THE TYRANNY OF PUBLIC DEBT

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The need for domicile debate
By: Hilly Bennett

Jacques Attali’s, in his contribution to the Newsweek, The West and the Tyranny of Public Debt, wrote “The history of public debt is very history of national power: how it has been won and how it has been lost. Dreams and impatience have always driven men in power to draw on the resources of others- be it slaves, the inhabitants of occupied lands or their own children, yet to be born- in order to carry out their schemes, to consolidate power, to grow their own fortunes.”

Attali proffered that the history of public debt is intertwined in the evolution of states. In ancient times, rulers of empires borrowed on the expectation of future conquest, harvest or taxes. Debt became public when national authority got separated from the monarchy.
In the book, The Economic History of Belize From the 17th century to Post Independence, Barbara Bulmer-Thomas, Victor Bulmer-Thomas, it is evidenced that the Public Debt in Belize was first issued under colonialism in 1863. The central purpose was for much-needed improvements to Belize. The colonial government made investment, at the public’s expense, in a full-scale railway in the south, connecting the valley to the nearest sea-port, which opened in 1911.

Figures for the fiscal year2017/2018 show Belize public debt standing at three points five billion dollars or ninety three point eight percent of GDP. Unaccounted in the debt profile is the below-the-line accounts- contingent liabilities, contested legacy claims, obligation related to the nationalization of BTL and BEL.

On March9th, 2018 at the budget presentation, Prime Minister Barrow outlined the amounts regarding Belize public debt.

The total amount owing in obligations to external creditors is two point five zero nine billion dollars or seventy-one percent of public debt. The remaining twenty-nine percent or approximately one point zero two six billion, which constitutes the domestic debt stock. GOB’s external debt portfolio- those are debt obligations denominated in foreign currency and requiring foreign-currency repayments- one point five billion are owed to commercial bondholders; some four hundred million is owing to Petro Caribe Loan Program sponsored by the Bolivarian Republic of Venezuela; three hundred and five point three million to the CDB; two hundred and forty-two million dollars to the Republic of China on Taiwan and two hundred and twenty-seven million dollars to IDB.

Notably, when the Peoples United Party demitted office in 2008 the PUP government had “brought government’s finance back into line.” The commercial debt was successfully restructured. A program of fiscal restraint was implemented lowering the debt percentile to 80% of GDP.

Upon taking office in 2008 the United Democratic Party government benefited from the Alba Petro Caribe arrangement made between the PUP government and the Bolivarian Republic of Venezuela – some four hundred million dollars to alleviate the condition of the poor, additionally, the BNE oil revenue amounting to five hundred million was added to the public coffers, providing the Barrow administration with a sound financial footing.
Within their three terms in office, the UDP has transformed the Belizean economy into “an indentured economy.” The Barrow government has grown the debt to one billion one hundred forty nine point zero three five dollars.

Under the guise of infrastructural development, debt has become the fuel for the engine of economic growth. In reality, DEBT is the new form of bondage for the Belizean populace.
Income distribution has deteriorated resulting in increased poverty and inequality. Unemployment continues to rise notwithstanding the bogus statistics presented by the government. The festering problem of crime and violence remains unabated. These anomalies contribute negatively to the debt burden and quality of life in Belize.
A domicile debate regarding Belize’s public debt is of paramount importance for the future of the Jewel.

The IMF Article IV Report highlights several recommendations to the government of Belize necessary to reduce the debt to GDP ratio to sixty percent within a ten-year period.
In my opinion, these structural adjustments are not people centred and could be detrimental to the survival of the less fortunate living on the fringe of society- the marginalized, the single mothers, the youths, the elderly and disabled.

On January 10th, 2019, three SI’s were signed by the Barrow government relating to pension reform, which is one of the IMF’s recommendations. There is also the likelihood of several zero rated items becoming taxed by the General Sales Tax department.
The Director of the Western Hemisphere Department at the IMF, Alejandro Werner cautioned that several risks could negatively impact the regions of Latin America and the Caribbean, including Belize- the escalating trade tensions between China and the United States. A slowdown in some major economies could result in lower trade growth for the region. The region could also suffer if global financial conditions tighten further, including spikes in global financial volatility higher US interest rates and a stronger US dollar.

Additionally, higher volatility in global markets could result in less capital, potentially harming investments potential. The Brexit situation and the recent Venezuelan crisis could also affect the Belizean economy. These external shocks could be spiral the economy into recession, devaluation or default.

The very reason why Attali warned that public debt must be handled carefully even when the borrowing is moderate. Responsible government do not finance their everyday expense by borrowing. Nobody can predict what will trigger a sovereign debt crisis.
Belize’s economic woe is also an internal one. The UDP government is plagued by the pathological phenomenon of corruption, clientilism, middle-mannism and parasitism; the Barrow regime lacks fiscal discipline and the financial stewardship to steer the Jewel, the haven of democracy to economic prosperity.

The budget presentation for the financial year 2019-2020 should be interesting. No doubt the Wizard of Finance will spin his spurious arguments to lobby for budget support. Hence the reason a domicile debate on the public debt is urgently necessary.

Voice of the Common Man