In past years, when the Prime Minister would present budget speeches that took less than 45 minutes to deliver, we often got the impression that politicos and professional tacticians were writing the speeches. Well today's budget speech made it clear that the technicians are the ones doing most of the writing now. It was the longest, most comprehensive and possibly the most straightforward budget speech this Prime Minister has ever given. He admitted to the $2 billion national debt and stated it in Belize dollars, he confessed to massive past deficits, boasted about a primary surplus, made it clear that there are continued lean times ahead, and revisited his theme that mistakes have been made. The only thing is, he didn't admit to making any of those mistakes. Here's the story from Belmopan.
Rt. Hon. Said Musa,
"This budget comes at the end of a difficult year for the country and for this government."
It was a year when government had to drastically curtail spending and increase taxes to reign in a deficit that had ballooned to 8% of GDP, the product of years of fiscal indiscipline.
Rt. Hon. Said Musa,
Government took the decision to rein in the deficit because we recognized that fundamental imbalances had emerged in our fiscal accounts, and time was not on our side in correcting those imbalances. The alternative would have been to continue to delay the adjustment with potentially disastrous consequences for our economy and our nation."
And according to Musa those "fundamental imbalances" and disastrous consequences aren't his or his former Finance Minister Ralph Fonseca's fault: it's the fault of their private sector partners:
Rt. Hon. Said Musa,
"As private sector counterparts did not or could not repay their loans, government went deeper into debt and over time it became increasingly difficult to meet debt payments while at the same time finance the projects necessary to improve the social and economic well?being of our citizens. Although a lot has been done, and the infrastructure is there to prove it, public finances became more difficult to sustain. Government was forced to curtail operating expenses and reduce expenditure on projects that would otherwise benefit the majority of citizens. Today, eight years later we need to rethink the policies which we must pursue to ensure a better future for Belize."
And according to Musa, rethinking those policies means making the budge more micro and less macro.
Rt. Hon. Said Musa,
"What this budget is signaling, in short, is a shift away from the policy of facilitating large private investments in the hope that these would provide jobs and improve the lives of a majority of our people, to a policy of investing directly in people through improved education and health, promotion of small and community enterprises, and consulting with people to define strategies that will reduce inequality and poverty."
Of course, those failed large private investments like Intelco and Novelo's that are now costing government and taxpayers were the ones that were supposed to reduce inequality and poverty in the first place, but something went wrong along the line.
Rt. Hon. Said Musa,
"Unfortunately, several things, some external and others originating internally, occurred which caused these policies to produce unintended and undesirable consequences."
He didn't say what "thing occurred" or who was at the wheel when they did, but now the Prime Minister says his government will walk the very straight and very narrow, starting this year when they reined in the fiscal deficit, almost bringing it to the target figure.
Rt. Hon. Said Musa,
"We have succeeded in improving our fiscal position. The bottom line is that, compared to an overall fiscal deficit of 8% of GDP in fiscal year 2004/2005, the overall deficit in fiscal year 2005/2006 has been reduced by more than half to 3.9% of GDP [$89.0 million]."
But add to that $89 million deficit a hefty serving of debt service requirements.
Rt. Hon. Said Musa,
"The projected overall deficit for the current fiscal year of $89.0 million, taken together with principal debt repayments of $306.7 million and payments for purchase of equity of $29.8 million, altogether resulted in a financing requirement of $425.5 million."
That debt was financed mostly by Bear Stearns but with the new fiscal year rolling around, there's another massive debt servicing bill coming up and the Prime Minister could only say that the experts at Houlihan, Lokey, Howard & Zukin are looking at it.
Rt. Hon. Said Musa,
"A report from the advisors is due shortly and their findings and recommendations will be carefully considered and an appropriate strategy will be adopted in consultation with our international lenders and development partners."
And while that unresolved debt financing issue hangs ominously over the next fiscal year, the Prime Minister expects sustained growth.
Rt. Hon. Said Musa,
"GDP will grow in real terms in calendar year 2006."
To go with that growth, government expects to collect $40 million dollars more in taxes, that's a more than 10% increase in tax revenue but the PM insists there are now new taxes.
Rt. Hon. Said Musa,
"The repeal of the Sales tax with effect from July 1, 2006 and the introduction of the General Sales Tax from that date is conservatively estimated to be revenue neutral. There is no new revenue measure in the 2006?2007 budget."
Revenue will total $663 million and expenditure will coming in at $668 million, leaving an overall deficit which the PM says is manageable.
Rt. Hon. Said Musa,
"The levels of proposed revenue and expenditure result in an overall deficit of $69.3 million, equivalent to about 2.9% of GDP. Given the success of the effort to reduce the overall deficit in fiscal year 2005/2006 and continuing commitment to achieve medium term fiscal sustainability, the effort to bring the overall deficit to below 3% of GDP is expected to be successful in the upcoming fiscal year. Indeed, it is absolutely important that this target be achieved."
And that was the overall message of the budget - an administration chastened by the excesses of the past, apprehensive about the austere prospects for the future and determined that it won't happen again.
Rt. Hon. Said Musa,
"It is about making hard choices, charting a new way forward. Tight fiscal discipline will remain in place and, as we have clearly demonstrated this year, it can be done."
And on that sober and somewhat somber note, the Prime Minister ended the longest and what we'd have to call the dullest budget presentation of his 8 year run in office. So dull, it didn't earn one single interjectory ovation or table banging acknowledgement from the members on his side, only their perfunctory applause at the end.
And while it wasn't included in the story, a few key projects included in the new budget are work on the Placencia Road, the Blue Creek Road, the building of a sports stadium in Dangriga and work on the Marion Jones Sporting Complex.
Click to Read The Full Text of Musa's 2006/2007 Budget: Budget Speech
