Measures include broadening the base of the General Sales Tax (GST) by removing zero-rated items, higher excises on fuel, and higher import duties on selected items, supported by stronger tax administration
Belize City: September 27th 2018
An IMF delegation from the International Monetary Fund (IMF) has just ended a two week visit to Belize where they evaluated the country’s economic climate.
In a preliminary report the IMF has said that the medium-term outlook for Belize remains “challenging” and that real growth of the Gross Domestic Product (GDP) stands at 2.2 per cent this year which is below recent trends.
The report revealed that the country’s deficits will narrow but will remain significant due to “structural weaknesses” in addition to limited international reserves.
Currently, the international reserves for Belize is below the cost of three months’ worth of imports of goods and services.
In order to reduce public debt, the IMF warns that there must be no fiscal adjustments for the financial year 2018-2019.
The IMF suggested that the downside risks of this could be, “Contested legacy claims, estimated at about five per cent of GDP, could lead to large public and external financing needs. Reputational risks from potential financial misuse of the offshore sector’s complex entities, and governance concerns, could weaken investor confidence and renew pressures on CBRs, (Corresponding Banking Relationships) which would weaken banks.”
These vulnerabilities could be made worst if there is any growth slow down with Belize’s, “main trading partners, higher international energy prices, and increasingly severe natural disasters associated with climate change.”
According to the IMF, these developments could endanger debt sustainability and undermine public support for the governmental reform.
The IMF further indicated that Belize should focus on improving its business climate. This however, can only be done with structural reform which, “include easing access to credit by establishing a Credit Bureau and collateral registry; accelerating and modernizing procedures for starting a business; amending labour legislation to allow greater flexibility in working hours and increasing support for technical training among other measures…”
Additionally, the IMF warned that Belize should reform its poverty alleviation strategy. Our newspaper has long warned that those who were truly in need were rarely benefitting from these “pro-poor” initiatives. The IMF recommended that to improve these existing programs, the government should, Increase the use of formal targeting mechanisms informed by an updated country poverty assessment, would increase the programs’ effectiveness at reaching the most vulnerable individuals…”
The IMF also recommended increased taxation to generate more revenue. The report said, “…Measures include broadening the base of the General Sales Tax (GST) by removing zero-rated items, higher excises on fuel, and higher import duties on selected items, supported by stronger tax administration…”
The IMF delegation to Belize was headed by Daniel Leigh, the Deputy Division Chief at the IMF’s Research Department of the Washington-based financial institution