Thursday 23rd June 2005


Belize still walking tight rope

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By Vangie Bhagoo & Stacey Ramjattan

Research Analysts


The IMF met with Belize’s technical economic team recently in Washington DC, where they were following up on the IMF’s Article IV mission.

In the meeting, it was noted that the country’s foreign exchange reserves was at $140 million, even after a relatively large debt payment was made.

The government believes that the current level of reserves should be adequate to service its debt through 2005.

It is estimated that debt service payments through the end of the year should total approximately $100 million, with roughly US$65 million in amortization and US$35 million in interest.

The sale of government’s remaining 37 per cent share in Belize Telecommun-ications Ltd. (BTL) will considerably ease debt service requirements in 2005.

While there is some optimism regarding Belize’s ability to service its 2005 debt, the outlook for 2006 is not as bright.

It is estimated that Belize owes approximately US$56 million in principal repayments and US$61 million in external interest due in 2006.

The likely year-end level of reserves, projected at around $100 million, is insufficient to meet the country’s debt obligations in 2006. Without market access, the government will have to consider the option of debt restructuring.

The government is also in the process of fiscal and monetary tightening. The reserve requirement ratio has been increased to seven per cent from five per cent, and the Central Bank noted that it is prepared to further raise the rate, if the need arises.

The government also intends to implement a combination of expenditure cuts and revenue increases to restrain the fiscal deficit.

The measures proposed by the government are quite unpopular amongst unions and the opposition, and has caused disruptions to the economy through protests.


The Monetary Committee of the Brazilian Central Bank (COPOM) has left the benchmark interest rate at its current level of 19.75 per cent.

The decision to keep the rate unchanged arose from lower-than-expected inflation last month and a slower growth rate in the first quarter of 2005.

The IPCA consumer price index, which is used by the central bank as a gauge to set interest rates, increased 0.5 per cent in May, its smallest pace in seven months. Real GDP expanded 2.9 per cent in the first quarter of 2005.

In 2004, the Brazilian economy grew by 4.9 per cent, and it is expected to grow at around 3.5 per cent in 2005.

The Central Bank has raised interest rates on nine consecutive occasions, which sparked criticism from industry and politicians and the latest decision by COPOM will alleviate some of these concerns, as it signals a possible end to the nine-month monetary tightening cycle.


The Public Utilities Minister recently announced that a hike in electricity rates is soon to be realised.

The Minister noted that the Regulated Industries Commission (RIC) had approved the standards for T&TEC which is a legal requirement and consultation is ongoing between the RIC and T&TEC.

Additionally, the Minister revealed that it was the RIC which made the decision to raise electricity rates, pending an analysis of T&TEC’s financial position. The government has also approved a $123 million loan for T&TEC.

The Parliament approved the $3 billion additional expenditure that the government proposed recently, which would take total government spending to a record $30 billion for the fiscal year.

The Junior Minister of Finance noted that the increase in expenditure was justified, saying that it is necessary to satisfy a requirement by the Central Tenders Board, for confirmation of funds for projects under the PSIP.

On the local money market, the Central Bank issued two OMO bills.

The first OMO was issued on June 10 , in an amount of $325 million at an average discount rate of 4.99 per cent. This issue matures on June 9 2006.

The second issue was on 14 June at an average discount rate of 5.00 per cent, amounting to $95 million, which matures on June 14, 2006.

All information contained in this article has been obtained from sources that CMMB believes to be accurate and reliable. All opinions and estimates constitute the author’s judgment as of the date of the article; however neither its accuracy and completeness nor the opinions based thereon are guaranteed. As such, no warranty, express or implied, as to the accuracy, timeliness or completeness of this article is given or made by CMMB in any form whatsoever.

CMMB and/or it employees or directors may, where applicable, make markets and effect transactions, or have positions in securities or companies mentioned herein. Neither the information nor any opinion expressed shall be construed to be, or constitute an offer or a solicitation to buy or sell.





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