In his weekly message to the nation, Prime Minister John Briceño, whose government came to power during by far the worst financial and health crisis our new nation has ever faced, said that since taking office his government has been “aggressively developing an export promotion strategy” and that better times are on the way because our Economic Recovery Task Force “will soon present their recommendations for implementation.”
The Prime Minister said one recommendation that won’t be made is for higher taxes, because they would be counterproductive. The IMF had called for the raising of the General Sales Tax, but this clearly has not fallen on fertile ground.
We noted in an earlier editorial that the government’s task force was stacked with the rich and famous in our country. They must know that their recommendations will be put under the microscope. One recommendation we all expect is an introduction of methods to improve revenue collection. That doesn’t fall in the bandwidth of higher taxes.
The task force would have made a brilliant start if they had called for a revisiting of the taxation of what they, their friends, and those in their bracket have the most of in this country — prime, prized properties and parcels of land, but that seems to have been ruled out by the PM’s blanket statement against higher taxes.
Straight up, our local elite have been hiding behind our less well-off folk for too long. They profit off a land taxation system which does protect poorer Belizeans, but isn’t keyed to spur productivity. A simple way of establishing a sensible tax structure on land in/near villages and towns would be to charge a higher tax on land purchased after 1981. There’s no perfect solution to anything in this world, but we can always do better.
The government has told its employees that it needs three years to turn the economy around, but it will not take more than three months for us to know if they are on the path to making good on that promise. If there is any lagging, the government will have to look more closely at our tax structure to see what drops we might be able to squeeze out, because, as the Prime Minister said, “our economic health is underwater…we are drowning.”
Our economy needs cheaper money, says PM
A key message from PM Briceño last week was that, “we must trim expenditures and make money available for lending at lower interest rates.” PM Briceño said that cheaper money “will allow us to unleash the entrepreneurial spirit of our people.” Belizeans have never had access to money at low interest rates; foreign investors have always been outcompeting us because they not only have access to more cash, but they also have access to it at rates 50% and 75% lower than the rates on loans in Belize.
The mantra of one of our most revered citizens, Dr. Leroy Taegar+ (a mantra that all in his circle were convinced of) was that our country could not grow until we established a national bank. The closest Belize came to a national bank during Dr. Taegar’s lifetime was the Development Finance Corporation (DFC), and the credit unions. These institutions, the former being government-owned and the latter owned by Belizean citizens, have always charged lower interest rates than the mostly foreign-owned commercial banks, but their interest rates have never approached the level needed to encourage local entrepreneurs to engage in anything but the safest ventures.
At the opening of the National Bank of Belize (NBB) in 2013, then Prime Minister, Dean Barrow, described the lending rates at the commercial banks as scandalous. The NBB was initially capitalized with $20 million, and it was very limited in whom it served and its scope of lending, prioritizing teachers and public officers who were interested in building a home.
The interest rate offered was an encouraging 5.5%, and the long-term vision, we were told, was to provide venture capital for all Belizeans; but this never materialized because the government didn’t inject the cash needed to boost the bank’s lending capacity. The bank hasn’t really languished because of delinquency, as some have claimed; the latest Central Bank Report showed that the bank’s non-performing loans were at a not-desirable but manageable less than 5%. Clearly, the bank can do better; but what it needs most is cash, so that it can continue issuing loans for home construction and expand its lending into other areas.
Back in early January, PM Briceño introduced the Central Bank Amendment Bill, which he said would generate $50 million that would be made available to Belizean entrepreneurs through the NBB, the DFC, and other organizations that wanted to participate, with the funds being targeted at businesses that create jobs and earn foreign currency.
In the debate on the Bill in the Senate in early March, where it was passed 9 votes to 3 with 1 abstention, Leader of Govt. Business in the Senate and Minister of Foreign Affairs, Foreign Trade and Immigration, Hon. Eamon Courtenay said the aim of the amendment was to say “to the domestic banks that the monies that are sitting there idly [over $400 million]…. should be put to productive use and be made available to the private sector.”
In these critical times, we must look at an injection of liquid capital as a last opportunity. The government must take measures to ensure that it comes without much devaluation or hyperinflation. The government must ensure that none of the monies it manages to inject into the system ends up purchasing luxury goods, that the funds are put to their absolute best use.
This cheaper money must go toward creating jobs, supporting efforts for import substitution, the development of arts and crafts, and the financing of small entrepreneurs who are interested in ecologically friendly tourism.
Our first Prime Minister, George Price, said that with independence we would have more economic opportunities, but the majority of us have never realized that promise; and today, forty years later, many of us are on the verge of selling our assets just to survive, and our country is on its knees begging foreign financiers for relief.
PM Briceño says our recovery begins with an injection of cheaper capital into the system. Our only advice to his government is that it remembers all of us are to win, so it must ensure that the bulk of the funds go to stimulate our many smaller businesses, not our few larger ones.