A few weeks ago, representatives from the Inter Monetary Fund (IMF)
visited Belize for follow-up meetings after its Article IV consultation last
February. Channel 7 News reported that they obtained a copy of an internal
government report that summarizes the IMF's concerns with the Belize
economy. According to Channel 7, the document stated, a primary finding of
the consultation.was that GOB's (Government of Belize) current fiscal stance
is unsustainable and would result in a collapse of the fixed exchange rate
regime during 2006.
The IMF analysis states that the present tax system is
not keeping pace
with growth. If GOB does not take corrective measures, the Belizean dollar
could face devaluation as early as next year, 2006.
What is the solution? According to IMF, GOB needs to
take significant
corrective and sharp cost cutting measures as soon as July 1st; measures
that go way beyond the tax hike imposed by GOB on March 1st. IMF suggested
that GOB increase the average sales tax by 40%, and increase excise rates by
50%. Another recommendation that would help GOB to maintain buoyancy is to
adjust tax rates.
How about expenditure? IMF suggested that GOB cut
their present wage
bill of $228 million to $225 million and cut back on goods and services by
$5 million while cutting back on Capital II spending by $25 million. By
putting these recommendations into effect, GOB could save approximately $44
million and by making proper revenue adjustments GOB should net an estimated
$44 million in additional earnings. The Belize deficit could go be reduced
to $50 million from $140 million.
These were among the recommendations made by the IMF.
Now it is up to
the GOB to consider and implement these valuable recommendations
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