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Jun 2, 2020

Is a Foreign Exchange Crisis Also Looming Ahead for Belize?

The COVID-19 pandemic is having a catastrophic toll on the tourism sector.  Tourism receipts, which represent up to forty percent of foreign exchange earnings, have plunged due to the downturn in the industry.  Earnings in the export sector have also declined.  It is resulting in a foreign exchange crunch at commercial banks, which are now reducing limits in credit card spending.  Here is News Five’s Isani Cayetano with a report.


Isani Cayetano, Reporting

International trade and investments are facilitated through the foreign exchange market by enabling currency conversion.  It allows a local company, for example, to import goods from the United States and pay in U.S. dollars, even though its income is in Belize dollars.  Foreign exchange is extremely important because of its huge trading volume.  It also represents the largest asset class in the world, leading to high liquidity.  In Belize, however, there seems to be a strict rationing of U.S. currency amid the economic crisis brought about by the coronavirus pandemic.


Mark Lizarraga

Mark Lizarraga, Senator, Business Community

“This morning I got a call from one of the banks, dropping my limits to ten percent.  Ah noh shame fu tell yoh, dehn drop mi down to a thousand dollars.  If somebody have to travel, do business, somebody gets sick, whatever.  One software license I have to pay for the year would consume all of that.”


That is on an individual and personal level.  Across the country, businesses are also feeling similar constrictions.  The prime minister reiterated during a recent press conference that foreign exchange is not an issue.  The private sector, on the other hand, says that local commercial banks are severely limiting access to U.S dollars.


Anil Hotchandani

Anil Hotchandani, Vice Chairman, Corozal Free Zone

“When it comes to general businesses, let’s say you are a merchant trading shoes and clothes and electronics, I think they are not going to be getting foreign exchange as quickly as someone who is dealing in essentials.  Also remember that the banks had to cut limits on credit cards.  People who had a generous limit of ten, twenty thousand dollars are now at a thousand dollars.  So that’s where the banks are tightening the belt on businesses and a lot of these businesses were using credit cards to do business in order to procure stock and whatnot.”


It’s an indefinite state of affairs that, according to Senator Mark Lizarraga, began well before COVID-19 and the resulting financial catastrophe.  The present economic meltdown only amplifies the situation.


Mark Lizarraga

“We’ve known for a long time that the formula that we’ve been seeing in this country has been a flawed formula.  We have been relying on our foreign exchange supplies coming heavily from borrowed money.  Where do we get foreign exchange from?  We get foreign exchange from tourism which is a big contributor.  We get from agriculture or exports.  We get from fisheries, we get from services, the BPOs, we get from the free zones.”


Notwithstanding those various sources, tourism being the chief foreign exchange earner, importers contend that there is a dearth of U.S. dollars and the banking sector is apportioning what is left on a priority basis.  Prime Minister, albeit circumspect in his response, says that they are already looking at ways to attract foreign exchange.


Dean Barrow

Prime Minister Dean Barrow

“Roughly speaking, it is my understanding that we have at least another couple of months to go before the commercial banks would be close to running completely out of foreign exchange.  If and when we get to such a point then of course we have to turn to our Central Bank reserves.  I repeat that we have some plans as to how we can attract some additional foreign exchange from abroad.  I don’t want to get into the details of those plans at this juncture for fairly obvious reasons.  We’re not quite there yet and we don’t want to give away what we’re up to.”


In a report compiled by the Central Bank of Belize back in mid-April, Deputy Governor Kareem Michael explored the potential impact of the “The Great Lockdown” on GDP and the Foreign Exchange Market.  That report indicated that foreign exchange inflows were down by 1.3 billion Belize dollars.  Its outflows were also down by 0.6 billion Belize dollars.


Mark Lizarraga

“We saw the trade deficit grow over the last years, COVID-19 is just now bringing to a forefront in a rash and brash kind of way, suddenly, all the ills that we have had in our economy for so long. The prime minister keeps saying we’re okay with foreign exchange and somebody is afraid to tell him that we don’t have any clothes because the banks have known it and the banks have been cutting back on access to credit cards.”


Prime Minister Barrow assures that there is no way the country will run out of foreign exchange.


Prime Minister Dean Barrow

“I assure you in the most sincere and transparent fashion possible that we do have a plan and so I don’t, I can say that there is no way the country will completely run out of foreign exchange, no way we will get even close to that before the end of the year.”


Reporting for News Five, I am Isani Cayetano.

Viewers please note: This Internet newscast is a verbatim transcript of our evening television newscast. Where speakers use Kriol, we attempt to faithfully reproduce the quotes using a standard spelling system.

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