Caribbean & Central America - July 2017 (ISSN 1741-4458)

*** BELIZE PRESSED TO INCREASE GST. The International Monetary Fund (IMF) is calling on Belize to increase the rate of the General Sales Tax (GST) to 15% from 12.5%. It is also calling on the Dean Barrow government to remove GST exemptions. The IMF concluded its latest mission to Belize on 15 June.

Debt is very much on the IMF’s mind. Belize’s debt-to-GDP ratio is close to 100%, and as a consequence it is urging the government to adopt a fiscal rule to help get the debt down. The IMF said: “In Belize, the adoption by parliament of a fiscal rule that targets 60% debt-to-GDP by 2025 could help guide the fiscal consolidation effort and broaden the support for it.”

More positively for the government, the IMF is projecting GDP growth this year of 2.5% following a recession in 2016. Another positive was news that the crisis over correspondent banking was easing. The IMF reported: “Since mid-2016, all affected banks have been able to reconnect to foreign banks, with no further losses of relationships.”

*** IMF CONTINUES TO BE SATISFIED WITH JAMAICA. Following a visit from 12-16 June to review Jamaica’s economic reform programme, the IMF reported: “Fiscal performance in 2016/17 was commendable, with the central government’s primary surplus in excess of 7% of GDP for the fourth consecutive year.”

It added: “Corporate and personal income taxes over-performed relative to the budget, partly reflecting dividends from reforms in tax and revenue administration over the past few years. The 2017/18 budget targets a primary surplus of 7% of GDP, with increased budget allocations to social and growth-enhancing capital spending.”

However, having reported in such as positive vein on the reform programme, the IMF also warned on “the need to anchor the upcoming public-sector wage negotiations on a comprehensive and forward-looking compensation framework.” It argued that containing the wage bill was an essential prerequisite if the government was to prioritise social and infrastructure spending.