The IMF team was in Belize for its article four consultation in February and they returned for follow up meetings a few weeks ago. Well tonight we'll tell you some of what the IMF said in those meetings. 7NEWS has obtained an internal government report which summarizes the fund's concerns with the Belize economy, and they are dire. The document generated within government states that, "a primary finding of the consultation...was that GOB's current fiscal stance is unsustainable and would result in a collapse of the fixed exchange rate regime during 2006." In small change that means that if government does not take corrective measures, by the IMF's projection, the currency would devalue in the coming year. With such a dire prognosis, the Fund recommends significant corrective measures that go beyond those new tax measures that went into effect on March 1st. Simply put, these measures would see government implementing tax hikes and sharp cost cutting measures which the IMF recommends go into effect as early as July 1st.
The IMF proposals include the following: government should increase the average sales tax by 40%, and increase excise rates by 50%. The IMF says GOB should also adjust tax rates to, "maintain buoyancy." On the expenditure side, the IMF recommends that government should cut the wage bill to $225 million from where it now stands at $228 million. And, the Fund analysts say government must cut back on goods and services by $5 million and cut back on Capital II spending by $25 million.
The savings in all these areas would be equivalent to 2.1% of GDP or about $44 million. And similarly, Fund figures say that the revenue adjustments should also net government $44 million dollars in additional earnings. The IMF estimates that with these measures, Belize's projected overall deficit of $140 million would go down to about $50 million.
In the monetary sector, the fund recommends that government should place Social Security surpluses at the Central Bank and not in commercial banks, and increase the cash reserve requirements by one more percentage point.
Again, we stress that these are IMF recommendations contained in an internal government document that we have obtained. There is no certainty that government will adopt any or all of them and indeed past history shows that it may ignore most. But, the bottom line is that in the opinion of the IMF Government has simply not done enough in the new budget to save it from a massive deficit and instability of the currency peg. Generally, the IMF public information notice on Belize which is the Fund's official document coming out of the article four consultations is released in August or September.
You can read the full document at_freebelize.org
