The Inter-American Development Bank (IDB)’s decision to not provide a partial guarantee and a policy based loan to aid in the “Super Bond” restructuring talks, should not hamper the overall process, Debt Review Team Leader Mark Espat said Wednesday.
Espat said the partial guarantee was not formally offered to bondholders; therefore, it should not have a negative impact on the ongoing negotiations. The partial guarantee was only one way to add value to “any new debt payment terms between Belize and bondholders,” He explained.
He pointed out that there are other mechanisms for support from the International Financial Institutions (IFIs), including “accelerating current projects, additional investment loans and technical assistance programs—all of which continue to be discussed, not only with the IDB, but also with the Caribbean Development Bank (CDB) and other IFI partners.”
Prime Minister Hon. Dean Barrow broke the news on Wednesday, when he said that IDB’s President Luis Alberto Moreno’s “crass act of cowardice” to not adamantly push forward the request had a lot to do with the resistance from the United States Treasury Department.
“Ultimately it was that the U.S. Treasury indicated clearly to Moreno and directly that it would not support the IDB agreeing to the guarantee,” PM Barrow said.
Notwithstanding the U.S. Treasury’s opposition, he said somewhat expected that Moreno would have presented the proposal to the IDB’s board anyway. “He [Moreno] had, I thought, the support at his board to push this thing through notwithstanding U.S. Treasury’s objection,” Barrow said.
Barrow, however, said that this recent development is not enough for the country to part ways with the IDB or to denounce the United States. “It’s not in our interest not to continue our relationship with the IDB,” he explained. “Having said what I have said, having made plain that Belize has the dignity and the sovereign courage to speak truth to power, we move on.”
Espat, speaking on Belize’s continued relations with both the IDB and the U.S., said that the position of the U.S. Treasury “is confined to its view of the respective roles of the IDB and the IMF [International Monetary Fund], within the so-called international financial architecture. Those views have no bearing on [the] wider Belize-U.S. relations which are cordial and constructive in multiple realms.”
Speaking specifically as to why the U.S. Treasury objected to the plan, Espat said that the treasury preferred that Belize submitted itself to a formal IMF program; however, the Government of Belize had made it clear that it had no intentions of doing so.
Of significant note, prior to the Prime Minister’s interview, the government had published “Question & Answers Update Two” on the Central Bank website, which stated that the government was not expecting any “such credit enhancement from the IDB or any other third party.”
Espat explained that the Q&A was a simply a statement of fact to answer the questions posed to GOB; however, he said that IFIs’ clients usually expect that those institutions “can and should do more to support their member countries.”
Earlier this year, the government—hopeful for the IDB’s support—had also presented several Bills to the House of Representatives, including the Domestic Banks and Financial Institutions Bill; Customs and Excise Duties (Amendment) Bill; and the Hotels and Tourist Accommodation (Amendment) Bill, which would have repealed the accommodation tax and replace it with General Sales Tax.
For the most part, PM Barrow said that given the recent disappointment most of those Bills “ain’t going to be done [passed].”
However, regarding the Hotel Tax, Barrow told Channel 7 News, “The stakeholders were of the view that to switch from the hotel tax to GST would have created a great deal of problems and that the government would not have gotten the kind of revenue that is now to be had which goes to funding the BTB’s marketing program and so on … Given that the IDB has worsened us – that’s dead, dead, dead.”
Without the IDB’s backing, Espat said that ultimately “the comfort and confidence of the creditors will depend on Belize’s ability to meet the restructured terms.”
He explained that it is for this reason that GOB maintains that whatever terms the bondholders and GOB agree to must be based on “reasonable and sustainable macro-economic assumptions such as economic growth and primary surplus targets.”