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#420677 - 11/02/11 12:26 AM IMF Executive Board Concludes Belize Consultation
Marty Offline

IMF Executive Board Concludes 2011 Article IV Consultation with Belize

Public Information Notice (PIN) No. 11/131
October 31, 2011

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

On October 21, 2011, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Belize.1

Background

Belize has weathered the financial crisis relatively well when compared with Caribbean Community peers. Output expanded by 2.7 percent in 2010 owing largely to activity in the electricity and wholesale and retail trade. Twelve-month inflation was nil in 2010, reflecting primarily continued weakness in domestic demand, and picked up slightly in the quarter ending in May driven by higher food and fuel prices. The external position strengthened, as a narrowing in the current account deficit (from 6.1 percent of GDP in 2009 to 3 percent in 2010) underpinned an increase in foreign reserves to 3.25 months of imports at end-2010, equivalent to 300 percent of 2011 external financing needs. Public debt rose to 83 percent of Gross Domestic Product (GDP).

In Fiscal Year 2010/11, the overall fiscal deficit widened by 0.3 percentage point of GDP to
1.5 percent of GDP, reflecting an increase in expenditure and weak grant disbursements. This outturn was, however, better than envisaged in the budget. Meanwhile, bank prudential indicators have remained weak, with high nonperforming loans (NPLs) and low provisioning. Bank liquidity remains ample. In July, the authorities participated in their first Financial Sector Assessment Program (FSAP). Despite a cut in reserve requirements, bank credit growth has slowed as fewer investment opportunities and high NPLs continue to constrain new lending. Improvements in social indicators have been protracted, despite the allocation of significant resources to social protection.

The macroeconomic outlook for 2011 remains moderately positive. Output growth is projected at 2.5 percent, reflecting a strong performance in the first quarter—supported by an expansion in manufacturing and electricity sectors, and a modest recovery in stayover tourist arrivals. Higher food and fuel prices are expected to push inflation slightly upward. The external current account deficit is projected to remain at about 3 percent of GDP in the context of some improvement in the terms of trade. The reserve coverage would remain at around 3 months of imports by year-end.

Executive Board Assessment

Executive Directors commended the authorities for their macroeconomic management, which enabled Belize to weather the financial crisis relatively well. While the near-term outlook is positive, challenges arise from the uncertain global environment, vulnerabilities in the banking system, rising gross financing needs of the public sector, and the weak investment climate. The recent rise in poverty is also a cause for concern. Against this backdrop, Directors encouraged the authorities to strengthen the policy framework and advance the reform agenda.

Directors emphasized the need to further tighten the fiscal stance and rebuild macroeconomic buffers. A gradual increase in the primary surplus would keep financing needs manageable and place the public debt on a downward path. Directors cautioned that growing contingent liabilities could put an additional burden on public finances, requiring close monitoring over the medium term. Welcoming the authorities’ intention to strengthen tax administration, Directors stressed the importance of improving overall tax collections, including a reduction in tax concessions. They also highlighted the need to contain the growth of the wage bill, and streamline capital spending in line with implementation capacity and grant disbursements.

Directors endorsed the authorities’ emphasis on developing social programs aimed at reducing poverty. They underscored that these programs should be cost effective and better monitored and targeted.

Directors agreed that safeguarding financial sector stability should be a high priority. They welcomed the authorities’ plans to use the findings of the recent FSAP to guide their reform agenda and strengthen the financial sector. Noting the high level of non-performing loans, Directors stressed the importance of issuing revised loan classification and provisioning guidelines by year-end as planned, and of closely monitoring bank’s capital adequacy. They encouraged the authorities to follow through on recommendations to enhance the bank’s supervisory capacity and reinforce the bank resolution and consolidated supervision frameworks. Directors also called for greater autonomy of the central bank. They welcomed the ongoing efforts to revamp the monetary policy framework.

Directors noted that the fixed exchange rate has provided an important anchor for macroeconomic policies. Given that rising gross external financing needs over the medium-term would increase vulnerability, they recommended building a higher level of foreign reserves as a buffer against shocks.

Directors emphasized the need to strengthen the macroeconomic framework and the business climate to tackle Belize’s low productivity growth. They called for timely compensation to former owners of the nationalized entities, once the courts have reached a final verdict. Improving the long-term conditions for growth would also require the implementation of steady programs to enhance physical and financial infrastructure, promoting the formation of skilled labor, and reforming the tax system. Directors stressed the importance of close collaboration between the Fund and development partners in these areas.


Belize: Selected Economic Indicators
 
        Prel. Proj. Proj.

 

2007 2008 2009 2010 2011 2012
 
             

(Annual percentage change, unless otherwise indicated)

National income and prices

           

GDP at constant prices

1.2 3.8 0.0 2.7 2.5 2.8

Nominal GDP (US$ millions)

1,277 1,359 1,349 1,401 1,474 1,552

Gross domestic investment 1/ 2/

17 27 22 18 19 19

Gross national savings 1/

12.9 17.7 15.7 15.0 15.9 14.6

Consumer prices (end of period)

4.1 4.4 -0.4 0.0 4.2 2.5

Real effective exchange rate (July for 2011)

-4.9 -0.6 4.5 -3.1 -5.6
             

Money and credit

           

Credit to the private sector

13.9 11.6 4.8 -3.6 0.3 1.5

Money and quasi-money (M2)

15.0 14.0 5.8 -1.8 4.2 5.0
             

(In percent of GDP, unless otherwise indicated)

Central government 3/

           

Revenue and grants

28.2 28.7 27.0 27.4 28.6 27.4

Current expenditure

23.2 23.4 24.5 24.0 24.9 24.6

Capital expenditure and net lending

5.7 4.9 3.7 4.5 5.4 5.4

Primary balance

3.8 4.2 2.4 1.9 2.2 1.8

Overall balance

-0.7 0.4 -1.2 -1.5 -1.6 -2.5
             

External sector

           

External current account 4/

-4.1 -10.7 -6.2 -3.0 -3.1 -4.4

Overall balance of payments (US$ millions)

22.9 57.9 47.3 4.6 3.8 16.1

Public and publicly guaranteed debt

86.3 79.7 82.1 83.3 80.4 78.1

Domestic debt

8.2 7.4 7.1 11.9 12.1 11.5

External debt

78.1 72.3 75.0 71.4 68.3 66.6
             

Gross international reserves (US$ millions) 5/

108.5 166.4 213.7 218.0 221.8 235.2

In months of imports

1.6 2.1 3.3 3.2 2.9 2.9
 

Sources: Belize authorities; and IMF staff estimates and projections.

1/ In percent of GDP.

2/ Including inventory accumulation.

3/ Fiscal year ends in March. Budget projection for 2010

4/ Including official grants.

5/ For 2009, includes the share of Belize in the IMF Special and General SDR allocations in the equivalent of SDR 18 million (US$28 million).

1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.

IMF


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#420719 - 11/02/11 02:15 PM Re: IMF Executive Board Concludes Belize Consultation [Re: Marty]
Marty Offline
IMF Says Poverty Rising


In its latest report on Belize issued yesterday The IMF has warned about growing poverty. The report warns that a "recent rise in poverty is also a cause for concern."

That aside, the report is modestly upbeat saying that "Belize has weathered the (global) financial crisis relatively well when compared with Caribbean Community peers. It warns about a high number of non-performing loans in the commercial banking sector but concludes that the macroeconomic outlook for 2011 remains moderately positive even as higher food and fuel prices are expected to push inflation slightly upward.

Channel 7

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#420724 - 11/02/11 02:30 PM Re: IMF Executive Board Concludes Belize Consultation [Re: Marty]
Marty Offline

IMF Report on macroeconomic state of Belize

The International Monetary Fund (IMF) has produced its latest report on Belize after consultations in August. It’s a mix of good and bad news. The good, according to a summary of the report, is essentially that the macroeconomic outlook for 2011 remains moderately positive. Output growth is projected at two point five percent, reflecting a strong performance in the first quarter—supported by an expansion in manufacturing and electricity sectors, and a modest recovery in overnight tourist arrivals. Foreign reserves are healthy but the high deficit is projected to remain at about three percent of GDP in the context of some improvement in the terms of trade. The public debt, accrued by the Government, went up slightly from eighty-two to eighty-three percent of GDP for 2010.

The bad is that there is a weak investment climate and concern for the rise in poverty which another recent report put at forty percent. Higher food and fuel prices are expected to push inflation slightly upward. The IMF team projects that there are challenges associated with the uncertain global environment, vulnerabilities in the banking system and rising gross financing needs of the public sector. There are also concerns about non-performing loans in the banking system and that bank prudential indicators have remained weak. Against this backdrop, the IMF encouraged the authorities to strengthen the policy framework and advance the reform agenda and programs to reduce poverty. The business climate must also be strengthened to tackle Belize’s low productivity growth. It recommends a reduction in tax concessions, with improvement in overall tax collections and a containment of the wage bill as well as a streamlining of capital spending. The IMF also calls for timely compensation to former owners of nationalized entities, such as Telemedia and B.E.L., which are now entrenched in the constitution. As to stability in the financial sector, the IMF says that should be a high priority.

Channel 5


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#420729 - 11/02/11 02:38 PM Re: IMF Executive Board Concludes Belize Consultation [Re: Marty]
Marty Offline
IMF commends Belize – but flags “recent rise in poverty,” bad loans in banking sector

The International Monetary Fund (IMF) issued a congratulatory report on the conclusion of annual consultations with Belize, but cautioned about rising poverty and the vulnerability of Belize’s banking sector against a “weak investment climate.”

The IMF mission in Belize, led by Gerardo Peraza, IMF Mission Chief for Belize, began on August 15 and concluded Thursday, August 25. IMF members concluded discussions with Belize on October 21, 2011, and the public information notice (PIN) based on the consultation was released this evening.

In its summary report, the IMF said its executive directors “commended the [Belizean] authorities for their macroeconomic management, which enabled Belize to weather the financial crisis relatively well.”

It cautioned, however, that, “While the near-term outlook is positive, challenges arise from the uncertain global environment, vulnerabilities in the banking system, rising gross financing needs of the public sector, and the weak investment climate.”

It added that, “The recent rise in poverty is also a cause for concern.”

They endorsed Belize’s attempt at developing social programs aimed at reducing poverty, the report said.

“They underscored that these programs should be cost-effective and better monitored and targeted,” the report added.

It also said that 12-month inflation (a general increase in prices and fall in the purchasing value of money) was nil in 2010, reflecting primarily continued weakness in domestic demand, but higher food and fuel prices drove it up in the quarter ending in May (the statistical year starts December). The report did not say, however, by how much these prices have increased.

The IMF report highlights continued concerns over nonperforming loans (NPLs) in the commercial banking system.

It noted that “bank prudential indicators have remained weak,” and that “safeguarding financial sector stability should be a high priority.”

“Despite a cut in reserve requirements [effected by the Barrow administration to encourage the shaving of lending rates], bank credit growth has slowed as fewer investment opportunities and high NPLs continue to constrain new lending,” said the IMF report.

The June 2011 financial report published by the Central Bank for the commercial banks indicates that the Belize Bank, the nation’s largest bank, and Heritage Bank (formerly The Alliance Bank) have excessively high NPL rates over 20%, whereas the rates for the remaining three commercial banks range from 7.03% to 8.45%. The prudential benchmark, according to the Central Bank, is 5%.

IMF directors agreed that “safeguarding financial sector stability should be a high priority.”

On a positive note, the report said: “Belize has weathered the financial crisis relatively well when compared with Caribbean Community peers. Output [Gross Domestic Product – the value of all goods and services sold by Belize] expanded by 2.7 percent in 2010, owing largely to activity in the electricity and wholesale and retail trade.”

The report on the country’s foreign reserve is good. The IMF report said the reserve was equal to 3.25 months of imports at the end of 2010. The IMF said this should stay more or less unchanged by year-end. A healthy foreign reserve position is important, because it provides the country with a cushion of foreign reserves in the event of such things as natural disasters.

The level of foreign reserves at the end of 2010, said the IMF, is equivalent to 300% of 2011 external financing needs.

The public debt, accrued by the Government, rose slightly from 82% to 83% of GDP for 2010, the IMF noted. A fall to 80% is forecast for 2011.

“Directors cautioned that growing contingent liabilities could put an additional burden on public finances, requiring close monitoring over the medium term,” said the report.

As for central government’s budget, the IMF noted that the overall fiscal deficit – the general difference between monies received versus monies paid out – widened by 0.3 percentage points to 1.5% of GDP. (This amounts to roughly BZ$75 million.)

“This outturn was, however, better than envisaged in the budget,” it went on to note.

The IMF notice said the macroeconomic outlook for this year, 2011, is “moderately positive.”

It pins the projected output growth (GDP) at 2.5%, while GDP growth is projected at 2.8% for 2012.

In the first quarter of 2011, GDP growth was led by “an expansion in manufacturing and electricity sectors, and a modest recovery in stay-over tourist arrivals.”

However, “Higher food and fuel prices are expected to push inflation slightly upward,” it added.

The IMF is urging a reduction in tax concessions, with improvement in overall tax collections.

“They also highlighted the need to contain the growth of the wage bill, and streamline capital spending,” the report added.

The IMF also “called for timely compensation to former owners of the nationalized entities, once the courts have reached a final verdict.”

(The full IMF Staff Report is pending.)

Amandala

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#421004 - 11/04/11 02:16 PM Re: IMF Executive Board Concludes Belize Consultation [Re: Marty]
Marty Offline

PM Couldn't Be Bothered About IMF

On Monday the IMF issued the result of its article four consultation with Belize. It was generally favourable, noting that Belize has weathered the global financial crisis relatively well and that twelve-month inflation was nil in 2010. It also noted that government revenue is up while the outlook for 2011 remains moderately positive.

That's pretty good in lean times, but at his press conference yesterday, the PM said the IMF can say what it wants, he doesn't care either way:

Prime Minister Dean Barrow
"I know that the media has been having a look at the public information notice sent out by the IMF as a consequence of the article 4 consultation, well that's what it is. Basically, I am here to tell you that what the IMF says doesn't much matter to me. We have a job to do and their insistence on fiscal consolidation at a time of recession when government needs to spend more to drive the economy, because the private sector is in the dulldrums. I don't really want to hear about fiscal consolidations."

"But to the extent that they have had to acknowledge that again our revenue expenditure program, certainly on the revenue side, we've been doing extremely well as a consequence of a number of factors. That is good to see."

And while Belize can laugh away the IMF, in Jamaica, their Satndard and Poorr's rating was downgraded recently largely due to the non-completion of reforms related to its medium-term targets under the IMF standby agreement.

Channel 7


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#423248 - 11/25/11 06:12 PM Re: IMF Executive Board Concludes Belize Consultation [Re: Marty]
Marty Offline
PM Requests IMF "Diagnostic"

At the Wednesday, November 23, 2011, business forum titled, Turning The Corner, Prime Minister Dean Barrow announced that the Government of Belize has requested the help of the International Monetary Fund (IMF) to conduct a diagnostic—a short-term technical mission—for Belize.

Following its annual 2011 mission to Belize, IMF directors, in a report released in October 2011, urged a reform of Belize’s tax system.

“Welcoming the authorities’ intention to strengthen tax administration, Directors stressed the importance of improving overall tax collections, including a reduction in tax concessions,” said the public information notice at the conclusion of their visit.

When asked at a subsequent press conference to comment on the IMF report, Barrow said, “Basically, I am here to tell you that what the IMF says doesn’t much matter to me. We have a job to do and their insistence on fiscal consolidation at a time of recession, when Government needs to spend more to drive the economy, because the private sector is in the doldrums, I don’t really want to hear about fiscal consolidation....”
On Wednesday, however, Barrow announced, “We have recently requested a diagnostic of our taxation system with a view to its simplification and its rationalization, and I know this is something that the private sector will greatly welcome so we, like you, will anxiously await the start and outcome of that exercise.”

Barrow later added: “...we have indicated to the Fund that we want this to happen with a sense of urgency. I’m not entirely sure where the process is...”

Adding more on the IMF process, Financial Secretary Joe Waight said that the formal application to the IMF has already been made and the Government of Belize had a discussion with the IMF in October.

He said that Belize should expect an IMF field mission next year, along with another assessment to be carried out by a team funded by the Canadians and including representation from the World Bank.

The team would look at Belize’s financial system and provide information that would feed into the IMF process, which is expected to take place in the first quarter or early second quarter next year, 2012.

According to the IMF, such technical assistance (TA) missions by the Fiscal Affairs Department (FAD) of the IMF are led by the IMF headquarters and last one to two weeks.

“The expert who participates in a diagnostic mission,” said the IMF, “will be expected to: prepare for the mission by reading relevant documents prior to the mission, and in some instances through a pre-briefing at IMF headquarters for 2-3 days... participate fully in discussions with national authorities in his/her area of expertise; write sections of the draft TA report that is prepared and submitted to the authorities while the TA mission is in the field; and contribute to the team effort as directed by the mission head.”

Amandala

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#423281 - 11/26/11 02:10 PM Re: IMF Executive Board Concludes Belize Consultation [Re: Marty]
Marty Offline
Barrow asks IMF for diagnostic of Belize’s taxation system
At the Wednesday, November 23, 2011, business forum titled, Turning The Corner, Prime Minister Dean Barrow announced that the Government of Belize has requested the help of the International Monetary Fund (IMF) to conduct a diagnostic—a short-term technical mission—for Belize.

Following its annual 2011 mission to Belize, IMF directors, in a report released in October 2011, urged a reform of Belize’s tax system.

“Welcoming the authorities’ intention to strengthen tax administration, Directors stressed the importance of improving overall tax collections, including a reduction in tax concessions,” said the public information notice at the conclusion of their visit.

When asked at a subsequent press conference to comment on the IMF report, Barrow said, “Basically, I am here to tell you that what the IMF says doesn’t much matter to me. We have a job to do and their insistence on fiscal consolidation at a time of recession, when Government needs to spend more to drive the economy, because the private sector is in the doldrums, I don’t really want to hear about fiscal consolidation....”
On Wednesday, however, Barrow announced, “We have recently requested a diagnostic of our taxation system with a view to its simplification and its rationalization, and I know this is something that the private sector will greatly welcome so we, like you, will anxiously await the start and outcome of that exercise.”

Barrow later added: “...we have indicated to the Fund that we want this to happen with a sense of urgency. I’m not entirely sure where the process is...”

Adding more on the IMF process, Financial Secretary Joe Waight said that the formal application to the IMF has already been made and the Government of Belize had a discussion with the IMF in October.

He said that Belize should expect an IMF field mission next year, along with another assessment to be carried out by a team funded by the Canadians and including representation from the World Bank.

The team would look at Belize’s financial system and provide information that would feed into the IMF process, which is expected to take place in the first quarter or early second quarter next year, 2012.

According to the IMF, such technical assistance (TA) missions by the Fiscal Affairs Department (FAD) of the IMF are led by the IMF headquarters and last one to two weeks.

“The expert who participates in a diagnostic mission,” said the IMF, “will be expected to: prepare for the mission by reading relevant documents prior to the mission, and in some instances through a pre-briefing at IMF headquarters for 2-3 days... participate fully in discussions with national authorities in his/her area of expertise; write sections of the draft TA report that is prepared and submitted to the authorities while the TA mission is in the field; and contribute to the team effort as directed by the mission head.”

Amandala

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#424147 - 12/04/11 03:40 PM Re: IMF Executive Board Concludes Belize Consultation [Re: Marty]
Marty Offline
Here is a FULL copy of the IMF's BELIZE 2011 ARTICLE IV CONSULTATION

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with
members, usually every year. In the context of the 2011 Article IV consultation with Belize, the
following documents have been released and are included in this package:

* Staff Report for the 2011 Article IV consultation, prepared by a staff team of the IMF,
following discussions that ended on August 26, 2011, with the officials of Belize on economic
developments and policies. Based on information available at the time of these discussions,
the staff report was completed on October 5, 2011. The views expressed in the staff report are
those of the staff team and do not necessarily reflect the views of the Executive Board of the
IMF.

* Informational Annex prepared by the IMF.

* Public Information Notice (PIN)

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#424481 - 12/07/11 03:09 PM Re: IMF Executive Board Concludes Belize Consultation [Re: Marty]
Marty Offline

IMF report solemn recommendations

The IMF country report was released late last week. It follows consultations conducted in August with Belizean officials on economic developments and policies. There are two issues that stand out in respect of social indicators. The report recognizes the high poverty rate of forty-one percent and says that despite a five point seven percent spending on GDP for social protection, it has not translated into results and that poor families remain vulnerable. One recommendation from the IMF mission that may not sit well with most Belizeans is to increase the general sales tax from twelve point five to fifteen percent to avoid a predicted twenty-two million dollar decrease in GST revenues in the coming year. The alternative, says the IMF team, is to phase out tax concessions that were implemented in 2010. In recent developments, the report notes that the nationalizations of B.E.L. and B.T.L. have affected an already weak investment climate.

The IMF projects that the economy will expand modestly for 2011 since inflation is up due to increased fuel and food prices and that the external current account deficit will remain at around three percent of GDP. It notes, however, that the current fiscal strategy is “insufficient to place the public debt ratio firmly on a downward trajectory and to address the large financing needs that are projected to emerge over the medium term.” The findings reveal that contingent liabilities are estimated at seventeen percent of GDP, which is around a half-a-billion dollars, but only zero point seven percent of GDP is recorded in the official debt statistics. The four main sources that contribute to the contingencies include nationalized assets, pending court judgments mainly associated with foreign investors, cancelled contracts—including with foreign investors—and loan guarantees to the private sector.

Channel 5


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#424514 - 12/07/11 04:33 PM Re: IMF Executive Board Concludes Belize Consultation [Re: Marty]
Marty Offline
Spending on poverty has not translated into results: IMF

The International Monetary Fund (IMF) has released the BELIZE: 2011 ARTICLE IV CONSULTATION, IMF Country Report (December 2011), in which it is again recommending that Belize should increase the rate of General Sales Tax (GST)—a consumer tax—to the regional level of 15%—this despite the Fund’s affirmation of a very high poverty rate in Belize and ineffective social spending that has not yielded the expected results in making life easier for Belizeans.

In 2009, the IMF had recommended a sales tax increase from 10% to 12.5% for the 2010/2011 financial year. At that time, Prime Minister Dean Barrow had told our newspaper that he would not take on the recommendation—not amid the economic climate that prevailed at the time.

Barrow did add, however, that the government would not reject the proposed increase “out of hand,” but he did not see his administration implementing the tax hike at the proposed time.

However, in March 2010, Barrow announced that in order to finance the hole in the budget, he would have to increase GST from 10% to 12.5%, effective April 1, 2010, raising an additional $42 million from consumers.

The December IMF report on Belize indicates that GST revenues increased only $37 million in 2010/2011, when the tax hike was implemented, as compared to the previous year. The 2011/2012 forecast is for a $22 million drop in GST revenues. There is no explanation provided.

The IMF tells the Government of Belize that, “...consideration could be given to raising the GST rate from 12.5 percent to regional levels around 15 percent or phasing out fully the 2010 tax concessions.”

Elsewhere in the report, the IMF reiterates the recommendation for “...raising additional revenues, including through: (i) gradually raising the GST rate to 15 percent––the regional average; and (ii) reversing tax concessions (½ percent of GDP) granted in the FY 2010/11 budget.”

At the Wednesday, November 23, 2011, business forum titled, Turning The Corner, Prime Minister Barrow announced that the Government of Belize has asked the IMF to conduct an urgent diagnostic of Belize’s taxation system.

Barrow said that the diagnostic was requested with “... a view to its simplification and its rationalization....”

The IMF process is expected to take place in the first quarter or early second quarter next year, 2012.

The IMF report on Belize identifies fiscal consolidation, safeguarding financial sector and monetary stability, and boosting growth and reducing poverty as key economic issues for Belize.

It also described the macroeconomic outlook for 2011 as “moderately positive.”

“Social indicators have weakened in spite of significant spending in social protection,” it noted.“A poverty assessment conducted by the authorities revealed that the overall poverty rate rose from 34 percent in 2002 to 41 percent in 2009. Unemployment has also remained high (13 percent in September 2009).”

It said that the high poverty rate persists despite the allocation of 5.7% of GDP in 2009 to social protection.

“This spending has not translated into results, as evidenced by the large number of poor families that remain vulnerable in Belize,” said the IMF report.

“The authorities [in Belize] noted that the economic slowdown, increased poverty, a surge in crime, and the associated need for increased citizenry security constrained their efforts at more aggressive fiscal consolidation,” said the report.

It also noted that Belize’s economic growth has decelerated sharply in recent years.

“Annual GDP growth rates in Belize averaged some 7 percent in the 1980s, but declined to less than 4 percent during the last decade,” said the report. “Potential growth has also steadily declined since 1988, and has now converged to the subdued level of the rest of the Caribbean.”

Last year, Belize reported a 2.7% increase in GDP, and the IMF said that economic growth would remain subdued.

“Feeble growth among Belize’s main trading partners and a weak investment climate will constrain growth rates at 2.5 percent over the medium-term,” it reported.
It also noted the deterioration in Belize’s debt profile, especially due to contingent liabilities accrued in the process of the nationalization of Belize Telemedia Limited (BTL) and the Belize Electricity Limited (BEL)

“In 2011, total fiscal contingent liabilities are estimated at 17 percent of GDP [about a half-a-billion dollars], with only 0.7 percent of GDP recorded in the official debt statistics.”

The contingencies, it said, comprise four main sources: (1) contingencies arising from nationalized assets, including BTL and BEL (12.5% - $375 million); (2) pending court judgments, mainly associated with foreign investors (2.7% - $80 million); (3) cancelled contracts, including with foreign investors (1% - $30 million); and (4) loan guarantees to the private sector (0.7%).

The Government also acquired contingent fiscal assets at approximately 12.6% of GDP—not enough to offset the debts.

“These comprise two key categories: (i) the net value of nationalized assets (12.5 percent of GDP), including BTL and BEL; and (ii) outstanding tax obligations from the private sector (0.1 percent of GDP), including those of NEWCO (airport concession),” said the report.

Belize’s public and publicly guaranteed debt is recorded as 80% of GDP for 2011.

As for consumer prices, the IMF said that inflation will increase, mostly on account of “higher fuel and food prices.”

Amandala

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