July 5, 2010 — Just after the Belize Times went to press last week, the IMF issued a press release about their June visit to Belize when they meet with the government to prepare their annual report on the state of the country's finances and economy. The release is a scorching indictment of UDP economic policy.
Based on just two months of tax collection data, the IMF is already concluding that the UDP government will not meet their budget targets. They lament that the economic recovery is "narrowly based." They sound the alarm on the growing number of non performing loans in the banking system. And they warn that the fragile state of government finances would be unable to provide any buffer if Belize were to experience a flood, a hurricane or any unforeseen event.
Most distressing is that the IMF, in their nuanced language suggests that the days of sacrifice have only just begun. They see the wage bill as a problem; in other words, GOB needs to retrench public officers. They see the pension program, both the public pension and the SSB, as a problem; this means that pension payments should be reduced. And they believe that another tax increase will be necessary to expand what they call "the primary surplus."
When Barrow and the UDP rammed through their $110 million tax hike on the people of Belize in March of this year, the impression the UDP gave was that these new revenues would solve all our problems. The PUP warned that the taxes would not materialize, invoking what economists call "diminishing returns." Raise taxes too high and you force people into evasion and stifle economic growth. This is exactly what the IMF discovered during their mission.
Given the gravity of the situation, Barrow and the UDP may have to come back for more taxes even before the next budget. Belizeans and businesses can expect this recession to turn in to a depression, for crime to continue unabated and for poverty to surge. Imagine the possibilities from this lethal mix of hopelessness, higher taxes, fewer jobs and crumbling businesses.
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Source: The Belize Times
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