General / Weekend News

Prime Minister presents 2018 budget

By Marion Ali, Assistant Editor

Prime Minister Dean Barrow took about 50 minutes to present the 2018-2019 $1.2 billion budget entitled, “Maintaining Steadiness; Consolidating Stability; Advancing Growth”, in the National Assembly building.

The Prime Minister said that Belize’s external deficit of the balance of payments increased from 8.1
percent of GDP in 2016 to 8.9 percent of GDP in 2017. He attributed this to fewer grant funding, larger profit payments to foreign shareholders, and the payment associated with the Superbond restructuring.

This occurred while our country showed an increase in exports and a decrease in imports, Barrow said, but he blamed the decline in gross official international reserves, which stand at US$297 million to the final payment for Belize
Telemedia Limited (BTL) and public sector debt servicing. But he assured that this figure “is still the healthy equivalent of 3.8 months of merchandise imports.”

The national debt stood at about $3.535 billion (93.8 percent of estimated 2017 GDP) at the end of the 2017 fiscal year, Barrow said. “This was made up of $2.509 billion in obligations to external
creditors, representing 71 percent of the total amount owing. The remaining 29 percent, or approximately $1.026 billion, constituted the domestic debt stock,” he explained.

While Barrow did not introduce any new taxes, he did adjust existing taxes to balance off the expenditures versus revenues. Total yields of these adjustments are estimated at around $20.5 million. Barrow indicated a 7-point strategy as follows: GST is to apply to the purchase of data services by telecom clients. Because data offers free calls, revenues have fallen dramatically in phone calls and this shift has resulted in a reduction in GST collections. This adjustment will simply restore GST revenues lost in this voice to data transition. The measure will not affect the free internet to schools service.

Exemptions for land clearing, crop dusting and harvesting will also end, and Government contracts, imports and purchases will be standard GST-rated rather than exempt now. The GST application to Business Processing Outsourcing (BPOs) will also be harmonized, ensuring a level playing field across this sector. Excise tax on kerosene imports will now be synchronized with that of jet fuel, and those applied to fuel oils will be the equivalent of the rate on diesel. There will also be a Free Zone social fee of 3 percent applied to goods other than cigarettes, liquor and fuel; and a social fee will now apply to duty free merchandize arriving at the Philip Goldson International Airport.

Of the debts that require foreign currency repayments, $1.055 billion is owed to commercial bondholders; while $400 million is owing to the PetroCaribe Loan Program. Another $305.3 million is owed to the Caribbean Development Bank (CDB); $242 million to Taiwan; and $227 million to the Inter American Development Bank (IDB). Barrow explained that this translates to 41 percent or 4 of every 10 dollars of the national debt being payable to these concessionary lenders.

Some 40 percent of our domestic debt is currently held by the commercial banks, while 38 percent by the CBB and the remaining 22 percent by other creditors. A quarter of this debt consists of short-term Treasury Bills, and 62 percent of which is longer-term Treasury Notes.

Barrow said that preliminary data shows a mixed picture heading into the start of the 2018 fiscal year. “There is clear evidence that successful fiscal consolidation is underway. But it is also clear that we will not meet the perhaps overly ambitious budgeted Primary Surplus Target of 3.1 percent of GDP which we had set for ourselves at the beginning of the fiscal year. Instead the outturn is likely to be closer to 1.8 percent of GDP. It is extremely noteworthy, though, that this is still within the commitment of a 3.0 percent of GDP turnaround in the Primary Balance which we made to our creditors last year as a term and condition of the 2017 SuperBond restructuring,” the Prime Minister said. He indicated that the lower than expected out-turn was due to revenue shortfalls caused by weaker than expected economic activity and a decrease in government investment.

It is projected that total expenditure, aside from interest payments, will be $1.037 billion, while total revenue and grants is projected at $1.106 billion. This would yield a surplus of 69.2 million (about 1.8 percent) of GDP.

The Central Bank also projects a growth in economy of between 1.5 percent and 2.0 percent this year.

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