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Ministry of
Finance and the Public Service
Belmopan - 02 March, 2007
Budget Presentation for Fiscal Year
2007/2008: FACING, FIXING, MOVING
ahead
The Rt. Hon. Said Musa,
PRIME MINISTER and Minister of finance and the Public Service
belmopan
march 2, 2007
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APPROVED ESTIMATES 2006/2007
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REVISED BUDGET 2006/2007
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DRAFT PROPOSED ESTIMATES 2007/2008
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TOTAL REVENUES AND GRANTS
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598,648,177
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626,885,289
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678,522,913
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RECURRENT REVENUE
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TAX REVENUE
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513,901,622
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528,837,402
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593,922,989
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Income and profits
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135,067,420
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136,279,526
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170,256,298
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Taxes on property
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6,115,000
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5,316,191
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5,617,722
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Ta Taxes on
international trade and transactions
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170,427,516
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164,281,950
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180,138,867
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ax Taxes on goods and
service
prices
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202,291,685
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222,959,735
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237,910,103
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NON-TAX REVENUE
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49,043,206
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53,519,944
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56,998,180
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Property Income
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4,500,000
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4,500,000
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7,700,000
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Licenses
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11,179,600
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10,248,700
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10,423,300
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Other
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33,363,606
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38,771,244
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38,874,880
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TOTAL RECURRENT REVENUE
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562,944,828
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582,357,346
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650,921,169
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CAPITAL REVENUES:
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Sale
of Crown Lands
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7,172,500
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5,388,577
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6,797,524
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Return on Equity
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-
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4,292,698
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3,328,909
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TOTAL CAPITAL REVENUES
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7,172,500
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9,681,275
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10,126,433
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GRANTS & DEBT SERVICE RECEIPTS
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28,530,849
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34,846,668
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17,475,311
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TOTAL EXPENDITURES
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667,901,273
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702,905,572
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703,235,731
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RECURRENT EXPENDITURE
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Personal Emoluments
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223,564,558
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220,259,920
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235,313,278
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Debt Service – Interest and Other Charges
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145,571,920
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169,528,568
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107,938,208
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Pensions
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39,802,215
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39,802,215
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39,019,482
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Goods Services
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152,746,569
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159,681,570
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202,965,322
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TOTAL RECURRENT EXPENDITURE
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561,685,262
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589,272,273
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585,236,290
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CAPITAL EXPENDITURES
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CAPITAL II EXPENDITURES
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54,157,460
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79,948,328
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49,956,293
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CAPITAL III EXPENDITURES
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48,850,551
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30,476,972
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64,835,148
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CAPITAL TRANSFER & NET LENDING
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3,208,000
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3,208,000
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3,208,000
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TOTAL CAPITAL EXPENDITURES
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106,216,011
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113,633,300
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117,999,441
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RECURRENT SURPLUS/[DEFICIT]
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1,259,566
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(6,914,926)
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65,684,879
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PRIMARY SURPLUS [DEFICIT]
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76,318,824
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93,508,285
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83,225,390
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OVERALL SURPLUS/[DEFICIT]
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(69,253,096)
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(76,020,283)
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(24,712,818)
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AMORTIZATION
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(122,982,893)
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(99,123,682)
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(61,653,891)
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FINANCING
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(192,235,989)
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(175,143,965)
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(86,366,709)
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GDP (in BZbillions)
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2.414
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2.428
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2.558
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Overall Surplus/Deficit (+/-) as a % of GDP
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-2.87%
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-3.13%
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-0.97%
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Primary Surplus/Deficit (+/-) as a % of GDP
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3.16%
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3.85%
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3.25%
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TOTAL REVENUES AND GRANTS
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598,648,177
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626,885,289
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678,522,913
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Budget
Presentation for Fiscal Year 2007/2008
Introduction
Madame Speaker,
I move the first reading of the General Revenue
Appropriation Bill for Fiscal Year 2007/2008.
Last year when we presented the budget proposals we
laid out certain policy undertakings which the Government intended to
pursue in the course of the year. Ambitious targets were set for
fiscal performance. We challenged ourselves to chart a new way
forward in order to achieve medium term stability and sustainability.
Overall performance for the year, I am pleased to
report, is generally good with the out turn expected to exceed the
targets set in most cases.
In this year’s budget proposals, Belizeans will see
that we are not only securing the gains we have made in our public
finances but also addressing the priority needs of our young growing
nation.
It is a Budget that ensures our country continues to
grow in a steady sustainable way:
- A Budget that will generate more and better paying jobs;
- A Budget that invests more in the human capital of Belize
through education and training for more productive living;
- A Budget that tackles the challenges facing families right
now by creating healthier and stronger communities;
- A Budget that invests in our nation’s economic
infrastructure; and
- A Budget that still ends the year with a much reduced
deficit and another primary surplus.
The Economy of Belize in 2006
The Central Bank and the Statistical Institute
estimate that real GDP growth was around 4% for 2006. The
combination of tight fiscal and monetary policies and strong performance
by exporters of goods and services led to a significant improvement in
the balance of payments position during the year.
The annual labour force survey showed that
unemployment fell from 11 to 9.4% largely due to the vibrancy of the
services sector, especially tourism.
The Consumer Price Index rose by 4.3%. All
major commodity groups were affected especially “Transport and
Communications” and “Rent, Water, Fuel and Power”.
Production and Exports of
Goods and Services
The primary sector performed well even though some
producers faced challenges in the form of unfavourable weather, disease
and financial constraints in 2006. There was a $145.4 million (36.6%)
increase in domestic exports to $543.1 million during 2006.
On the down side, marine export production fell,
mostly due to an 18% contraction in shrimp output. The value of
marine exports totaled $84.9 million down from $98 million the previous
year.
In the case of sugar, favourable
weather conditions during growing and harvesting pushed sugarcane
deliveries up by 26% to 1,173,469 long tons for the crop year and a total
of 111,394 long tons of sugar were produced. Molasses production
increased by 11.1% to 41,179 long tons. Papaya production rose by
20% to 76 million pounds. The petroleum industry, produced 811,199
barrels of crude oil, of which 715,872 barrels were exported and 45,692
barrels were sold locally.
With f.o.b. earnings of approximately $81.2 million,
petroleum accounted for more than half of the increase in export
earnings.
In spite of a decline in production, the volume of
citrus exports rose by 19.9% as stocks were drawn down. Citrus
export earnings rose by 55.0% to $120.1 million, breaking all previous
records.
Higher sugar sales to preferential markets in the US
and EU pushed sugar export earnings up by 43.2% to $100.1 million.
The vigorous growth in domestic exports exceeded an
11.0% rise in imports, causing the trade deficit to narrow. Much of
the rise in imports was due to substantial capital investment by export
processing zones and an increase in the cross border trade from the
commercial free zone. The trade statistics show that the EPZ’s and
the CFZ accounted for some 41.0% of the increase in imports during the
first three quarters of 2006.
Fuel imports were up due to higher acquisition
costs, while other substantial increases were recorded in imports of
vehicles and intermediate inputs such as construction materials.
The performance of tourism was mixed.
Stay-over visitor arrivals rose by an estimated 4.7% to 237,716, but
there was a decline in the number of cruise ship calls that contributed
to a fall in cruise ship visitor arrivals to 590,336. However,
earnings from tourism increased by 23.7% because the increase in
overnight visitors resulted in a higher average daily expenditure.
Balance of Payments
The combination of a reduction in the trade deficit,
higher foreign exchange earnings from tourism and other services, and
inflows of remittances, substantially offset an increase in outflows for
interest payments and profit repatriation. The result was a marked
improvement in the current account deficit of the balance of payments
from $235.7 million during the first nine months of 2005 to $58.4 million
for the comparable period of 2006. This was an impressive
turnaround.
Money Supply and
Credit
An expansion in net domestic credit to meet the
demands of the private sector plus foreign inflows from loan
disbursements and earnings by exporters of goods and services contributed
to a 13.3% rise in broad money supply in 2006. The net foreign
assets of the banking system expanded by $127.0 million (94.6%) with the
net foreign asset holdings of the Central Bank and commercial banks
registering increases of $65.8 million and $61.2 million,
respectively. At the end of December, the official foreign reserves
stood at $208.9 million, equivalent to 2.2 months worth of merchandise
imports.
The Central Bank sought, during the year, to address
the rapid expansion in domestic liquidity so as to restrain credit
expansion and avoid excess demand for foreign exchange. After
implementing a 1% increase in statutory reserve requirements at the start
of 2006 and overseeing the removal of offshore deposits that had been
artificially inflating domestic liquidity, the Central Bank intervened
again with a further 1% increase in the cash and secondary reserve
requirements that took effect at the beginning of September.
Notwithstanding these interventions, bank liquidity
remained at high levels and credit grew twice as fast than in 2005.
In 2006, the 11.1% expansion in net domestic credit
reflected a $151 million rise in loans to the private sector and a $38
million increase in net credit to Central Government. Credit to the
primary and tertiary sectors expanded while the secondary sector
experienced net repayments.
There was a slight narrowing of the commercial
banks’ interest rate spread during the year as a result of a 30 basis
points increase in the weighted average deposit rate to 5.8%, and a 10
basis points decline in the weighted average lending rate to 14.2%.
Madame Speaker, I now turn to the Government’s
fiscal performance for the current fiscal year, 2006/2007.
BUDGET
PERFORMANCE IN FISCAL YEAR 2006/2007
Expected Outturn
for the Fiscal Year 2006/2007 - The Approved and Revised Estimates
This year, the Government of Belize continued on its
programme to achieve medium term stability and sustainability in its
fiscal and debt operations. Over the past several years, this
programme has resulted in a sharp decline in the overall deficit from
over 8% of GDP to 3.3% of GDP last year. At the same time, the
primary balance moved into surplus, an achievement that came from strong
fiscal discipline and firm commitment to the objective of securing
stability and sustainability in Government finances.
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Summary of Approved Budget
and
Expected Outturn for FY
2006/2007 - $BZ mn
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Approved
Estimates
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Projected
Outturn
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Total Revenue and Grants
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598.6
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626.9
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Total Expenditure
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667.9
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702.9
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