Money and Metals

A once popular off-shore tax haven is on the rocks. "'Devaluation is not on the table,' Prime Minister Said Musa assured members of the media and the public at a press briefing on Thursday evening, August 3 in Belmopan. Musa called the briefing to explain how the government planned to “rearrange” 90% of its public debt, a portfolio US $ 960 million."

"Musa acknowledged that Belize was heading for a sovereign default when this plan was put in motion. The government will be working very closely with official sector partners such as the International Monetary Fund (IMF), the Inter-American Development Bank and the Caribbean Development Bank."

"The government of Belize is now calling on its commercial creditors, that is, private lending institutions which have loaned government money in the past, to cooperate in helping Belize meet its debt repayment commitments."

"While Musa initially blamed four tropical storms which hit Belize between 1999 and 2003 for some of the debt the country incurred, in the end he was forced to take blame for the debt crisis. His government had carried out expansionary programmes, he admitted because the economy was in recession. The government also undertook a major housing construction programme which played a large part in accumulating debt."

"Government, he said, had also undertaken a lot of public investment projects to improve infrastructure, maintain existing systems and services, expand the education system, improve health care services, build highways, and expand utilities."

"The Prime Minister, even in the gloom of red ink, boasted some success: reducing the fiscal deficit from 8.7% of GDP to 3.1% of GDP within 24 months and by cutting capital expenditure to the bone. The primary deficit, he said, had been reversed from a deficit of 2% of GDP to a surplus of 3.1% of GDP through improving revenue collection and tightening spending. The Central Bank has also simultaneously tightened the liquidity in the banking system to protect international reserves."

"These reserves stand presently at Bze $150 million, or US$75 million, the Governor of Central Bank, Sydney Campbell explained at this point. The Central Bank monitors the liquidity situation to ensure "there is sufficient foreign exchange to meet debts as they become due, Campbell said.

"Musa did not clarify whether the holders of GOB bonds would be asked to take a hit, but Carla Barnett, Financial Secretary, said discussions with bond- holders would be taking place shortly, in a matter of weeks."