The International Monetary Fund has released its official report following its Article Four consultation with Belize back in February of this year. Among the policy points Belizeans would be most concerned about are the recommended cuts to government spending and increases in taxes, including the General Sales Tax. The report acknowledges Belize has been hard hit by COVID-19. In fact, the report says Belize has had one of the highest numbers of cases and deaths per capita in the Caribbean. In 2020, tourism fell by seventy-two percent. Belize’s Gross Domestic Product contracted by fourteen percent that year and public debt increased from ninety-seven percent in 2019 to almost one hundred and thirty percent in 2020. Because the IMF says Belize’s recovery from the pandemic will be protracted with only sluggish tourism growth for most of 2021, and public debt likely to remain high, the fund says Belize’s economic outlook is “subject to substantial downside risks, including from a resurgence of the pandemic and natural disasters.” The Fund directors say there is an urgent need to restore debt sustainability, provide support to the most vulnerable and implement structural reforms. The directors recommended broadening the tax base, strengthening revenue administration, and reprioritizing expenditures. A major priority is restoring debt sustainability to reduce external imbalances and strengthen the currency peg. They called on the authorities to limit central bank financing of the government, which together with fiscal consolidation, would help reduce the current account deficit, improve access to external financing, and boost reserves. But they also called for increasing tax rates, including that of the GST. News Five spoke with Financial Secretary Joseph Waight about IMF’s latest report.
Joseph Waight, Financial Secretary
“The thing is this. Nobody knows for sure what the future holds. The government is putting in place what it thinks are credible and adequate goals to try to resume growth and bring our debt back to sustainable levels. We have taken difficult actions. We have reached out to our partners, including Labour and the private sector, everybody working together. But, it needs a sustained effort. And we are hoping that in eighteen months or another two years, we look back in the rear view mirror and we see that we have climbed out of this hole. The IMF is conservative by nature. And there are risks, downside risks. So, climate change we have to consider, things we don’t know. Prices on our commodities can sometimes be volatile, so there are a number of unknowns. But I think we are taking the correct steps to stabilize ourselves, put ourselves back in a sustainable path. And hopefully in three years’ time, with sustained effort, we will be able to say that we are back on solid ground you know.”
“God forbid, but we are to have a natural disaster, or a second wave in the COVID-19 pandemic, that would set those projections back substantially. Can this risk be mitigated by broadening the tax base?”
“The idea is to try to improve your administration and widen the base of course. Rather than increase the rates you widen the base. And indeed, if we have a big economic shock we would have to go back to the drawing board.”