Despite all the cutbacks, retrenchment, tax hikes...all those revenue and expenditure measures, government will not meet its deficit target. For the third year in a row the deficit will exceed what was budgeted and now government has to figure out how to break the bad news to an IMF team, that's here to finalize its Article IV consultations.
The confirmation of the deficit over-run is contained in a confidential ministerial-level document meant for the Public Finance Committee which is headed by the Prime Minister. The document says that as at the end of June, the overall deficit for this year is approximately $74.1 million or 3.4% of GDP, higher than the targeted deficit of 3% of GDP. And according to the confidential document, one of the three causes of that over-run is a $6 million adjustment to meet, "unexpected expenditures such as those associated with the BTL case in Miami."
But according to the document government is still weighing its options: it can meet the projected deficit and offset those "unexpected expenditures" by applying higher taxes to goods and services. And in that regard, the document discloses that new taxes in the form of a goods and services tax, known as the "GST" - or what the politicians call a "god-send tax" - is already being planned. The new tax we gather will be a more broad based tax than the sales tax, as it incorporates some of the elements of the VAT tax.
But until that tax goes into effect the technicians are advising the politicians to give up on the 3% target and embrace a new, more realistic deficit that will be 3.6% of GDP. That's over the target, but compared to 8% in 2003/2004 and 6.4% in 2004/2005, the technicians believe the IMF will be pleased with the continued improvement the document includes speaking points for the Ministers as they prepare for a critical wrap up meeting with the IMF.
The meeting is critical because government hopes to make key points that will earn it a more favorable Article IV report. In this document, the technicians urge the ministers to mention that government is hiring international firms to advise it on debt restructuring, who will tell it how to, "proceed on this matter without destabilizing the situation.".
You can find the entire confidential document at freebelize.org
