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Jan 31, 2007

Government enthusiastic over superbond approvals

Story PictureTonight the Musa administration is celebrating the news that in an “exceedingly rare” event, almost all of Belize’s bond holders have opted to participate in the country’s debt restructuring proposal. According to a press release issued by Belmopan, ninety-three percent of holders have agreed to exchange their existing claims for new lower-interest bonds that would mature in 2029. Today Government officials credited an open and transparent process for the high percentage of participation, a number that is expected to grow to as much as ninety-five percent before the exchange offer becomes final on February twentieth. Financial Secretary Carla Barnett and Minister of National Development Mark Espat discussed the results of the new bond offer with the media.

Dr. Carla Barnett, Financial Secretary
“I wouldn’t call it a sigh of relief, but I would call it a certain amount of satisfaction. We’re very happy about that, clearly our creditors and ourselves came to a high degree of understanding of what the problems were and what we needed to do to fix the problems. So it’s a really good state of play so to speak, where we are today with the debt restructuring.”

Mark Espat, Minister of National Development
“I believe at ninety-three percent it would be the most successful sovereign government restructuring in the history of restructurings. And I think we conducted the process in a very open and transparent way with the creditors, I think they’ve reciprocated and I’m certainly elated and I think our team and our government, our Prime Minister, our advisors are elated at the response from the creditors. It means that this will save Belize hundreds of millions of dollars both in terms of real cash flow, foreign exchange, balance of payments as they call it, as well as in terms of real savings on a net present value basis. And so I’m very happy that so many of the bond holders have opted to accept our exchange offer.”

Dr. Carla Barnett
“We have made commitments locally and internationally that we are going to keep our fiscal accounts in balance, which means that the limits to borrow will really be determined by the size of the overall deficit. If we keep that deficit within the limits that we have established for ourselves, those really establish the limits that we can borrow. The performance for this year has been reasonably good and we expect by the end of this year to be very close to the targets we had set for this fiscal year and we are putting together a budget that we think is going to be quite responsible, if I could use that word, in terms of keeping within our targets. We are not going to try and prepare a budget that exceeds the targets we set for our self. And just to remind you we are talking about targets for the overall deficit, we want to keep the overall deficit below two and a half percent of G.D.P., we don’t want that to go above that, we are trying to bring it down gradually and we want our primary surplus to grow towards four percent of G.D.P. So those are the main targets that we try and work everything within.”

Mark Espat
“In the next couple of weeks, we do intend to convene a meeting with the National Economic Council to brief them fully on the results now that the negotiations are pretty much concluded and all the paperwork should be finished by the twentieth of February, I think we can speak a lot more openly about it. And I think when people have the chance to see what’s been done, they will understand fully that we are not talking about new funding, any new loans for Belize. We’re talking about better terms for old loans and we are talking about a result that should reduce significantly the amount of money that goes to debt servicing, which will allow us to invest in other areas. The bottom line of it is that we had a serious problem with the debt that we could not afford to pay and so government had to embark on a restructuring, not a pleasant exercise, but thankfully one that appears to be successful.”

According to Dr. Barnett, no one in the remaining seven percent has said that they will not to participate in the offer. Responding to queries regarding the event of a hurricane or similar catastrophe, this afternoon the Financial Secretary announced that Belize is going to sign onto a World Bank insurance scheme that would provide insurance for G.O.B.’s revenue streams. The new bonds will carry an interest rate of four point two-five percent for the first three years, six percent for years four and five, rising to eight and a half percent in year seven through to maturity.

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