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BZ $1.4 billion budget proposed       

GeneralBZ $1.4 billion budget proposed       

Photo: House sitting on Friday, March 10, 2023

Prime Minister Hon. John Briceño’s budget speech touched on several key areas and featured positive indicators for Belize despite a projected regional deceleration 

by Marco Lopez

BELMOPAN, Fri. Mar. 10, 2023

The Prime Minister’s Budget speech presented at the House of Representatives sitting today touched on five major areas: domestic and regional conditions, a revision of the financial sector and real economy developments, the projected budget performance for fiscal year FY2022/2023, a summary of the new estimated budget for FY 2023/2024, and highlights of select policy and reforms which can impact the economy positively.

The PM indicated that he is hopeful of continued growth in 2023, given the trajectory of the tourism industry, in which global overnight travel is estimated to grow by 28 % and cruise sector travel by 13 percent. The Caribbean and Latin America will, however, see a deceleration in economies over the coming years, experts believe, and with a difficult 2023 projected for the United States, inflation and cost of living rate will possibly be negatively impacted in countries like Belize.

The annual economic growth of the country, according to the Statistical Institute of Belize (SIB), reached 12.4 % in 2022. This growth comes on the heels of 15.2 percent growth in 2021 and is seen as continued momentum by this administration. While overall growth was recorded, it was not uniform across all subsectors. Yields in the primary sector decreased by about 0.9 % during 2022, and increased revenue from sales of lobster, chicken, and yellow corn were offset by contraction in the banana, citrus, shrimp, and cattle industries.

The secondary sectors, which saw an increase in sugar, beverage production, construction supplies, and domestic electricity generation, recorded growth of 11.9 percent. And the tertiary sector grew by 13 % – the only sector showing some uniformity in its growth. Areas like wholesale and retail trade, transportation, and support services such as BPO operations also contributed to growth.

Domestic exports rose by $46 million – with foreign direct investment (FDI) being recorded at $15.7 million in the first 9 months of 2022 – while $14 million in remittances were recorded. FDI is currently a total of $261 million, according to the Central Bank, which foresees a yearly total remaining above $200 million through 2027.

In 2022, the rate of inflation in Belize was 6.3 percent, according to Prime Minister Briceño, up by 3.2 percent from 2021. This is lower than the global rate of inflation, which stood at 8.8% percent in 2022 and 4.7 percent in 2021. GDP output for the country in 2022 has exceeded the 2019 level, the PM’s speech suggests; this is despite the fact that tourism arrivals have remained below the sub-sector’s 2019 performance.

“On this basis, there appears to be great potential for continued growth in 2023, in tourism and across the economy,” the PM remarked.

The two largest components of money supply, net foreign assets, and net domestic credit, grew by 5.2% and 5.7 %, respectively. A 4.7% money supply expansion was fueled by renewed lending in the private sector and continued growth of the gross official reserve of the Central Bank. At the close of 2022, the Central Bank Official Reserves stood at $960 million.

Projections for this fiscal year ending on March 31, 2022, puts total revenue and grants at $1 billion 356 million approximately, 89% of which is tax revenue, 8% non-tax, and 3 percent capital revenue and grants. According to the PM, actual revenue and grants exceed the original budgeted amount by 6.9%.

On the expenditure side for 2022, a total of $71 million was spent over the original estimates; and $1 billion 436 million dollars is the total expenditure for 2022. This is inclusive of the supplementary allocations. Recurrent expenditure was $48 million more than what was originally estimated, with investments in capital projects costing an additional $119 million.

Financing of $178 million was required for FY 2022/2023 budget. This was sourced from International Financial Institutions (IFIs) such as the IDB, CDB, World Bank, CABIE, and OPEC fund, which collectively contributed $120 million to finance that budget. The Republic of China Taiwan contributed $30 million, while another $28 million was procured through domestic borrowing. An overall deficit of $80. 5 million is recorded for this period. According to the PM, a primary surplus of 0.5% of GDP of 31 million dollars for 2022 will be achieved.  

Total public debt was recorded at $4.031 billion or 64.1% of GDP – $2. 716 billion is owed to external lenders while domestic creditors are owed $1.314 billion. Of every dollar of debt, 67 cents is owed to foreign creditors while 33 cents of every dollar to local creditors. This year, the government paid $112 million in interest and $97.5 million in principal toward this debt stock.

The PM in his speech said, “this Administration, through its public debt management operations, has reduced the amount owed by the Government by over one billion dollars – 315 million US dollars in debt reduction attributable to the Super Bond/Blue Bond transaction, which includes the principal reinstatement Belize avoided; up to 163 million U.S. dollars of Petrocaribe debt from the recent reduction provided by Venezuela; and 39 million U.S. dollars in damages avoided as a result of last September’s settlement of the compensation claims for Belize International Services Ltd (BISL) – a total of 517 million US dollars of debt reduction.”

For this upcoming fiscal year which starts on April 1, 2023, total projected revenue and grants stand at $1.408 billion, comprised of tax revenue totaling $1.372 billion and non-tax revenue of $112 million. Capital revenue of $5.5 million and grants in the amount of $30 million are also projected. Taxes on goods and services will account for 49 cents of every tax dollar; taxes on income tax and profit, every 26 cents, and taxes on international trade will account for 18 cents of every dollar, while less than 1 cent of each tax dollar will be charged on properties.

Proposed expenditure for FY 2023/2024 stands at $1.496 billion; recurrent spending used to cover wages, pension, goods and services, subsidies, and debt services will account for the lion’s share of that spending, totaling $1.112 billion. For capital investments, $384 million is programmed and $158 million will be drawn down from loans and grants to meet Capital 3 funding.

A forecasted primary surplus of $24.3 million or 0.39 percent of GDP is being made for this upcoming fiscal year. GDP is projected to be a “robust $6.253 billion of economic output.” The overall deficit for Fiscal Year 2023/24 is projected to be 1.41 per cent of GDP, or some 88.1 million dollars.

Inflation will remain at 4.1 percent, according to projections. A total of $210 million will be needed to finance this budget and will be sourced by loans from the IFIs again, this time to the tune of $128 million, along with grants from our international partners totaling about $30 million, and domestic financing of $54 million.

Of note, funds will be allocated to key areas focused on increased quality of life. A million dollars will be allocated to fund surveying and processing of costs for first-time land owners, $7 million for the expansion of NIH in Orange Walk, $3 million for municipal streets and drains, $5 million to recruit new police and BDF and Coast Guard personnel, and 1 million to support the FIU civil asset recovery unit.

These and more topics will be debated next week for three days during the budget debate, starting Wednesday, March 22, and ending on Friday the 24th.

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