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Sep 27, 2016

IMF Recommends Higher Taxes and a Cut in the Wage Bill

Last week, the Prime Minister confirmed to the nation on Independence Day that the country is in recession.  Within days of that pronouncement, the IMF issued its latest report on Belize in which it speaks of dire economic conditions and recommends more taxes and a reduction of the wage bill. The IMF states that GDP growth slowed to one percent in 2015 due to falling oil production and reduced output in the primary commodity sectors. There was a further decline in exports in the first half of 2016, combined with settling liabilities related to the two nationalized companies, which reduced international reserves to four point four months of imports in late August 2016 and that could deteriorate even further. Hurricane Earl, which hit Belize in early August, compounded the challenging economic environment. The silver lining was that tourism held its own. The IMF states that the fiscal position has weakened;  pushing the public debt higher to a whopping eighty two percent of the GDP and the economic outlook has worsened further since the 2015 Article Four.  The Executive assessment emphasizes that rigorous and sustained efforts, including both revenue and expenditure measures, are critical to ensuring fiscal sustainability and building investor confidence. Directors recommend additional measures such as raising the GST rate, reducing the public wage bill, reforming the pension plan for civil servants, and strengthening public financial management.

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