For the past two days all the news has been about Government's half a billion dollar baby, BTL and the very costly settlement with the Ashcroft Alliance. And while the bottom line figure is staggering, what about paying it all back? Government has to pay a total of 454 million dollars. It paid 65 million last year, as partial settlement, so that leaves 390 million dollars outstanding. Half of that has to be paid within 10 days of the judgment, and the other half in a year's time. Government will have to scramble to come up with all that cash - and to do so it has to resort to domestic sources, namely treasury bills. But will it be a shock to the economy, with government crowding out available liquidity. We asked the Prime Minister about it on Wednesday - and we also have a comment from the Leader of the Opposition:...
"Isn't the government, by issuing more paper, stagnating the economy, forcing the stagnation of the economy by sapping up all the available funds in order to pay its debts and in so doing depriving the commercial banking sector of those funds which would in the normal course be on lended for, one hopes, developmental growth purposes? That sort of thing."
Rt. Hon. Dean Barrow, Prime Minister
"But that's not true Jules. That point is rubbish right away by the fact that there is all this excess liquidity in the system. So how can you say what we are doing is to deprive the....? I am not sure what it is that you want to come with next. But that's the short answer. We can't be depriving the business sector, won't even say the productive sector, because there is not a whole lot taking place to the productive sector, but Lord man, why that is why it is a good deal for SSB to buy shares. That is why so many of the institutional members of the financial system, that the none bank, the insurance companies and all these people are in fact dying for some way that they can make an investment and get some returns while satisfying the statutory requirements that they faced. So, there can be no question at all of us depriving anybody by resulting to the commercial bank."
Hon. John Briceno, Leader of the Opposition
"Our debt is going to go up, our cost, because we have to pay interest, it's going to go up. Thirdly, the liquidity in the system is going to be sucked out, because the government now is taking that liquidity out of the system. So that when the time for the economy trying to rebound, they are going to find themselves in trouble because there is going to be no liquidity in the banks and that then could have an even worse effect on us in the years to come. And our foreign currency reserves are being drained as we know that sugar is in trouble, citrus, bananas, shrimp - all of those. The statistical institute of Belize pointed out yesterday that our economy shrank by 2% in the first quarter. So, we are getting less foreign currency. What we are having is that we are setting ourselves for a perfect storm. All of these are going to converge and it can create havoc in our economy."
Taking on this additional debt is expected to send government's debt to GDP ratio into the red zone, which is the 90% range.