By Benjamin Flowers
A recent report published by the Inter-American Development Bank (IDB) said that governments of Latin American and Caribbean countries need to increase revenue generation and harness it through better spending to cope with projected economic difficulties.
The document, the 2015 Annual Macroeconomic Report, cited that the regional gross domestic product (GDP) growth for the decade will not exceed 2.2 percent, while governments’ expenditures are rising and revenues are in decline.
“Latin America and the Caribbean have performed well in the years that followed the global financial crisis, increasing fiscal spending to fuel economic growth, but lower commodity prices and higher inflexible spending are threatening to erode many of the gains,”the report highlighted.
It pointed out that Primary expenditures rose by almost five percent of GDP between 2008 and 2014, while fiscal revenues increased by only 1.5 percent of GDP.
The report however, took into account that a great portion of government spending within the region are in the areas of salaries and social programs. The IDB recommended fiscal policy adjustments to be able to address the need for such programs while remaining competitive.
“Countries will need to find ways to enhance revenues and the efficiency of spending while they protect social gains”, said IDB Chief Economist, José Juan Ruiz.
“The region needs to boost underlying productivity to obtain medium-term growth rates on a par with other successful regions”, he continued.
When considering the type of fiscal policy changes, the IDB recommended four considerations to governments, i) the size and the sign of the output gap;
ii) the size and the sign of the structural fiscal balance;
iii) the level of debt to GDP; and
iv) the speed at which that debt is increasing (or decreasing), as measured by the required adjustment in the primary fiscal balance, in order to keep the debt to GDP level constant.
In 2014 Prime Minister Dean Barrow had assembled a team to consider cost-saving measures for the government of Belize.
In its report, the Committee to Evaluate and Advise on Cost-saving Measures (CEACS) cited areas that need to be optimized, including: rental of office space, land acquisition costs, numbers of contract officers, cost of utilities, cost of advertisements, overdraft facility costs, and costs incurred on boards and committees.