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The IMF finished its Article IV Consultation in Belize yesterday and issued its concluding statement this morning. While not exactly upbeat, the report does note with encouragement that "the economy is expected to return to positive growth in 2017", but laments that "the medium term outlook remains weak." They project 2� percent growth in 2017, and an average of just under 2 percent in the medium-term. The report also concludes that international reserves are projected to decline to two and a half months of imports over the medium term, and, quote, "any negative shocks could push them below that level." Notably, the IMF estimates the overall level of public debt at about 100 percent of GDP - which is very high.

And, once again, the IMF is urging the government to increase the percentage rate on GST and reduce zero rated items. The report states, quote, "reform options include broadening the base of the General Sales Tax (by removing zero-rated items and streamlining exemptions), and/or increasing the GST rate from 12.5 percent to the regional average of 15 percent."

And, again, the IMF wants government to cut jobs in the public sector, saying, "a civil service reform could help stabilize the number of public employees and contain the wage bill. Moreover, the public sector pension plan could become contributory and pensions adjusted to be in line with inflation."

These are almost like a chorus now for the IMF, which the Barrow Administration has consistently rejected.

Channel 7

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I.M.F. Says More Must Be Done for Belize's Economy

The International Monetary Fund has concluded its annual Article Four consultative visit to Belize, held from June sixth to fifteenth. It has issued its preliminary findings, which speak of a weak economy. The summary of their conclusions is as follows: "The economy is expected to return to positive growth in 2017, but the medium term outlook remains weak. Public debt remains elevated, despite the cash flow relief and NPV gain from the recent debt restructuring agreement with private external bondholders; and the current account deficit is sizable. While the tightening of the fiscal stance in the context of the 2017-18 budget is welcome, in the view of the team, further fiscal consolidation is necessary to mitigate risks and put public debt on a clear downward path, and to facilitate external adjustment. Withdrawal of Correspondent Banking Relationships and low capital buffers in a major bank remain key risks to financial stability." The I.M.F. team says Belize needs to supplement its fiscal adjustment with other measures, including streamlining the wage bill, broadening the base of the General Sales Tax, implementing a fiscal rule to lower public debt to GDP ratio to sixty percent like in other Caribbean countries, and introducing more technological platforms to make Government service more effective. It notes that unemployment has gone up from eight to eleven percent of the available labour force and that Belize is slipping in the rankings of the ease of doing business.

Channel 5

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IMF presses Belize to increase GST to 15%, and broaden tax base

Following a mission to Belize which was concluded yesterday, June 15, the International Monetary Fund (IMF) is asserting that the Government of Belize needs to take further measures to put the national debt and the economy on a better trajectory and mitigate risks.

The IMF continues to press the Government of Belize to increase consumer taxes, particularly by upping the rate of the General Sales Tax (GST) from 12.5% to 15%. So far, the Barrow administration has resisted calls from the Fund to increase the tax levy, which the IMF suggests should be charged on essential items now zero-rated, with the removal of exemptions.

After IMF meetings led by Dr. Bert van Selm, formerly the IMF resident representative to Jamaica, with key government officials in Belize, including Prime Minister Dean Barrow, Financial Secretary Joseph Waight, Central Bank Governor Joy Grant, members of the Opposition People's United Party, as well as representatives of the private sector and civil society, the Fund is also renewing calls on the Government of Belize to contain the wage bill and stabilize the number of public sector employees.

"Moreover, the public sector pension plan could become contributory and pensions adjusted to be in line with inflation," said the IMF.

Whereas the report issued today notes that the Belize economy is expected to return to positive growth (2.5%) this year, following the recession experienced in 2016, inflation will continue to trend upward, in the region of 2%.

However, public sector debt remains a major concern, despite the gains made from the restructuring of the billion-dollar superbond earlier this year.

It is interesting to note that a part of the deal with bondholders is that if the Government fails to meet the targets to which it committed in its agreement to restructure, which holds the Government to belt-tightening and revenue measures aimed at gaining a primary surplus of 3% of GDP in this budget year (2017/2018) and 2% for the next three budget years, the IMF would be asked to conduct a special technical mission to (i) determine why the primary surplus target was missed and (ii) recommend remedial measures. This is in addition to a commitment to report to the National Assembly on the reasons for the failure to meet the agreed targets.

The IMF says that the Government should also adopt a fiscal rule, which would support the consolidation effort. This fiscal rule would target a reduction in public debt to 60 percent of GDP over the medium-term. A similar rule has been adopted by Jamaica, the IMF said.

"In Belize, adoption by parliament of a fiscal rule that targets 60 percent debt to GDP by 2025 could help guide the fiscal consolidation effort and broaden the support for it," said the report.

Belize's debt-to-GDP ratio is nearing 100%, exacerbated by onerous obligations under an arbitration award to meet nearly half-a-billion dollars in compensation for the nationalization of Belize Telemedia Limited. As we reported earlier this week, the Government has to pay roughly $200 million to finalize payment and we have been told that it would have to borrow to pay most of the funds, since only $50 million was earned from the sale of its utility company shares.

The IMF notes that, "The sale of government shares in nationalized utility companies to domestic investors and issuance of domestic debt will contribute significantly to financing in FY2017/18."

It also said that financing from Venezuela under the PetroCaribe program is expected to continue to dwindle.

However, there is good news for the banking sector, with reports of recovery from the problems experienced with correspondent banking relations in the previous two years.

According to the IMF report, "Since mid-2016, all affected banks have been able to reconnect to foreign banks, with no further losses of relationships."

Amandala

GOB Says No To IMF Tax Hike

Last week Friday, the IMF issued the customary statement after its Article IV consultation.  Noting the projection for lackluster growth and stifling debt, the IMF advised the government to increase the raise the GST rate from 12.5% to 15%, along with limiting zero-rated items and cutting public sector jobs. Today, we spoke to Deputy Prime Minister Patrick Faber about the report, and whether we should expect to see an increase in taxes anytime soon...

Hon. Patrick Faber - Deputy Prime Minister
"Well you will always find that these recommendations coming from the IMF are stern and stiff. Traditionally under the leadership of our current prime minister, we have tried to address the problems in our economy by not always following the prescription from the IMF. Those are often very stern and in fact we have had occasion in the past to learn very difficult lessons politically from following tee tie toe what the IMF recommends. We believe in some home grown measures from time to time that help us. If I recall correctly I do recollect the report saying that while the growth is not where we would want it to be that it is looking positive, that is going to be positive and so we will continue to utilise our home grown efforts where that coincide with what the IMF prescribes then fine but we want to do what is best for our people and whatever measures we put in place to fix the economy cannot come with the result of human suffering further especially for the poor people in this country. So we are resolute in making sure that doesn't happen."

Channel 7

PM Puts the Brakes On IMF, Fast

Yesterday we showed you what the Deputy Prime Minister had to say about the IMF's recommendations to raise GST from 12.5% to 15%. The advice came in the IMF's required Article IV Consultations. Deputy PM Patrick Faber told us that the government will reject the suggestions and find a way to grow the economy in its own way. In an interview this afternoon, Prime Minister Dean Barrow put it even more emphatically...

Rt. Hon. Dean Barrow, Prime Minister
"You know I made the point to the IMF in the wrap-up meeting we had that when we first re-engaged with the bondholders trying to restructure again the super bond, initially they had sought to insist that a pre-condition to our discussions ought to be Belize's entry into an IMF program. We absolutely rejected that and we proceeded on the basis that Belize is quite capable of writing its own prescriptions and going its own way."

"The fact that we are not in any IMF program, means that, while as a matter of courtesy and respect, we look at what the IMF has had to say. There is absolutely no obligation on our part to follow any of it and certainly with respect to the recommendations as to raising the GST and as to doing away with exemptions and the recommendations having to do with pensions and public officers. We absolutely reject those. As we have made clear repeatedly."

"We've been able to go our own way successfully. There are some current hurdles, there was the economic downturn last year. There was the liabilities that we had to deal with and these have in fact ratcheted up debt so that our debt to GDP ratio is now where we would want it to be, but we have taken our measures as witness the last budget presentation. The economy is already on the rebound and I am absolutely certain that we can in fact find our way out of these temporary difficulties relatively easily."

Channel 7

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P.M. Maintains It's No to IMF Prescriptions

Prime Minister Dean Barrow has emphatically rejected the recommendation of the International Monetary Fund to increase the General Sales Tax to fifteen percent.� That proposal from the UN financial agency succeeds what is known as an Article Four Consultation during which the IMF meets annually with each member government.� An assessment of Belize's economic health has led to several suggestions, including a removal of tax exemptions, as well as other measures that would affect pensioners and public officers.� In an interview with PM Barrow this evening, he stated that government has once again refused to administer the prescriptions of the IMF, in the best interest of Belize.� According to the prime minister, in concluding the recent Super Bond renegotiations, IMF advisors had made a previous attempt to convince government to join one of its many programs.

Prime Minister Dean Barrow

"You know I made the point to the IMF team in the wrap-up meeting we had that when we first re-engaged with the bondholders trying to restructure again the Super Bond.� Initially they had sought to insist that a pre-condition to our discussions ought to be Belize's entry into an IMF program.� We absolutely rejected that and we proceeded on the basis that Belize is quite capable of writing its own prescriptions and going its own way.� The fact that we're not in any IMF programs means that while, as a matter of courtesy and respect, we look at what the IMF has had to say.� There is absolutely no obligation on our part to follow any of it and certainly, with respect to the recommendations as to raising the GST and as to doing away with exemptions, and the recommendations having to do with pensions and public officers, we absolutely reject those as we have made clear repeatedly.� So, as I said, it's always interesting to talk to the fund, they have a job to do, we are members and the Article Four Consultation is a prescribed, as it were, feature of membership and we will always, as I said, be respectful and treat the IMF team with extreme courtesy.� But we absolutely will not follow any of the prescriptions which, in our view, would result if followed in a fracturing of the social compact."

Belize Will Go its Own Way

The annual assessment by the IMF seeks to forestall future financial problems that member countries may face; however, its conditions have been broadly debated.� It is argued that the IMF's policy prescriptions present standardized remedies that are not sufficiently tailored to each country's individual circumstances.� So where does PM Barrow stand on criticisms that his government has never subscribed to recommendations of the IMF?

Isani Cayetano

"Now PM, one would look at your legacy as leader of the Government of Belize since 2008 as one where we could say despite some of the recommendations that have been put forward by the IMF, in terms of our economic state of affairs, that your government has never really followed any of these prescriptions or recommendations.� How would you respond to such a criticism?"

Prime Minister Dean Barrow

"Well I don't know that that is a criticism.� I would consider that, in fact, a compliment that Belize has been able to avoid getting into what some people might describe as the clutches of the IMF, in terms of any formal program and we've been able to go our own way successfully.� There are some current hurdles, there was the economic downturn last year.� There are the liabilities that we have to deal with and these have, in fact ratcheted up our debt so that our debt to GDP ratio is not where we want it to be but we have taken our own measures, as witnessed at the last budget presentation.� The economy is already on the rebound and I am absolutely certain that we can in fact find our way out of these temporary difficulties relatively easily and certainly most successfully.� Look, you can't, I don't see how austerity can get you out of a recession.� It doesn't make sense.� It's a contradiction in turns.� If you're going to get out of a recession, you can't do that by cutting spending absolutely by simply preaching and practicing this doctrine of having no flesh on the bone of the body politics.� So we, as I said, will continue to recognize the IMF as an extremely important global institution and always treat with them on the basis of respect and equality and dignity.� But we will continue to go our own way."

Channel 5

They are in for a surprise. The human behavior factor introduced to math. charge more get less.
From Google
The Laffer Curve is a theory developed by supply-side economist Arthur Laffer to show the relationship between tax rates and the amount of tax revenue collected by governments. The curve is used to illustrate Laffer's main premise that the more an activity such as production is taxed, the less of it is generated.

IMF Concludes Article IV Consult, Not Impressed With GOB Finance

The IMF today released its report on the conclusion of its Article IV consultation with Belize, and the news, to no one's surprise, is not good. The IMF warns, quote, "The economy continues to face multiple challenges. The macroeconomic outlook remains weak. Public debt remains elevated, at around 100 percent of GDP..."

They add also that, quote, "the medium term outlook is relatively weak with high debt, and large external imbalances."

And what's the fix? Well, it's the IMF one size fits all solution of taxation and retrenchment. The report advises a broadening of the base of the General Sales Tax - meaning fewer deductions, and, quote "reform of the civil service to help stabilize employee headcount and to contain the wage bill." From that you can read "retrenchment". The Barrow Administration has generally ignored the IMF's prescriptions.

Channel 7

Wow! Businesses currently will be supporting or participating in a Social Security increase.....That coupled with a GST increase and the simple costs of getting items to the island is only going to worsen the final bill to our citizens/tourists....... When we started doing business here there was no GST; then it was (I think) 8%, then to 10% and then to 12.5%. Fifteen years since GST implementation has anyone experienced an increase or benefit to our infrastructure, citizens, education, anything? Increased GST seems like it will be more of a burden to the end user.......

The Government of Belize is like the beggar. He comes to your door one day and asks for a dollar. You give it to him. The next few days he returns and you give him a dollar everyday. One day he comes and you tell him you don't have a dollar, and now he is pissed!

Someone has to pay for the PM's and ministers new homes and their kids and entire families new 60K cars for each one of them! They sure are not going to suffer!

And most businesses only pay a tax of 1.75 business tax. Those of us in the significantly higher scale (15% of gross revenue) are already stretched almost to breaking point. My industry has seen a marked decrease in sales due to many factors but yet another tax hike may peal the final death knell. I am comfortable paying taxes when business is flowing, but the land's department has been dysfunctional for the past 5 years which has prevented sales from closing, titles from being issued and this results in obvious additional caution and lack of confidence in the department, which means less sales. Less sales, less development, less jobs, less tax payers. The downward spiral will come to an end. Either this industry will shut down or GOB needs to heavily focus on what is usually a steady and substantial gravy train.

Those of us who pay taxes are squeezed until there is nothing left to squeeze at the same time that we see many not even paying the paltry 1.75% rate.

Retrenchment appears to be inevitable.