Prime Minister Dean Barrow has recommended a further 20.5 million dollars in fiscal measures to help close the budget gap. Targets include adjustment of taxes on fuels other than diesel and on data services apart from free Internet to schools.
The P.M. maintains that the economy is performing well enough but not as good as expected. More importantly the fiscal targets set in last year's budget have not been fully met due to several factors. Nonetheless the PM says Belize will move on.
New bills being introduced concerning immigration and crime.
Turning now to politics - today was Budget day in Belmopan. It's the biggest day on the Parliamentary calendar - but the usual energy of the day was diminished because the election seemed to have sapped up the week's political energy.
The Prime Minister called it a steady as she goes budget - and we found out why:...
Jules Vasquez reporting
Rounding out what he called a UDP Decade - Prime Minister Barrow presented what might be his leanest budget yet - bereft of goodies and giveaways - it's austerity turned into a hardened fiscal conservatism.
And, while nothing new was offered - the best that he could do was promise that what has been given will not be taken away:
Rt. Hon. Dean Barrow, Prime Minister "We grasp the nettle with both hands, we rise to meet the challenges, and we will overcome them. This year's budget is structured accordingly and there therefore can and will be no retreat from our signature pro-poor policies: BOOST and Food Pantry; the Apprenticeship Program; the High School Subsidies; the Payment by GOB for students' CXC exams."
And there's also no retreat from Government's enormous debt - close to 100% of GDP:
Rt. Hon. Dean Barrow, Prime Minister "At the close of 2017, the national debt stood at approximately $3.535 billion, some 93.8 percent of estimated 2017 GDP."
"The immediate goal is to reduce the debt to 80 percent of GDP in the next five years. If Belize can sustain and build our fiscal primary surplus position, and if we can, in collaboration with private enterprise, spark just a few years of higher than average economic expansion, then this key criterion of sovereign economic and fiscal health can be fully restored."
But, government did not meet its targets for economic growth or the primary surplus which bondholders watch closely.
Rt. Hon. Dean Barrow, Prime Minister "We will not meet the perhaps overly ambitious budgeted Primary Surplus Target of 3.1 percent of GDP which we had set for ourselves at the beginning of the fiscal year. Instead the outturn is likely to be closer to 1.8 percent of GDP."
"The lower than expect out-turn is due to revenue shortfalls arising from weaker than expected economic activity and some slowdown in government investment and some slowdown."
And to increase government's tax revenue, Government is looking to your mobile data purchases:
Rt. Hon. Dean Barrow, Prime Minister "GST is to apply to the purchase of data services by telecom clients. For some time now, this sector has been in a dynamic transition where revenues have shifted dramatically from voice to data, and with this shift has come a commensurate reduction in GST collections. Making tax application even more difficult is the bundling of services, effectively obfuscating taxable elements from those untaxed. This proposed alteration will simply restore GST revenues lost in this voice to data transition."
And while that is to bring up revenue, Government also has to control expenditure - and that means taming the 431 million dollar wage bill:
Rt. Hon. Dean Barrow, Prime Minister "The rise in Current Expenditure is driven largely by increases in personal emoluments as provisions have to be made for the award of annual merit increases across the public service."
"Renewed efforts will be made to hold down on the increase in the wage bill by capitalizing on natural staff attrition."
Projections for economic growth are modest:
Rt. Hon. Dean Barrow, Prime Minister "The Central Bank of Belize projects that the economy should grow between 1.5 percent and 2.0 percent in 2018 due to increased output from the primary and tertiary sectors."
While Capital programs are basically infrastructure projects:
Rt. Hon. Dean Barrow, Prime Minister "Continuation of the upgrading of the Hummingbird Highway ($11.0 million); Continuation of the Belize City Southside Poverty Alleviation Project ($4.0 million); Commencement of work on the upgrading of new sections the George Price Highway including the construction of a new double lane bridge at Roaring Creek. ($13.0 million). Commencement of work on a upgrading of a new section of the Philip Goldson Highway ($5.0 million); Commencement of work of an new Airport Link Road joining the access road to the PGIA with the e Western Highway ($3.0 million); Commencement of work of New Haulover Bridge ($3.0 million); and Commencement of work on Phase I of the CARACOL Road Project ($4.0 million)."
And to cover the deficit financing requirements Government is sourcing external and domestic source:
Rt. Hon. Dean Barrow, Prime Minister "The financing needs of the budget amounting to $118.1 million will be met from the following sources: Disbursement of $63 million from Loans already contracted with our multi-lateral development partners to fund our Capital III Expenditure Program; Disbursement of $20 million in budget support financing from the Republic of China (Taiwan) under the on-going bilateral economic cooperation program; and a further draw-down of PetroCaribe financing in the amount of $15 million (which is already held in a GOB account); and Access to some $20 million in domestic financing."
And to round out the bare-bones budget, PM Barrow ended with - not a flourish - but a foray into formlessness:
Rt. Hon. Dean Barrow, Prime Minister "Our philosophy, the defining economic outlook of the UDP decade, does not envision government as either the problem or the panacea; rather, we view government as the activist enabler."
An enabler - not very able with limited budgetary resources:
Rt. Hon. Dean Barrow, Prime Minister "This administration will surge ahead now on the current of a swift-moving economy. And our public finances will remain firmly anchored to an always more sturdy bedrock that is the plinth of a people who will ever progress and advance throughout the many years to come."
Leader of The Opposition Says “No Glitter, No Substance” In New Budget
The PM called the budget Maintaining Steadiness; Consolidating Stability; Advancing Growth. Here's the reaction from the leader of the opposition:
Hon. John Briceno, Leader of the Opposition "Orange Walk East in the next general elections..."
Reporter "Prime Minster is saying though that they will have a 4th term."
Hon. John Briceno, Leader of the Opposition "Ahh he could say a lot of things. It's like his budget. The Prime Minister was known as always talk about all glitter and no substance. Well today it's no glitter and no substance because there is nothing in that budget. It's lifeless. You see nothing. He talks nothing about crime, about the social ills that are affecting us. He is talking about him being the enabler. The only enablers that he has done are some UDP millionaires that have been profiling on television. There is nothing. The very same that that remember he use to criticize the PUP about this below the line items now, now the BTL settlement he is treating it as below the line. Something that we paid from the budget. If we were to include that we wouldn't have enough money to pay the rent, pay light bill and to pay teachers. That is why he has been living on borrowed money. Issues those treasury bills and treasury notes, sucking up all the liquidity in the banking system. I don't know what the Prime Minister is talking about - a fourth term. Well if they are so confident, bring it on.""
Reporter "The budget, the tax measures that were announced he mentioned specifically the data services, internet, excluding the schools and then also fuel. Again, that what he called low hanging last year. But I notice there is not any increases, readjustment of taxes. Do you think he will be able to reach the kind of funding they will need to keep this budget balanced and ongoing?"
Hon. John Briceno, Leader of the Opposition "When it comes to the issue of data or access to internet, that has been the most fast growing sector of the telecommunications industry including the cable industry, because the cable industry is hardly any growth. People are moving more to data. So basically what the Prime Minster is doing now is putting in new tax on the Belizean people, especially the middle class and the low class who are struggling, who ensure now access to internet or data, is a necessity. Every child that goes to school, when they go home, they need to have internet and now what is the Prime Minister doing? Taxing those families, taxing those children in the family are going to have even more trouble. The Prime Minister promise the cane farmers 3 hundred thousand dollars to be able to fix the sugar farm, they haven't gotten that money yet. This budget is bogus. It's a lifeless budget, it is no glitter and no substance."
Prime Minister Dean Barrow took about 50 minutes to present the 2018-2019 $1.2 billion budget entitled, “Maintaining Steadiness; Consolidating Stability; Advancing Growth”, in the National Assembly building.
The Prime Minister said that Belize’s external deficit of the balance of payments increased from 8.1
percent of GDP in 2016 to 8.9 percent of GDP in 2017. He attributed this to fewer grant funding, larger profit payments to foreign shareholders, and the payment associated with the Superbond restructuring.
This occurred while our country showed an increase in exports and a decrease in imports, Barrow said, but he blamed the decline in gross official international reserves, which stand at US$297 million to the final payment for Belize
Telemedia Limited (BTL) and public sector debt servicing. But he assured that this figure “is still the healthy equivalent of 3.8 months of merchandise imports.”
The national debt stood at about $3.535 billion (93.8 percent of estimated 2017 GDP) at the end of the 2017 fiscal year, Barrow said. “This was made up of $2.509 billion in obligations to external
creditors, representing 71 percent of the total amount owing. The remaining 29 percent, or approximately $1.026 billion, constituted the domestic debt stock,” he explained.
While Barrow did not introduce any new taxes, he did adjust existing taxes to balance off the expenditures versus revenues. Total yields of these adjustments are estimated at around $20.5 million. Barrow indicated a 7-point strategy as follows: GST is to apply to the purchase of data services by telecom clients. Because data offers free calls, revenues have fallen dramatically in phone calls and this shift has resulted in a reduction in GST collections. This adjustment will simply restore GST revenues lost in this voice to data transition. The measure will not affect the free internet to schools service.
Exemptions for land clearing, crop dusting and harvesting will also end, and Government contracts, imports and purchases will be standard GST-rated rather than exempt now. The GST application to Business Processing Outsourcing (BPOs) will also be harmonized, ensuring a level playing field across this sector. Excise tax on kerosene imports will now be synchronized with that of jet fuel, and those applied to fuel oils will be the equivalent of the rate on diesel. There will also be a Free Zone social fee of 3 percent applied to goods other than cigarettes, liquor and fuel; and a social fee will now apply to duty free merchandize arriving at the Philip Goldson International Airport.
Of the debts that require foreign currency repayments, $1.055 billion is owed to commercial bondholders; while $400 million is owing to the PetroCaribe Loan Program. Another $305.3 million is owed to the Caribbean Development Bank (CDB); $242 million to Taiwan; and $227 million to the Inter American Development Bank (IDB). Barrow explained that this translates to 41 percent or 4 of every 10 dollars of the national debt being payable to these concessionary lenders.
Some 40 percent of our domestic debt is currently held by the commercial banks, while 38 percent by the CBB and the remaining 22 percent by other creditors. A quarter of this debt consists of short-term Treasury Bills, and 62 percent of which is longer-term Treasury Notes.
Barrow said that preliminary data shows a mixed picture heading into the start of the 2018 fiscal year. “There is clear evidence that successful fiscal consolidation is underway. But it is also clear that we will not meet the perhaps overly ambitious budgeted Primary Surplus Target of 3.1 percent of GDP which we had set for ourselves at the beginning of the fiscal year. Instead the outturn is likely to be closer to 1.8 percent of GDP. It is extremely noteworthy, though, that this is still within the commitment of a 3.0 percent of GDP turnaround in the Primary Balance which we made to our creditors last year as a term and condition of the 2017 SuperBond restructuring,” the Prime Minister said. He indicated that the lower than expected out-turn was due to revenue shortfalls caused by weaker than expected economic activity and a decrease in government investment.
It is projected that total expenditure, aside from interest payments, will be $1.037 billion, while total revenue and grants is projected at $1.106 billion. This would yield a surplus of 69.2 million (about 1.8 percent) of GDP.
The Central Bank also projects a growth in economy of between 1.5 percent and 2.0 percent this year.