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Successful fiscal consolidation is underway, says PM

On Friday, Prime Minister Dean Barrow presented his eleventh fiscal budget entitled, “Maintaining Steadiness; Consolidating Stability; Advancing Growth”. The Prime Minister boasted that his administration managed to achieve a 10-year average of 2.2 percent GDP growth, and a 1.5 percent of GDP overall fiscal deficit. For the new fiscal year, Barrow announced seven revenue measures including the application of GST on the purchase of data services to customers. He says that this fiscal year will have delivered a primary balance of 1.8% of GDP and an overall deficit of 1.0 percent of GDP. This represents a turnaround of just about 3.6 percent of GDP, valued at some $134 million.

Dean Barrow, Prime Minister of Belize

“Mr. Speaker, At the close of 2017, the national debt stood at approximately $3.535 billion, some 93.8 percent of estimated 2017 GDP. 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. With regard to GoB’s external debt portfolio – that is, debt obligations denominated in foreign currency and requiring foreign currency repayments – $1.055 billion is owed to commercial bondholders; some $400m is owing to the PetroCaribe Loan Program sponsored by the Bolivarian Republic of Venezuela; $305.3 million to the CDB; $242 million to the Republic of China on Taiwan and $227 million to the IDB. Thus, 41 percent or 4 of every 10 dollars of the national debt is payable to concessionary lenders, either bilateral, as in the case of Venezuela and Taiwan, or multilateral as with the CDB and the IDB. As of the end of 2017, without the borrowings that were necessary in the nationalizations of BTL and BEL, estimated at 17 percent of GDP, the public debt would stand at 79 percent. The poisonous Accommodation Agreement alone, representing 60 percent of the final BTL award, added 7 percent of GDP to the national debt. Let me repeat that number for emphasis: almost a quarter of a billion dollars was deemed to be the value attributable to the Accommodation Agreement signed by two former PUP Party Leaders, in their capacities as Prime Minister and Attorney General, and executed without the knowledge or the consent of this Honourable House.”

According to the Prime Minister, the 2017 average interest rate on the domestic debt was 5.8 percent. He says that without the renegotiations of the SuperBond, Belizeans would have paid $157 million in interest payments in 2017 alone; instead, the actual interest paid was $115 million, a 27 percent reduction or $42 million less. Barrow says that the immediate goal is to reduce the debt to 80 percent of GDP in the next five years. This can be achieved if Belize can sustain and build the fiscal primary surplus position, and if Government can, in collaboration with private enterprise, spark economic expansion.

Dean Barrow, Prime Minister of Belize

“Mr. Speaker, with only a few weeks to go before the end of the current fiscal year, preliminary data shows a mixed picture. 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 lower than expect out-turn is due to revenue shortfalls arising from weaker than expected economic activity and some slowdown in government investment. Total expenditure less interest payments to the end of the fiscal year is projected to stand at $1.037 billion while total revenue and grants is expected to come in at $1.106 billion. This would yield a positive primary surplus of 69.2 million or about 1.8 % of GDP and is to be compared with a primary deficit of 1.8% of GDP in the prior fiscal year. Altogether it represents a turnaround of 3.6% of GDP in the primary balance between the two years, and it is to this we point and of this we boast when we claim fiscal consolidation success.”

The Prime Minister says that the projected outturn does not include the $208 million which was paid as the final installment of the compensation for the acquisition of the BTL shares. The budget will be debated on March 22 and 23.