Foreign direct investments and tourism up
In the banking and financial sectors, Prime Minister Barrow also reported that there is excess liquidity in commercial bank holdings due, in large part, to foreign direct investments, as well as tourism. The surplus, he said, serves to limit the interest rates currently applied to loans.
Prime Minister Dean Barrow
“Reflective of the strong economic performance, the broad money supply expanded by eleven percent led by higher foreign inflows and supplemented by growth in credit to the private sector, which occurred even after taking into account thirty-seven point three million dollars in loan write-offs during the year. Most of the credit went towards personal financing and the building and construction sub-sector. The build-up in net foreign assets was largely attributable to elevated inflows from foreign direct investment and tourism even as the external current account deficit widened. The accumulation of foreign assets and credit growth contributed to the continued rise in cash and statutory bank liquidity. At the end of the year, commercial bank holdings of cash and statutory liquid balances were respectively eighty-one point seven percent and sixty-one point three above required levels.
The high level of liquidity facilitated a hundred and three basis points fall in the weighted average lending rate to eleven point nine-nine percent as all loan categories recorded rate cuts, the most notable being one hundred and thirty-nine basis points for residential construction and one hundred and twenty-nine basis points for personal loans. The weighted average deposit rate also fell to two point five-five percent (the lowest level since 1977) chiefly due to a one hundred and forty-two basis points fall in the time deposit rate. As a result, the weighted average spread increased by seven basis points to nine point four-four. I should at this juncture, Mr. Speaker, note that since December 2008, the weighted average lending rate has fallen by two hundred and eleven basis points and, the weighted average deposit rate went down by three hundred and eighty basis points. Accordingly, the weighted average interest rate spread increased by one hundred and sixty-nine basis points during the period.
Mr. Speaker, credit unions continue to play a leading role in Belize’s development. Lending by the five largest credit unions rose by thirty-six point two million dollars to four hundred and three million dollars during 2012, and this was almost twice the twenty point eight million dollars recorded for 2011. The loans extended for agriculture, individuals, real estate and residential construction overshadowed the repayments for home improvement and manufacturing. The quality of the credit union sector’s loan portfolio continues to improve, and as of December 2012, the NPLs ratio fell well below the five percent threshold to three point five percent.”