| Belize Announces Impending Debt Re-arrangement |
SC Admin |
08/7/2006
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Economy, Trade & Investment
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Belize Announces Impending Debt Re-arrangement
Belmopan, Augst 2, 2006...The Government expects that most of the external commercial debts of
Belize and its public sector entities will be affected by this debt
rearrangement.
The Government of Belize is simultaneously approaching its
official-sector creditors to solicit their assistance in addressing the
country’s currently unsustainable debt burden.
In October 2004, the Government of Belize began implementing a
significant tightening of fiscal policy. This tightening has seen a
major reduction in capital expenditure and expansion in Government
revenue. As a result, the country’s overall deficit has declined from
over 8% of GDP in fiscal year 2004/2005 to 3.1% in fiscal year
2005/2006. The budget enacted earlier this year for fiscal year
2006/2007 is also very tight and is expected to reduce the deficit even
further.
In this same period, the Central Bank tightened liquidity in the
banking system on three separate occasions in order to dampen the
demand for foreign exchange and thereby ease the pressure on the
balance of payments.
Even with these belt-tightening measures, however, Belize is projecting
significant fiscal deficits over the medium term. Considerable
shortfalls in the balance-of-payments are also expected to persist,
exacerbated by Belize’s very low level of international monetary
reserves. Belize’s ratio of debt to GDP is just over 90%. The country
spends -- on interest payments alone -- more than 27% of the
Government’s fiscal revenue.
“Servicing of the Belizean external public sector debt stock on its
existing terms is no longer a viable option,” said Said Musa, Prime
Minister and Minister of Finance of Belize. “We must urgently ask the
cooperation of our creditors to help put this debt stock on a
sustainable financial footing.”
Belize has retained Houlihan, Lokey, Howard & Zukin as financial
adviser, and in this role, the firm will be assisting the Government in
its consultations with the affected creditors. Those consultations will
commence immediately. Belize would like to conclude the debt
rearrangement by the fourth quarter of 2006.
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