Posted: Saturday, July 4, 2020. 2:51 pm CST.
By Aaron Humes: Breaking Belize News has obtained the opening statement from Financial Secretary Joseph Waight made on Tuesday morning, June 30, in a meeting with bondholders to consider capitalization of interest for payments on the Belize Bonds due 2034, alias the Superbond.
And while Prime Minister Dean Barrow told us on Thursday that the early indications were that the meeting had gone well and that bondholders were willing to work with Belize, the usual forthrightness of Secretary Waight makes for unpalatable listening – and reading.
Belize is seeking to defer three interest payments, due in August and November of 2020 and February of 2021 and not two as has been previously reported. The amount represents 1.5 percent of the national Gross Domestic Product (GDP). The official culprit is the COVID-19 pandemic.
But Waight also raises the possibility of a fourth potential restructuring of the Superbond, though stating, “…we don’t want to launch ourselves into a full-scale restructuring of the Superbond unless this step becomes absolutely unavoidable… None of us knows the future so we cannot promise that a restructuring of the bond won’t be necessary at some point down the road. But we are trying hard to avoid that outcome…” He added that the interest capitalization being sought does not materially prejudice bondholders while giving Belize a chance to “ride out the storm.”
And what a storm it has been: After a contraction of 4.5 percent in the first quarter, projected second-quarter contraction is estimated between 18 and 30 percent. Revenues to Government have been slashed 40 percent between April and June, and more than 80 thousand applied for the Government’s Unemployment Relief Program (with a little more than half that receiving relief), which represents half the employable population and 70 percent of participants in Social Security.
The budgeted primary deficit was 0.7 percent of GDP and overall the deficit was 3.9 percent projected; this is expected to go down to 6.9 percent primary and 8.8 percent overall at the end of the financial year next March. Government has tapped up to 3 percent of GDP in concessionary loans from the various international financial institutions (IFI) to provide relief.
Waight mentioned that while the state of emergency which morphed from San Pedro to Cayo and ultimately countrywide limited case spread – 18 cases were reported in the first phase and 2 deaths, while 12 more have been reported since – it cost Belize the height of the tourist season and a sizable chunk of earnings and revenue. The Government is planning to gradually reopen the economy and the state of emergency was lifted earlier this week, while the International Airport reopens under strict protocols on August 15. It is also keeping a worried eye on neighbors Mexico and Guatemala, whose borders with Belize remain closed.
Internally, the Government has frozen hiring; eliminated ongoing salary increments by agreement with the trade unions; cut allowances for senior officers; reduced the number of officers on contract; reduced allocations for goods and services by a quarter for the financial year and deferred up to $30 million in capital expenditure. These saved up to 3% in GDP; however the debt-to-GDP ratio, at 96% in March and on track to be reduced to 80% by 2025 with fiscal consolidation and revenue strengthening measures, has been literally blown to hell by COVID-19.
As a result, says Waight, while Belize intends to resume its fiscal consolidation plans at some point, “nothing we have seen suggests that anything resembling normalcy will return to our economy this year.”
Belize still faces uncertainties, Waight explains, with how long the pandemic will last if Belize can avoid a major outbreak, how much damage has been done economically and when the tourism will resume.
Waight also revealed that Belize is seeking debt relief from both multilateral and bilateral creditors, the biggest of the latter being the Republic of China (Taiwan) and Venezuela. The former is already committed to increasing financial support, and if the United States lifts sanctions that prevent Belize from paying Venezuela under Petrocaribe, then we will approach the South Americans as well.
Waight concludes: “We believe, therefore, that a temporary suspension of interest payments, to allow the trajectory of the economic recovery and the public finances to take shape is both necessary and reasonable.”
Barrow told us the matter now lies in the hands of attorneys appointed by both sides.
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