Eleven days later, on Wednesday, September 28, his Cabinet announced that there would be cuts to both Central Government?s recurrent and capital budgets.

This announcement came less than a month after Government claimed it had to withdraw its proposals for what would have been the country?s largest bond offering, of US$225 million on the international market.

According to a September 15 Bear Stearns report (see page 15 of this issue), Belize needs to make US$48 million in debt payments by the end of the year. The first major payment of US$2 million becomes due next month, according to the international rating agency, Standard and Poor?s.

Government?s recently announced US$140 million refinancing plan, with the International Bank of Miami and the Royal Merchant Bank of Trinidad and Tobago, cannot adequately cover Government?s refinancing program plus its excess expenses. Additionally, Belize?s ability to borrow is limited, since we already owe nearly as much as our Gross Domestic Product (GDP), with a high debt to GDP ratio of 92. Therefore, serious cutbacks have had to be instituted, to ensure that Government does not spend much more than it earns or what it can borrow.

?Cabinet approved a programme to contain the projected fiscal deficit [now about double its target] for the fiscal year 2004 /2005,? announced a press briefing from Cabinet dated Wednesday, September 29, 2004. ?The programme aims to reduce Government?s recurrent operating costs by 5% through reductions in the cost of material and supplies, operating expenses (especially fuel) and public utilities.?

From its recurrent budget GOB pays expenses such as salaries, pensions, debt service interest, and goods and services. The only two areas with any real room for cutbacks are salaries, and goods and services, but the Government is committed to a three-year salary increase of 5% and 8% for public servants, which expires in 2005.

In addition to slashing its recurrent expenses under goods and services (approved at $104 million for 2004/2005) by 5%, or about $5 million, Government also plans to trim its capital budgets by over $30 million, our sources say.

?The capital projects to be affected will be selected to minimize the negative impact on the social sector, including health, education and poverty alleviation,? Cabinet?s release said.

It added that reductions in discretionary tax exemption, and improvements in tax and duty collections would be effected. This, it said, would be done in coordination with the international financial institutions, to develop a self-monitored programme for fiscal and debt management.

GOB said that the objective of the budget cuts is to reduce its fiscal deficit – the difference between the amount of money it earns and how much it spends, to under 3% of the country?s GDP.

In April, the IMF, in its report on its annual visit to Belize, expressed serious concerns over the country?s deficit, saying, ?The Central Government deficit remained at levels around 9% of GDP since FY 2000/01 (fiscal year begins April), and is projected to decrease only slightly in FY 2003/2004.?

?The large and continued fiscal imbalance and the accommodative monetary policy are threatening the sustainability of the exchange rate peg [tagged at US$2 to BZ$1 since 1976],? it cautioned.

?The authorities agree that the Central Government deficit should be reduced to below 3 percent of GDP in FY 2004/05?to achieve this target, there is a need to implement a comprehensive tax reform to restore buoyancy to the system, freeze current expenditure, and reduce budget-financed capital expenditure further. Combined with a tightening of monetary policy, this adjustment in demand policies could halt the loss in international reserves in 2004,? the IMF further advised.

Since officials of the International Monetary Fund (IMF) concluded its meetings with Belize on December 15, 2003?which formed the basis of its April 2004 report?the Government of Belize has implemented, among others, the following austerity measures:

1. A hike in sales tax, with some consumer goods being exempted;

2. Land and other tax reforms;

3. A review of allowances for public sector officials, with a view to trim costs incurred by some officers; and

4. A ?freeze? of its capital budgets, purportedly to reprioritize $12 million worth of projects.

Its latest austerity measures amount to a cut of the 2004/2005 budget that could tighten expenditures to a new low?the lowest they?ve been in at least four years.

Data published by the Central Bank of Belize indicate that in both 2001/2002 and 2002/2003, Central Government spent well over $600 million under its recurrent and capital budgets?in both cases, roughly $100 million more than what had been approved by legislators.

In May this year, legislators passed supplementary appropriation bills to cover for the overspending in those years, plus almost $50 million in principal loan payments anticipated for the current financial year.

With the new budget cuts, expenditures could be trimmed to levels lower than the $524 million scheduled for last year, 2003/2004.

With over $35 million trimmed from the 2004/2005 approved expenditures ($547 million), GOB?s spending would be capped at around $512 million?lower than annual expenditures recorded in the past three years.

On August 11, 2004, the Government of Belize reported that it had taken a ?proactive step? to improve its fiscal management, by ?holding the line? to the fiscal targets approved in the 2004/05 budget without committing against future revenues.

This week, GOB took things a step further, by announcing wide cuts of its 2004/2005 budget.

The latest developments have occurred against this following backdrop: the withdrawal of Government?s US$225 million international bond; three credit rating downgrades from Moody?s and Standard and Poor?s, and recent scandals that have resulted from some of Government?s controversial policies, such as securitization, and its loan guarantees for private businesses.

Routinely, Government has also funneled money into its development bank – the Development Finance Corporation of Belize, which has its own financial challenges?including crippling debt payments?with which it is trying to cope.

Despite numerous attempts, we could not get a comment from either the Prime Minister or his Cabinet Secretary today.