Prime Minister Dean Barrow presented his first budget today. It was due at the end of March, but asking for time to put the new administration’s finances in order, Barrow deferred it until today, the first July budget presentation on record. So was it worth the wait? We went to Belmopan to find out.

Hon. Dean Barrow, Prime Minister
“I present this budget today, Mr. Speaker, in the full consciousness that the people of Belize will look at it as a benchmark budget; a tone setting and a mood shaping budget.

What I wish to make clear at the outset though, is that we seek no excuses. Not even in consequence of the trials visited upon us by mankind’s worst food and fuel crises do we flinch from our obligation to deliver. And not even in the face of the moral, political and economic wasteland bequeathed to us by those that for ten long years plundered our resources , do we give in to any talk of despair.”

No despair, but Barrow conceded that things aren’t good. The economy has experienced a critical slowdown; growth has slowed, exports are down, inflation is up and the debt is crushing.

Hon. Dean Barrow,
“In 2007, the last full year of the previous era, Belize experienced economic slowdown with real GDP growth falling to a mere 1.6% as compared to 5.3% in 2006. Output of papaya, sugarcane, banana, citrus, farmed shrimp, garments and electricity fell for a variety of reasons.

The Statistical Institute of Belize estimates that GDP grew by only 0.6% in the first quarter. The Statistical Institute of Belize also reported that the domestic price level (as measured by the average annual increase in the consumer price index) was up by 2.3% during 2007 with food prices increasing by 5.3%. Price hikes in imported food staples and fuel raised the consumer price index to 4.7% over the twelve months to February 2008, an upward trend that is likely to continue and one that, as we have already acknowledged will pose a grave challenge to both consumers and producers alike.

At the end of April, 2008, the outstanding public sector and publicly guaranteed debt stood at $2.249 billion.”

But, with all this, Barrow projects that GDP will grow in the next year.

Hon. Dean Barrow,
“The draft estimates have been prepared on the assumption that nominal GDP will grow by 5.3% in the face of rising import prices, while real GDP will grow by approximately 2.0%.”

And while those are issues for the technicians to quibble over, the bread and butter issues are a major part of the budget.

Hon. Dean Barrow,
“Government has prepared this budget to reflect three fundamental objectives: to restore fiscal sanity, moral well-being, and honesty in administering the business of government; to take the development agenda forward, investing especially in education, health, infrastructure, agriculture and tourism; and to look after poor people.

I am pleased to say that in this budget there will be no new taxes. We are removing GST from a broad range of medicines, and exempting all medical services from GST. In addition to no new taxes on the Belizean people in this budget, we are, of course, actually providing positive relief especially to the poor. We will thus be lowering or removing tax on a number of basic items and services.

The removal of GST from a number of basic food items including powdered milk, cooking oil, chicken Vienna sausages, corned beef, coffee and tea.

The new measures thus include: the removal of the general sales tax by applying a zero rate on a wide range of over-the-counter and prescription medicines and medical supplies including analgesics, cough and cold preparations, diagnostic testing kits for glucose in the blood and urine, insulin and insulin syringes, oral rehydration salts and solutions, dialysis fluids, oxygen, and anti-retroviral drugs.

In order to help to alleviate the increased financial burden on the poor brought on by the sharp rise in food prices, we have allocated the sum of $2 million for a food subsidy program aimed at the poorest of the poor.

As of the 1st of August, the remaining revenue replacement duty will be removed from both regular and premium gasoline, and on aviation spirits and jet fuel. This tax, not so fast, removed but replaced. This tax will be replaced by a lower flat tax per gallon which will be added to the existing Customs duties applicable to these products.”

And while that may not make oil cheaper, this will.

Hon. Dean Barrow,
“With the discovery and extraction of crude oil in Belize, several entrepreneurs have expressed an interest in establishing micro-refineries to process and blend the locally produced crude oil into refined gasoline, kerosene, and diesel oil for the local market. Two local companies have invested substantially in refining equipment and are poised to produce a refined diesel and gasoline for the local market. Together these two producers project that they can supply more than 50% of the local market within the next few years, but starting almost immediately, at prices significantly lower than what we pay now.

With this new commercial activity, it has become necessary to apply an excise tax. While we keep well in mind the need not to unduly burden this local refining, the excise tax, in keeping with WTO and CARICOM obligations, can be no more favorable than the taxes applied to similar products which are imported into Belize.”

The agriculture sector will also receive exemptions and there will be the promised education grants to secondary schoolers.

Hon. Dean Barrow,
“A brand new allocation of over $3 million to provide for education grants first-year high school students on a needs basis.”

And with that bundle of tax breaks and gifts, Barrow called it a job well done.

Hon. Dean Barrow,
“When you place it in the context of all the objective difficulties we’ve had to face, I think that we have been creative, I think we’ve also been lucky and the fact that we are able to offer such widespread, though admittedly incremental relief to people is for me an achievement not to be underestimated.”

One other notable announcement in today’s presentation is that NHI will continue but it will not be rolled out nationally and it will not be paid for by Social Security. As for details on the increase in tax revenue from oil, PM Barrow says the windfall tax still requires fine tuning and he will hold a press conference on Wednesday to announce the final package. And in what it calls an effort to control the contraband trade in cigarettes, government will be reducing the excise tax on a carton of cigarettes from the present level of $18.00 to $12.00 per carton. These issues and much more will be brought back to the table when the budget is debated on the 24th.and 25th July.