General

Central Bank predicts several lean years

The Government of Belize will be short US$122 million on its external debt in 2013.

The government also projects similar shortfalls each year for the next five years on the Superbond and what it has to pay as compensation to the former owners of Belize Telemedia (BTL) and Belize Electricty Ltd (BEL).

“Financing gaps”—which simply means that Belize “owes and can’t pay!”—is the term the Central Bank of Belize coined for these shortfalls, as explained in The Belize Economic and Financial Update, a 19-page document, posted on the Central Bank’s website on Wednesday, June 20. 

The reason is that the Belizean economy has not grown at the rate that was anticipated when Belize’s debt was restructured with the “Superbond” in 2007. In 2007 Belize’s Gross Domestic Product (GDP) was US$1.277 billion and our public debt was US$1.133 billion.

The global economic crisis hit everyone hard, and the only reason Belize was able to record some growth was because of revenues generated by the oil produced by Belize Natural Energy.

Oil, which remains  Belize biggest export, is expected to generate US$128 million in export earnings this year.

Oil revenues allowed Belize to report a modest 3.6% growth in GDP in 2008. But oil production began to decline in 2009, when Belize reported zero growth (with GDP at US$1.349), and public debt at US$1.147 billion.

Oil production fell 10 percent last year, but buoyed by tourism arrivals, Belize was still able to record a modest 2.7 percent growth in GDP in 2010, (to US$1.399 billion), and a smaller 2.0 percent growth in GDP in 2011 (to US$1.448 billion). Public debt now stands at US$1.497 billion, and GDP has slipped from its 2.0 percent growth.

With oil revenues tapering off, and other exploration efforts failing to bring in new oil wells, government has been  forced to face the reality that oil production will decline to half the 2009 level by 2015. Tourism has been a big foreign exchange earner, but last year’s tourism earnings, good as they were, were still 12 percent less than where they stood in 2007.

Government has incurred further debts when it nationalized BTL “for a public purpose” in August 2009, and when it nationalized BEL in June 2011.

The government is  required to pay the former owners compensation.

In the case of BTL, government valued the company at $72.3 million, but the Ashcroft group wants considerably more. So to strike a balance the Belize Central Bank’s has set a  median value of $168 million.

Government has also offered the former owners of BEL, Fortis, $106.3 million for BEL. But Fortis hired an independent external evaluator, whose valuation was again considerably higher.

Government recently began talks with the owners of both utilities to try to reach on agreement on “appropriate compensation”.

The government of Belize has appointed a team of experts to negotiate a re-structuring of the “Superbond”, and has also been working with the International Monetary Fund, the Inter-American Development Bank and the Caribbean Development Bank to find a way to meet the interest payments on the ”Superbond”.

In 2019, six and a half years from today, Belize  will also have to begin paying  back the principal on the Superbond.

Even with all anticipated revenues coming in, Government planners are seeing  a shortfall or “financing gap”, and Belize may have to default, unless the lenders of the “Superbond’ are persuaded to work out an alternative payment plan.

The shortfall next year is expected to be $130 million or 8 percent of GDP. In 2015 and 2016, the shortfall is expected to be $136 million a year, or 8 per cent of GDP.

In 2017, the last year of the UDP’s  present term in office, the shortfall is expected to be $134 million or 7.3 percent of GDP.