DRAFT BELIZE BUDGET POSTPONED SPECULATION

Dean Barrow, Finance Minister and wife.
FEB 27 DRAFT BUDGET POSTPONED UNTIL AFTER TOWN BOARD ELECTIONS

It is widely believed that the DRAFT BUDGET is not very encouraging and thus in order to not effect the outcome of the TOWN BOARD elections around the Nation of Belize, which have become partisan and political party orientated, in imitation of the National Elections, the DRAFT BUDGET has been postponed, so say a new announcement by the government. The UDP wish to win the TOWN BOARD elections nationwide. It seems the proposed draft budget originally announced for Feb. 27, might have had an effect on the Town Board Elections?
Government watchers are looking at the DRAFT ANNUAL NATIONAL BUDGET keenly and expectantly. What reserves are allocated for a HURRICANE, or FLOOD disasters is a curiosity. A minimum of $150 million is expected to be held in reserve through November this year, for the unexpected environmental disasters outside of the ability of government to predict.
Another big item to watch is the National Debt to GDP ratio. The National DEBT rose during 2008 and the GDP fell during 2008, but by how much, is the question and what effect this will have on the many GDP ratios used to judge the economy of Belize? This ratio is a government management skill indicator. When it drops, the government is doing the correct things and when it rises the government is making bad mistakes. Confusing things, is the mix between the CALENDAR YEAR ending Dec. 31st and the FISCAL year which runs from APRIL to APRIL. The new UDP government has cancelled monthly, quarterly and annual calendar year reporting of economic statistics during 2008. This new UDP government has been keeping SECRET the monthly reporting of GDP ratios of the economy, used by the private sector business people, as done by the previous PUP administration. This has caused consternation and much complications in private sector bank transfers, planning for foreign exchange purchases and set asides and other re-investment factors. Private Sector planning has reverted to the old Colonial systems of uncertainties and inability to do quarterly and short term planning for lack of statistical information.
Projections for the 2008 Calendar year were about $800 million in government revenues. Due to two floods and various bulk commodity industry losses during 2008, the new estimates are about $40 million lower for government revenues, estimated at $760 million. The private sector awaits the actual figures with interest? Mainly because no change in annual revenues is expected now that a WORLD DEPRESSION is under way through 2009 and probably part of 2010. The future forecast for government revenues is expected to level off at $760 million thereabouts, annually, for the remaining 4 years of the UDP term in office. We are in a down phase of the average cycle of government revenue averages.
The cost of government is of special interest. Government will have to run around $430 million in total annually, during this world depression for 2009; so efficiencies in the budget are expected to be announced. 2010 forecasts project increased cuts in government size and spending needed. The new UDP government is not yet prepared to implement a monthly departmental grant system, tied to GST collections as a ratio, for various government departments and units. ZERO budget balancing is still but a dream under this UDP. This means a continuation of wild politically created swings in the economic projections and money management by the Finance department. The $200 million expected inputs from new foreign loan borrowing spending will keep the economy flowing for taxation revenue through 2009, but will not really foster any expansion in government size and costs. Should the UDP expand the government size and costs, then this is going to wreck any future economic projections.
The amount of government revenues and foreign exchange circulating in the system is going to put hardship on the private sector it is believed. During 2010 next year, the interest rate on the National Debt in foreign exchange is going to increase by 30%, due to a balloon payment interest schedule from 4 ¼ % to 6% interest. The actual amounts of interest and foreign exchange to be needed by the government, is of great interest to the private sector business community. This will effect private sector business decisions for 2009 through 2010 government fiscal year. What the actual interest payment amount will be is of paramount interest to the private sector, as the fallout from these payments indicate the fluidity of the foreign exchange availability on the black market, foreign exchange currency system, to pay for private sector imports. The probability is that for the balance of the next four years of the UDP term, there will be a savage tussle to control foreign exchange availability. The government to pay the political foreign debts, against the need by the private sector to keep the economy running.
Inflation figures monthly are needed and whether or not we can get these is going to be a curiosity? The danger of a DEFAULT on the foreign debt will become more clear by late April, after the final budget is reached. A first minor crisis point will be reached somewhat in 2010, but expected to escalate in 2012, to a complete DEFAULT on foreign bond obligations, or a new restructuring, to bring interest rates on the 20 year bonds down to 2% to 3% interest. An amount the country can handle. Projecting out mid term for 2010, 2011 and 2012 will thus effect private sector business expansion planning. Mostly to see if the UDP react with fiscal panic and start increased taxation in desperation. This can be counter productive. The struggle to control foreign exchange, is also going to be bigger than before, going back similar to the 2005 period.
The problem facing the new government is not tax collections, which are relatively big and efficient already, but fiscal management skills. During the world depression now unfolding, what could be glossed over as amateur night, can no longer be ignored and the level of fiscal management skills is becoming increasingly dominant and important.