline what it described as “generous benefits vis-a-vis contributions on the public officer’s pension scheme.

The report also suggested phasing out the 2008 reduction in the fuel excise tax.

The report warned that it expects sluggish growth in exports and tourism, reduced access to external funding and limited prospects for growth and employment.

Thus it encourages the government to focus on strategies to achieve debt sustainability, protect banking system stability and strengthen the external position to create an environment for increased private investment.

“The plan seeks to strengthen competitiveness by addressing infrastructure bottlenecks, high costs of financing, and red tape,” it added.

The report was released in January of this year.

The Reporter

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#398316 - 01/24/11 03:17 PM Re: IMF reviews Belize economy [Re: Marty]
Marty Online   happy
IMF recommends tax increase, wage freeze & employment cap

In 2010, the Barrow Administration hiked General Sales Tax by 25%. That
measure, which is still causing greater hardships for middle and low-income
earners and slower business, was a direct recommendation from the
International Monetary Fund in 2009.

Today, the Prime Minister is reviewing a set of new recommendations from the
IMF, which call for even higher taxes, among other austerity measures to
curtail GOB spending and increase revenue.

In its 59-page 2010 Article IV Consultation, the IMF issues a number of red
flags to the Barrow Administration, warning that if specific responsible
fiscal management steps and key policy decisions are not taken, things could
spiral out of control for the country.

The IMF warns that under the present policies of the Barrow Administration,
GDP growth would be restrained "below historical trends" which could also
"lead to high external financing needs" at about 8.5% to 10%of GDP.
Furthermore, the Washington-based group said foreign reserves would decline
gradually to under two months of imports by 2020.

To avoid those complications, the IMF has recommended measures that will be
painful to Belizeans, but which, as we have seen before, the Prime Minister
won't have a hard time in accepting.

Those measures include increasing GST to 15% (currently at 12.5), reducing
Government's wage bill, limiting growth in non-priority areas, capping
Government employment to where it stood in 2009, and possibly even
reintroducing the full fuel excise tax, which the Barrow Administration
claimed it removed.

While the nation's finances need improved management, the IMF also noted
that the banking system, which is supervised and regulated by the Central
Bank, has become unstable. ".the overall health of the banking system has
deteriorated, with three banks facing financial weakness. The authorities
recognized that the situation of the three banks, if not addressed, could
threaten the stability of the banking system."

The banks' instability is as a result of a high number of non-paid loans
(NPL). One of the banks, noted the IMF's report, doubled in NPLs to 34
percent of total loans from January to June of 2009. The high volume of
non-paid loans is indicative of the hard times Belizeans are living in.

Those hard times were discussed by the IMF Report which noted the increase
in poverty, the highest it's ever been at 40% of the population.

The IMF Report also made special mention of two legislative steps taken by
the barrow Administration which could adversely affect the economy. One of
them is the expropriation of Belize Telemedia Limited. The IMF said it is
necessary for an "early resolution" in the matter of negotiations between
Government and the previous owners, to avoid affecting the investment
climate, or pressure on public debt.

The IMF report was even more suspicious about the Government's legislation
on contempt of court, which was introduced in March 2010. The document says
while Government imposes increased penalties or imprisonment for contempt of
court, the amendment could be viewed by investors as limiting the scope for
arbitration in commercial disputes, with the unintended result of deterring
private investment.

Prime Minister Dean Barrow is yet to discuss the IMF Report publicly.

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