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Dec 15, 2011

Belize’s economy in dire straits; banks not accepting deposits

We start tonight’s newscast with a story on the economy. It is safe to say that at this of the year consumers traditionally spend more. But for months commercial banks are turning down fixed deposits because requests for loans have gone down considerably. The local banks fear that they will have to pay interest on local and foreign currency sitting in their vaults. It is a sign that the investment climate is weak and the prospects are not looking too good if the government doesn’t step in. News Five’s Isani Cayetano reports.

Isani Cayetano, Reporting

A profusion of local and foreign currency in the Belizean economy over the last two years has created a surplus in liquidity within the commercial banking sector.  There are more deposits that are currently being made to all five lending institutions than there are loans being sought. Investment is at a standstill because of a weak economic climate.  It would appear as though an excess in cash flow or financial resources translates to more money being accessed by consumers; however, the unevenness has left several businesses, including First Caribbean International Bank, in a sticky situation.  The glut has forced a refusal of deposits being made on the basis that banks, which act as vehicles for the creation of loans, are losing money paying deposit rates for the overage at the Central Bank.

In the fourth quarter of 2010 statistics indicated that there was a surplus of 60.5 million dollars being held at the Central Bank.  Recent figures released on November twenty-third are showing that the sum has grown by almost fifty million dollars, bringing it to a total of 109.5 million in overabundance.  The banking sector, on the other hand, is making all attempts to attract consumers into drawing down on the overflow by reducing interest rates on various loans being offered.

But looks can be deceiving.  A loan with an interest rate of 8.5 percent does not necessarily mean that borrowers are getting away with murder.  Instead, the sum being reimbursed throughout the life of the loan is dependent upon the method of calculation being utilized by the bank.  More often than not a formula known as an add-on is what is usually applied when calculating the total amount to be repaid, unlike credit unions which use an amortization method. But there too, fixed deposits are being turned down.  Despite competitive interest rates, particularly during this Christmas season, borrowers remain fearful of drawing credit, many citing the current economic climate as their primary cause of trepidation.

News Five has fielded a number of questions to the Central Bank but they have not yet provided answers. In Friday’s newscast we’ll expand on this story and we’ll have the empirical data to show the state of the Belizean economy.

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14 Responses for “Belize’s economy in dire straits; banks not accepting deposits”

  1. Storm says:

    Same thing is happening elsewhere, including in the States. When the USA gets a cold, we all cough.

    Problem is that there is too much uncertainty about the future for businesses to invest — what will happen in Europe over the next few months? Who will win the U.S. election next year — there will be a big difference whether Obama gets re-elected or a conservative comes in and reverses course.

    I don’t see any major role for the GOB to intervene and try to change the laws of economics.

    “Wealth of Nations” by Adam Smith, and almost anything by Milton Friedman, explain how money and national economics really works. Everyone pretending to be a candidate for PM should be REQUIRED to read those books, and be tested on them, just like our students!

  2. Alley Cat says:

    I avoid doing business with banks and and use them only as an last resort. If this article is true then this comes down to supply and demand so the banks need to find that sweet spot, maybe a couple points above what their rate is to borrow and without the creative caculations. Plus it sounds like the public is getting smarter and living within their means OR they are too indebted and have nothing else left to secure the loan with.

  3. carlos says:

    this is due to the poor economic strategy of the government . They have preferred to fight with investors local and foreigners. Can’t Mr. Barrow see this . What happens to the minister of economic development? Can’t come with good strategies or is it time to change.

  4. Lindsay Howard says:

    About time somebody reported on this. Belize Bank also won’t accept fixed deposits, neither will Scotia. This has been going since around April, I think.

  5. mustard says:

    lol, someone finally is paying attetnion to the “over liquidity” of the banks, and none of us can qualify for the loans, the 8.5 percent ends up being close to 23 % after all their add ins and lawyer fees. The needs to be a “truth and lending law” but, there is not ,so, the banks are actually legal monetary pirates. Legal “loan Sharks”.. your credit card is around 24% plus.
    They have no competion in lending, the GOB is not doing anything about this and lots of people are losing their homes to foreclosure and now the banks are the largest real estate sales company in Belize..GOB is not doing nothing………

  6. thanissaro says:

    The whole global banking system is very near to collapse. The money supply is based upon numbers only. The worlds debt on paper can never be paid back. I do not use Banks only Credit Unions. In respect of this article and comments above. Yes the population of the planet is more aware, or at least those who use these financial institutions, and certainly more cautious. The Banks greed, and in truth fraudulent behaviour, is catching up with them. From Central down to the high street outlets. The spread has always been too wide. If you offer Savers 5% and borrowers 9.5% on principal this is robbery. The service and systems set up to monitor theses transactions cost Penny’s Not hundreds of $. The goose that laid the Golden Egg has left home and is looking for somewhere else to lay.

  7. Said says:

    How do u reach the conclusion that the economy is in dire straits because consumers refuse to borrow from banks at loanshark rates?

  8. William says:

    I as an ivestor an a small business owner tthinks that the government needs offer more incentives. They are taxeing the hell of small business owner thatthey have made it very difficut for the small business to survive!!

  9. yeah right says:

    The government of Belize has the plan. Siezing the phone and electric companies is a long term solution. They are now well managed and highly efficient, the govt way of natural law, anything goes. Soon they will pay us to use their services. So taking over the banks, robbing the reserves will balance the budget, and pay for graft and corruption. Foriegn investors will come, lined up like fish, to be fleeced. Crime and killing will get rid of the complainers and …… Another wonderful day in the Jewel. Fear is the best way to control the population. Who needs education? It costs too much and only confuses people on how to think like a gang.

  10. Earl Grey says:

    THESE BANKS have BEEN MILKING OUR PEOPLE DRY for too long…..NOW THEY CHOKED!!!! ;-)

  11. Concern says:

    The economy could have been better, but the Government prefers to fight and give so many turn arounds when business proposals are on the table. Hope the next elected leader look at this very seriously to put some traction to the economy.

  12. realism says:

    If the banks had any brains they would lower their mortgage rates to just above what they are paying out on savings accounts or term deposits, this would attract more foreign investment and would eliminate the huge amount of foreclosures and local oppression which makes us all loose. But their too greedy for that.

  13. Rene Rodriguez says:

    Nine out of ten so called “INVESTORS” that come to Belize try to con us. During this time it´s easier for Mexicans to come and invest in Belize than an american or european company.

  14. ROX says:

    We are all complaining but would you buy a pound of rice for a dollar and sell it for a dollar?
    If you understand business and natural human tentendies then this world is yours for the taking. The business mentality is not the problem as this is the drive for all of us and is nescessary for building any economy in default we would have no reason for Improvement.
    The Government can help to some extent by reduction of import duties collected on several goods and service and alos by stategically investing in Belize to promote tourism (especially locally originating). Look at our duties such as vehicle importation where the % charged can go as high as 78%. The final consumer always gets hit with the charges. Look at our roads , law enforcement , rate of conviction for criminal offences even our poeple’s attitude to each other. We have a lot to do as a country but there is lack of execution. Do our minister’s travel? Have they seen how other get ahead? Do they not feel they can improve Belize appearance and welcoming athmosphere? Will be forever remain a third world country? What are they really doing for Belize ? This is aimed at all and no political party (UDP or PUP). We should always Put Belize First. We need our leader to be just what they said they would be “leaders not managers”
    Managers just keep within limits. Real Leaders provoke desire and confidence in their poople.

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