Posted: Wednesday, October 26, 2016. 9:02 a.m. CST.
By Richard Harrison: “Since June 2014 oil prices have dropped about 65 percent in U.S. dollar terms (about $70) as growth has progressively slowed across a broad range of countries. Even taking into account the 20 percent dollar appreciation during this period (in nominal effective terms), the decline in oil prices in local currency has been on average over $60. This outcome has puzzled many observers including us at the Fund, who had believed that oil-price declines would be a net plus for the world economy, obviously hurting exporters but delivering more-than-offsetting gains to importers.” ~ iMF direct, March 24, 2016.
In general, a country like Belize (which is a net importer of fuel) should be witnessing an economic boom period….given that lower fuel prices should reduce the cost of producing everything….thus increasing profits….which is principally what drives increased investment, saving and consumption….growth.
The Belize government however, decided to highjack all the benefit for themselves….by increasing the taxes on imported fuel….artificially raising the pump price of fuel…increasing ONLY the revenues for the public purse….instead of passing this benefit to all the actors in the general economy….and taxing at the end of increased economic activity…..such that ALL in the economy would benefit first….and the government in the end would benefit even more from increased revenue on higher turnover in the economy.
This policy decision by the government of Belize effectively wipes out the gains to the general economy from this period of low oil prices….the increased revenue from the hike in fuel tax flees the country rapidly to pay off liability obligations of the government….and is not put to work in the general economy.
If the Government of Belize were to pass on these lower prices of fuel to the general economy….this factor alone would drive GDP growth up at least 3% notch…and this would improve the country’s economic and financial profile.
The government has effectively high jacked its own people….eliminating the opportunities for ALL other economic actors that should be realized from this period of low fuel prices.
When the leaders have no vision….the people perish.
The views expressed in this article are those of the writer and not necessarily those of Breaking Belize News.
This article was written by Richard Harrison, Belizean investor in production and services businesses in Belize. He holds a Master’s in Business Administration degree from Lancaster University.
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