This evening at 6:20 pm, the Ministry of Finance issued a 6-page press release detailing its position on the IMF preliminary findings. First, the document says that the document that was leaked to the media was a genuine document prepared by a Central Bank technician after discussion with the IMF team on preliminary recommendations which, according to the release, were subsequently revised.
So what are the final recommendations? Well in an unprecedented move, forced only by the leaked document, the Ministry has released them in what it describes as the entire article four preliminary findings report. It is a six page document that came into our newsroom just 10 minutes before newstime. We hope to look at it more closely tomorrow. But we can tell you that the recommendations it makes are, from what we can tell, identical to the ones we showed you earlier this week.
They are and we quote that government collects business taxes from banks, increase sales taxes by an average of 30%, increase excise taxes on beer, alcoholic beverages, tobacco and soft drinks by 50% and adjust tax rates as may be necessary to maintain buoyancy in the FY2006/2007. On the expenditure side, the IMF team has recommended that government implements cuts to reduce the projected wage bill in the current fiscal year to $225 million and to reduce projected expenditure on goods and services by $5 million and Capital II projects by $25 million. The total additional fiscal adjustment would amount to approximately 4.2% of GDP (or approximately BZ$85 million).
The IMF team has also recommended supporting monetary policy measures aimed at reducing liquidity in the financial system. These include increasing the cash reserve requirement by a further 1%, shifting Social Security Board surpluses and other public sector deposits to the Central Bank to sterilize the expansionary impact on domestic liquidity, establishing a schedule to close down the Casa de Cambios and implementing the anticipated IDB Recommendations with regard to the DFC.
You can read the preliminary findings here.
