Yesterday 7NEWS was first to reveal (See The IMF Recommendations) a portion of the recommendations in the 20 page IMF report and since then, news of the drastic wording of those measures have been rippling through the community.
Two of the most influential membership groups with the greatest representation, the trade unions and the Chamber of Commerce met to discuss the report this afternoon at 3:00 pm. The session lasted only an hour and a half, and will be succeeded by a follow-up meeting on Monday after which some public disclosure of a strategy is expected. A Chamber representative said his group is aware government does not have to follow the recommendation, but the tax measures are so drastic that they need to be pre-emptive to ensure that they are not implemented.
As we reported, the IMF recommends that business tax be increased to 1.5% across the board, and that the threshold on income tax would be lowered from $20,000 to $15,000. Also, the IMF recommends a 3% increase in sales tax and that the 12% tax also be applied to residential light bills which would mean a 12% increase in your light bill, not 3% as we reported last night.
While those are the recommendations, others parts of the reports are even more ominous. On a heading called near term risks, the IMF advises that the economy continues to live beyond its means, and if it continues, reserves would be depleted by June of 2005. That would invoke a balance of payments crisis which, according to the IMF, would imply of a loss of the currency peg, job loss, and capital flight, among other things.
In its final recap, the IMF warns that if government does not proceed with a short-term policy of containment and adjustment or face, "a costly and disruptive crisis" including a default on external debt service, and loss of the peg. As we have reported, government is reviewing this very same report and is weighing its options, including the political and practical costs of making these though decision.