The consolidation of government finances was a crucial factor in the economic growth of the late 1980s. The first step was the reduction of total expenditures. Between 1981 and 1985, total government expenditures had stood at 34 percent of GDP. Between 1986 and 1990, this proportion was reduced to 31 percent. More significant, however, was the decline of current expenditures as a portion of GDP, from 25 percent to 21 percent. This decline indicated that cuts in government spending were not being made at the expense of development expenditures. Development expenditures as a percentage of GDP actually increased from 7.4 percent between 1981 and 1985 to 8.7 percent between 1986 and 1990.

Statistics for the period 1986-90 also showed an increase in government revenues over 1981-85. These revenues, which had amounted to 24 percent of GDP over the 1981-85 period, increased to 30 percent of GDP in 1986-90. Some of this increase was accounted for by the sale of government assets, which increased capital revenues. The remainder came mainly from higher tax revenues, which rose from 21 percent to 24 percent of GDP.

Lower current expenditures and increased current revenues permitted the Belizean government to experience several years of high surpluses on its current account. In 1990 this surplus on the government's current account was 11 percent. This fiscal consolidation reduced government competition with the private sector in the domestic credit market. Consequently, increased lending to the private sector accelerated growth without increasing the money supply and therefore without threatening currency stability.

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Source: U.S. Library of Congress