Barrow’s Budget – Pay Today, Poorer Tomorrow!

On March 15, 2010 PM Barrow presented his 3^rd budget which was so inaccurately entitled – “Recovery today, prosperity tomorrow.” It should have been more accurately entitled “Pay today, poorer tomorrow”.  The verbosity and wonton disregard, with which this presentation was made, made it quite obvious that the current UDP government continues to have apathy for the wellbeing of the Belizean populace.  A review of the budget presentation and concomitant proposals reveal that it will negatively affect the majority of Belizeans, who continue to provide the human resource that drive the Belizean economy.

The 2010/11 budget presented was premised on seeking to address four key areas, namely: social investments, job creation, access to credit and addressing crime and violence.  A review of the proposals put forward clearly reveals that there is a lack of substantive and meaningful interventions that were presented.  To address the escalation of crime and violence, the PM proposes a new intake of police recruits and the intention to find funding for ballistic testing equipment.  The IDB funding of a community action for public safety programme can be expected to be plagued with the lack of institutional capacity that resonates within government.  These initiatives are surely insufficient to assure the safety of the Belizean people.  The Government has a constitutional obligation to maintain law and order and when such a function is not being addressed adequately and it impinges on the economic sustainability of businesses providing services and employment; the Government needs to make conscientious interventions that will restore safety to the people.  This does not seem to be forthcoming.

With regard to access to credit, $4M is being sourced from CABEI and IFAD for a rural finance programme; this is being executed via the Credit Union League.  This micro-finance program will be targeting rural communities with disbursement not expected to be fully expended in the 2010/11 FY.  An indication of a dedicated fund for young entrepreneurs of no less than $5M provides no real commitment as to a concrete implementation schedule for access to such line of credit.  Consequently, with the amendments to the banking legislations there remains no guarantee of interest rate movements downwards, and the likely expectation is that upon GOB issuance of new T-Bills and T-Notes crowding-out of saving funds within the financial system can be envisaged.  Therefore, with no concrete proposition that seeks to address the implementation and use of monetary policy instruments, access to credit will remain but a fleeting idea.

On the third issue of job creation, the current administration has failed to aggressively promote any new investment.  With the threat of nationalization and possible litigation investor’s confidence within the Belizean economy has dwindled over the past year, with the expectation that the no-confidence of the current administration will not cause any significant investment to be attracted.  Furthermore, new investments by the Social Security Board, as a key partner that has a mandate to contribute to the economic development of Belize, has not materialized over the past year.  So where will the jobs come from?  The public sector investment programme which is tasked with the execution of infrastructural development, recorded a less than stellar performance.  Project execution continue to be plagued with lack of institutional capacity, as Government has failed to utilize and place qualified persons cognizant of project management and procurement processes, to ensure draw-down of loan funds are received to execute projects in a timely fashion.  Thus is the reason why very little was accomplished in 2009/10 of the $100M that was approved for capital projects.  It remains highly unlikely that if the capacity constraints are not addressed, that the infrastructural projects would not be realized in 2010/11.

Now to address the primary focus of the budget, that of social investment to support a poverty alleviation programme is a quid pro quo that disadvantages the poor even further.  The total value of the relief measures proposed, will net the Government $10.5M in foregone revenue, which will be completely eroded by the 25% increase in GST to 12.5%.  This increase in GST is expected to net Government an additional $42M.  Thus, the net effect on Belizeans is negative and does not auger as pro-poor policy initiatives.  Personal income tax relief of $23,600 per annum will only apply for persons earning less than $24,000 per annum or $2,000 per month.  The majority of who were not liable for paying income tax as previous level of personal relief was $19,600 per annum.  This proposal ought to have gone across the board for all employees, in light of the increase in consumption tax.

A review of the items that would be exempted from import duty and GST indicates an extremely limited list of consumable items, especially when compared to what are currently available as zero-rated items and not subject to GST.  A summary in table 1 below provides a quick snap-shot.

The inclusion of processed meat items surely does not support healthy dietary and nutritional value to Belizeans.  Such processed meats are high in sodium, cholesterol and saturated fats, which are the underlying contributing factors to life-style deceases such as hypertension and diabetes.  To provide the utmost benefit for Belizeans, items such as the following in table 2 should be zero-rated for GST.

What will be felt immediately is the effect that this increase in GST will have on users of hotel services both local and foreign users. This will of course discourage local travel and make the Belize tourism product that much more costly. Gone are any ideas of a few days away with loved ones for the Easter holidays.  When the voice of the PM subsides all that remains are the hurt that this budget will inflict on the majority of Belizeans.  As one search for areas to give compliments and encouragement as meaningful benefits of the 2010/11 budget, one is forced to conclude that this presentation of the 2010/11 budget is short on vision, short on creativity, extremely short on government curtailment measures of its activities and very long on measures to inflict pain on poor and vulnerable people and the business community.  The record will reveal in time, that this budget of 2010/11 will result in greater levels of poverty when the full brunt is realized upon Belizeans.

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