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| Prime Minister, Hon. Dean Barrow |
“It is not enough.
And no one can help noticing the increase in
commercial bank spreads. Quite clearly the correlation between deposit rates
and lending rates is going in the wrong direction”
Prime Minister Dean
Barrow was addressing the House of Representatives during his budget speech
when he delivered this note of caution to the banks.
He went on to warn:
“Now, legislative
intervention of a Central Bank rate setting dictates may still be too blunt a
public policy instrument for the moment. But time is running out, and this
should be the last year in which we are seeing rates in the basement
internationally but in the stratosphere locally.”
The Prime Minister
returned to this subject later in his budget speech, speaking more bluntly this
time.
“In another move to
further reduce the cost of funds for commercial banks and to provide more
latitude for lowering of interest rates, the Central Bank decreased the minimum
interest rate on saving deposits from 4.5 percent to 3.4 percent on November 1,
2010.
“It is expected that
there may be a lag before the effect of this action is felt through the banking
system, but that there will be a gradual decline in the weighted average
lending rate in the months ahead.
“If that doesn’t
happen, I say again, that this massaging of the system would have to be
replaced by more direct action.”
On the question of oil exploration anywhere on
the land or on the sea, the Prime Minister repeated his resolve to do what
seems best for the people and the economy of Belize.
“There are unending
complaints about our petroleum industry from those that would straitjacket it.
But the receipts therefrom are now a mainstay of government revenue and help
greatly with salaries, pensions, operating expenses and the delivery of goods
and services to the people.
“So we must indeed be
careful to ring-fence what is still a nascent enterprise.
“Appropriate
environmental, cultural and social safeguards are obligatory. But government
will also not be deterred from pressing on with the new exploration that can
unlock the plentiful reserves that the data suggests is very much present as
part of our Belizean bounty.”
On GDP growth:
“The Statistical
Institute of Belize reports that the (GDP) growth was underpinned by expansion
in services, utilities, sugarcane, non-traditional crops and livestock.
“There was a sizable
increase in domestic capacity for electricity generation as the hydroelectric
facility at Vaca Dam and the bagasse co-generation (Belcogen) plant were
brought fully online.
“An upswing in tourism
due to respective increase in stay-over and cruise ship visitors of 1.4 percent
and 8.4 percent boosted activities in hotels and restaurants, transport and
communications and wholesale and retail trade.
“Growth in the latter
was also facilitated by an increase in cross-border trade at the Commercial
Free Zone.”
On the question of the
national debt, there was some bad news and some good news.
Credit to the private
sector fell by $42 million last (fiscal) year and net credit to Central
Government also contracted by $8.6 million. But there was a build-up in
government deposits. Bank liquidity was unusually high, rising to 160.1 million
or some 37 percent above the required level.
The greatest cost push
came from sharp increases in acquisition costs for imported fuel, and that
drove up prices at the pump and for other petroleum-dependent activities
On the positive side
the current account deficit fell from 6.3 percent in 2009 to 1.0 percent of GDP
in 2010 due to a contraction in the trade deficit and higher earnings from
abroad,
Exports increased by
26.1 percent, a resurgence in crude oil prices and higher earnings from citrus,
banana, papaya and molasses. The merchant trade deficit contracted by 43.8
percent.
In the period under
review, the government had to pay $118.3 million on its national debt, more
than $66 million of this on the “superbond.”
In August last year,
the interest rate on the “Superbond”
rose from 4.25 percent to 6 percent. In 2012 it will go up to 8.5 percent, and
in 2019 interest payments will reach $110 million.
Concerning the overall
thrust of government’s social policy,
Prime Minister Barrow declared:
“We will to make
impregnable the ramparts guarding the poor and the marginalized. The government
repeats, with no apology and indeed with much pride, that our pro-poor
programmes are at the centerpiece of our social campaign, our mandate of
egalitarianism.
“We are therefore
replenishing our funding for the food support programme that we started in
Southside Belize City. But we are going further now. We are expanding it to
northside of the old capital and rolling it out in the Cayo District where it
will serve principally the disadvantaged residents of the twin towns.
“Altogether then, we
will provide 2.5 million dollars over the coming year to help with food and
cost of living. The Conditional Cash Transfer Initiative is of countrywide
application and there is $4 million for that.
“We are also starting a
brand new intervention this year under which we will give child care subsidies
to working families nationwide.”
(More about the budget
next week)
The Reporter
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