On Friday, March 17th, 2006, Prime Minister Said Musa presented the proposed Government budget for fiscal year 2006/2007. Honorable Musa commenced his speech by stating that the budget presentation comes at the end of a difficult year. He stated, “This current year, Government has implemented a very tight budget. We planned, through a series of expenditure reduction and revenue enhancing measures, to reduce the overall fiscal deficit by more than 4% of GDP. […] We have made bold and decisive steps to correct the fiscal deficit. […] There is more to be done, not only to ensure that we secure the gains we are making in our public finances, but also to ensure that as we move ahead, we chart a course that creates opportunities for all our people.”
Prime Minister Musa continued, “After posting an overall deficit of one hundred and seventy-seven point eight million in financial year in 2004/2005, the approved budget for financial year 2005/2006 targeted an overall deficit of sixty-six million dollars. This sharp reduction in the deficit was intended to be achieved through a combination of expenditure controls and new revenue measures. […] These adjustments resulted in a revised overall deficit target of seventy-nine point three million or approximately three point six percent of estimated G.D.P. […] The outturn for the first ten months of fiscal year 2005/2006. 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 six point eight million dollars, as compared to forty-two point four million for the same period of the last fiscal year. There was also a substantial reduction in the overall deficit from one hundred and twenty-seven point six million for the first ten months of last fiscal year to sixty-five point one million for the same period this year. […] Recurrent revenue collections totaled four hundred and forty-one point three million in the first ten months of fiscal year 2005/2006, an increase of sixty-two point three million over the same period of the 2004/2005 year. Recurrent expenditure rose by twenty-six point seven million with outlays for goods and services and wages and salaries rising by twelve point six million dollars and nine point eight million, respectively. On the other hand, capital expenditure declined by thirty-three point nine million to seventy-five point eight million. […] On the basis of the actual outturn for the first ten months and reasonable expectations for the remainder of the year, the overall deficit for the current fiscal year is expected to be eighty-nine million dollars or three point nine percent of G.D.P. […] The recurrent deficit is expected to be at about twenty point one million by the end of this fiscal year. This is a significant deviation from the position set out in the approved budget for this year, which provided for a recurrent surplus of fifty-two point six million. This expected outturn is also short of the revised recurrent deficit target of one point four million set at the end of the first quarter of fiscal year 2005/2006. […] This negative performance on the recurrent account relative to the revised targets primarily reflects the shortfalls in collections of Revenue Replacement Duty on imports of fuel. This was the direct result of the Government’s decision to absorb a significant portion of the sharp oil price increase experienced in 2005 through reductions in the R.R.D., rather than pass on the full impact of the oil price increases to the public. […] Achieving and maintaining an overall deficit target below three percent of G.D.P. remains the over-arching objective of financial management of this budget. The budget proposals for the coming fiscal year continue to emphasize health, education and poverty alleviation. Therefore, the portfolios and projects which address these concerns will continue to receive the greater share of proposed allocations in the next fiscal year. […] Government will continue to exercise control over the expansion of staff complement. The staff containment policy continues to be in place and, as in the budget presented last year, this budget limits the creation of new positions only to indispensable positions in priority areas. […] The budget is predicated on the basis that G.D.P. will grow in real terms by between two point five and two point eight percent in calendar year 2006. The Central Statistics Office has confirmed that it estimates G.D.P. to have totalled two point two-one-four billion in current year prices in calendar year 2005. […] For the purposes of the budget, the C.S.O. has prepared projections of G.D.P in fiscal years 2005/2006 and 2006/2007 to facilitate estimates of the fiscal deficit to G.D.P. ratio. The C.S.O has estimated G.D.P. at market prices for fiscal year 2005/2006 at two point two-five-four billion and for fiscal year 2006/2007 at two point four-one-four billion. This translates into growth in G.D.P. at current market prices of seven point two percent. These are the numbers which are used in the calculation of the fiscal deficit as a proportion of G.D.P. […] The budget presumes that economic growth, as indicated by expansion in G.D.P. in current market prices, would naturally produce around seven percent growth in revenue collections. In addition, there should be some improvements in revenue administration, which would add to total revenue collections. The repeal of the Sales Tax with effect from July first, 2006, and the introduction of the General Sales Tax from that date is conservatively estimated to be revenue neutral. There is no new revenue measure in the 2006-2007 budget.”
What made the country fall into such a state of debt? Honorable Said Musa explained, “As private sector counterparts did not or could not repay their loans, government went deeper into debt and over time it became increasingly difficult to meet debt payments while at the same time finance the projects necessary to improve the social and economic well-being of our citizens. Although a lot has been done, and the infrastructure is there to prove it, public finances became more difficult to sustain. Government was forced to curtail operating expenses and reduce expenditure on projects that would otherwise benefit the majority of citizens. Today, eight years later we need to rethink the policies which we must pursue to ensure a better future for Belize.”
Prime Minister Musa concluded by stating the following, “This budget is not just about revenue and expenditure. Its about making hard choices, defining priorities, charting a new way forward.