Vangie Bhagoo & Stacey Ramjattan
The IMF met with Belizes technical economic team recently
in Washington DC, where they were following up on the IMFs
Article IV mission.
In the meeting, it was noted that the countrys 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
The sale of governments 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 Belizes 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 countrys 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
The government also intends to implement a combination of
expenditure cuts and revenue increases to restrain the fiscal
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
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&TECs 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
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
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.
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