The IMF preliminary report, it's always been a guarded document that successive governments have kept close to their executive chests mainly because it is an initial report, and usually quite different from the final report which is arrived at after weeks of intense lobbying and back and forth. But pressed on by the 7NEWS revelation of what the Ministry of Finance confirms is an authentic internal Central Bank document, which outlined the IMF's position on Belize, the folks at Finance yesterday sent out that preliminary report. And while the release of the document was supposed to silence fears of a devaluation, it also gives rise to greater speculation about the soundness of government's finances.
Most worryingly, the document discloses figures that differ significantly from those presented by the Prime Minister in his January 14th budget presentation. First, it states that GDP growth was less than the 4.7% stated by the Prime Minister. It also states that official reserves at the end of December stood at $106.5 million, which is $23 million less than the Prime Minister's figure which was $129.5 million. It's a notable difference, because reserves are not estimates, it's money in the bank, so it seems there can hardly be a justifiable reason for a variance of 25%.
The IMF also confirms a revenue shortfall that was not anticipated in the PM's budget presentation. The Prime Minister had projected revenues of $450 million, but the IMF reports that at the end of the year, the government only collected $424 million. That's 14% less than was projected and in fact it's 5% less than the previous year, before sales tax was increased in the Fonseca rebalancing budget.
The IMF report also makes the quite stunning declaration that inflation is likely to rise to over 4%, which is large for a country that has probably never reported an official inflation rate of more than 2% which is when vat was introduced. The IMF report also discloses that budgetary adjustments will have to be made to cover failed Social Security Board securitizations this refers specifically to the 17.2 million dollar default of the Godfrey companies. Also additional provisions more than the $19 million already budgeted will have to be made to cover DFC debt servicing. The IMF report also makes special note that money will have to be found to cover the legal fees for the BTL imbroglio.
In its preliminary response, the Ministry of Finance which just implemented across the board tax increases, says that, "there is need for further adjustment of fiscal and monetary policy in support of the fixed exchange rate peg and policy considerations are underway." The document goes on to dispel worries of a devaluation by stressing that the IMF staff agreed on the stability of the exchange rate peg. However the preliminary report makes it clear that IMF team stressed that government has to continue to tighten the money supply to stop the continuously fall in reserves. At the end of the fiscal year, IMF figures in the Central Bank document say that reserves stood at US$40 million about 4 weeks of import cover.
