Belize Budget Aims To Balance Government's Books

Posted By: Marty

Belize Budget Aims To Balance Government's Books - 03/23/06 06:05 AM

Belize Budget Aims To Balance Government's Books, by Mike Godfrey,, Washington 23 March 2006

In marked contrast to 2005 when Prime Minister Said Musa's budget announcement sparked street riots, strikes and protests, the 2006 budget statement was by comparison a tame affair with little in the way of new taxes announced as the government concetrated on reining in the budget deficit.

On the revenue side, the Approved Budget provided for increases in rates of business tax, environmental tax, sales tax on luxury items and excise tax.

However, after the budget was approved, and in response to public sentiment, significant reconfigurations were made to expenditure and revenue plans. The reconfigurations included a reduction in the Recurrent Revenue target as a result of the partial roll back of approved increases in the environmental tax. The reconfigurations also included an expansion in the Recurrent Expenditure target to provide for the full implementation of the 5% and 8% salary increases to public officers and teachers.

The only major change to tax laws this year will be the elimination of the current Sales Tax and its replacement with a 10% general sales tax from July 1, 2006.

During the first quarter of the current fiscal year, Cabinet approved further adjustments to revenue and expenditure plans in order to achieve the fiscal targets. On the revenue side, excise taxes were increased.

During the first ten months of fiscal year 2005/2006, the tightening of Government’s fiscal policy was reflected in a sharp reduction in its Recurrent Deficit to $6.8 million, as compared to $42.4 million for the same period of the last fiscal year. There was also a substantial reduction in the Overall Deficit from $127.6 million for the first 10 months of last fiscal year to $65.1 million for the same period this year.

The Central Statistical Office [CSO] estimates that real growth in GDP decelerated from 4.6% in 2004 to 3.1% in 2005, which, according to Musa "is more than commendable" in global terms.

Said, who also holds the Finance portfolio, explained that the economic slowdown reflects the impact of tighter fiscal and monetary policies that were implemented in 2005 to dampen domestic consumption so as to improve the balance of payments.

In his concluding remarks, Musa suggested that: "This budget is not just about revenue and expenditure. It is about making hard choices, defining priorities, charting a new way forward."

The 2005 budget, which proposed a series of tax hikes on businesses, banks, real estate agents, casinos and professionals, in addition to increases in environmental taxes and sales tax on luxury items prompted the 200 members of the Belize Chamber of Commerce to vote in favour of a two-day strike in January of that year. The strike was supported by other businesses and public workers, leaving Belize City without water.
Posted By: Marty

Re: Belize Budget Aims To Balance Government's Books - 03/26/06 04:39 PM

Finance Technicians on 2006/2007 Budget
posted (March 22, 2006)

The Prime Minister presented the budget last week and starting tomorrow morning, it will be debated. With the UDP members emboldened by recent success at the polls, and their PUP counterparts scrambling to regain some ground, the two days of debate should be spirited. But before the representatives rip it to shreds, the technicians who put the budget together today held a press briefing to get out the good news on fiscal year 05/06. Those technicians are the Financial Secretary Dr. Carla Barnett, senior advisor in the Ministry of Finance Joe Waight, Governor of the Central Bank Sydney Campbell and Deputy Governor, Marion Palacio. Here's they had to say.

Alfonso Noble Reporting,
This morning government's top monetary and fiscal managers came to present their budget.. Financial Secretary Dr. Carla Barnett said it is, very much, their budget.

Dr. Carla Barnett, Financial Secretary
"The budget presentation that's before you is a budget that the technicians were fully involved with. What we've done in this fiscal year is take it into hand, we decided how we would do it."

That's a sharp departure from the past where the two Ministers of Finance presented figures, particularly for the overall fiscal deficit, that were very wrong, off by the tens of millions.

Dr. Carla Barnett,
"Clearly we have had difficulties in terms of the numbers presented and the actual out turns. I take no blame or credit for any of that. If I tell you that my data is correct, you don't have any reason to believe me because of what has happened historically. But I'm telling you we're operating in a different context, one in which those who look at our numbers are now saying we're on the same page. If we're on the same page and I tell you that as we go along in fiscal year we work very closely with those institutions, we have no difference over these numbers."

And while the IMF supports the new finance regimes numbers, it also supports its contractionary programs, slowing unsustainable and superheated levels of growth that prevailed in the year 2000. This year, the experts predict between 2.5 to 2.7% level of growth.

Sydney Campbell, Central Bank Governor
"And I am certain that, as what was said in the budget speech, we continue to display the fiscal discipline for us to have sustainable growth."

Inflation will also increase to 4.5%, Campbell said inflation is unavoidable.

Sydney Campbell,
"Inflation will be 4.5% in 2006, higher than it was in 2005. Again there are some variables outside of our control. We are a small open economy, we import a lot, and therefore when the international prices change, it impacts on our prices here."

And while the inflation rate will go up, the unemployment rate is expected to be stable. If unemployment does increase, it could be due to a projected 13% decrease in cruise ship arrivals coming off a year when arrivals went down by 6.5%. Campbell commented on the reason for the cruise ship projections.

Sydney Campbell,
"As we understand it, one of the large cruise ship companies has reduced the number of calls by one boat. 52 calls were made in 2004 and that will mean at least one call a week and if it is not replaced by a new ship, all the indications are that the calls will go down by 13.5%."

And while cruise ship arrivals will go down, exports should go up, led by citrus which will have another good year. The exports do not include petroleum, Campbell explained why it could be a boon for exports.

Sydney Campbell,
"We hope that it will jump even more than the 21% if this thing is found in commercial quantities and sustainable, then we will see a jump, a real larger jump in domestic exports."

And while the technicians are conservative, hopeful and proud of this budget which halved the deficit, one the next few days it will be pillories in the National Assembly. According to Barnett, that's all right by them.

Dr. Carla Barnett,
"What goes on in the National Assembly is part of why we are here. I have no difficult with what anybody wants to say about this. At the end of the next fiscal year, if it turns out that we around this table were all wrong, I expect you all to tell us that we ere all wrong.. That is how I look at it but it is just part of the life we live man, you really think I would take that personal."

And while Barnett laughed it off today, if the UDP has its way, tomorrow, it'll be bombs over Belmopan and we'll have coverage of the debate.

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