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Mar 17, 2017

Where goes the national debt?

Belize’s debts have climbed over three billion dollars for the first time, much of it owed externally. A full third of that is attributed to the Superbond, the package of development loans negotiated by past administrations that were bundled to avoid heavy payments. Coming just behind are monies owed to the international development banks and to Taiwan and Venezuela. But does the Government see any way out, or is “sustainability” the way to go? Aaron Humes has a review of the Prime Minister’s statements on the matter.

 

Aaron Humes Reporting

Prime Minister Dean Barrow reported to the House on Monday that among the Government’s priorities are attaining the consolidation needed to achieve lasting fiscal and debt sustainability. The Prime Minister informed that fresh financing for the budget will be at its lowest since he started office, even as the external public debt is at its highest.

 

Prime Minister Dean Barrow

“At the close of January 2017, external public debt amounted to seventy percent of GDP, some two point three billion dollars; and domestic debt totalled twenty-two percent of GDP, some seven hundred and fifty million dollars. The interest cost of these obligations is projected at one hundred and four point six million dollars for this fiscal year and is expected to rise slightly to one hundred and nine point one million dollars during Fiscal Year 2017/18.”

 

The breakdown of the external debt shows that most of it is for three principal creditors: the bondholders of the formerly 2038, now 2034 Bonds re-negotiated last week; international financial partners such as the Caribbean and Inter-American Development Bank, and the republics of Taiwan and Venezuela. In the case of the Bonds, the Prime Minister spoke of a “debt trap” that he said hamstrung his Government’s ability to borrow should they choose to.

Prime Minister Dean Barrow

“Our predecessors, those across the aisle, who trafficked in high-interest bonds and promissory notes, laid a debt trap before leaving office: they drove up the public debt from 48 percent of GDP in 1998 to 89 percent of GDP in 2008. This deprived their successors – this deprived us – of the critical option of borrowing, which, when done prudently, is one of the most effective tools to combat recession and economic crisis. The PUP’s pace of public borrowing, on average, was a “double-up” and “triple-up” approach – dehn got out BTL – : borrow two dollars for every dollar of economic growth, borrow three dollars for every new dollar of revenue: clearly a case of irrationality, cognitive dissonance, and corrupt use of unmonitored debt funds to fill ministerial and crony pockets.”

Later, the Prime Minister would say in specific relation to Petrocaribe that he still has no regrets on spending despite the legitimate questions in the public.

 

Prime Minister Dean Barrow

“I don’t regret for one minute the spending of the Petrocaribe funds; I think the infrastructure and social programs that those monies funded were well worth funding. They improved the quality of life – and they were consistent with the sort of objective of Comandante [Hugo] Chavez’s vision. And so there is no regret there at all.”

 

And while the Prime Minister touted advances in the Superbond renegotiation, at home the credit system still suffers from high liquidity despite Government intervention.

 

Prime Minister Dean Barrow

“On the monetary front, the broad measure of money supply expanded by two point eight percent. This was attributable to a surge in borrowing by the Government and a one point six percent growth in lending to the private sector. The net foreign assets of the banking system contracted due to lower export earnings, the substantial payments for BTL and the purchase of the local branch of First Caribbean International Bank. The credit unions also increased lending by nine point two percent or forty-eight point nine million dollars. New issue of government securities targeted at financial institutions and institutional investors made virtually no dent in the high level of banking system liquidity. Consequently, the weighted average interest rates on new loans and deposits declined further, resulting in the weighted average interest rate spread decreasing by thirteen basis points to 7.63 percent.”

 

It seems that despite a hundred million in interest payments, there seems no end in sight to reducing the debt figures that threaten to choke Belize’s economy. Aaron Humes reporting for News Five.

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