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#516290 - 07/29/16 11:13 AM Central Bank Warns Of Dire Position With Reserves
Marty Online   happy
We've received a copy of that letter which the Denys Barrow says Central Bank Governor Glenford Ysaguirre wrote to Joseph Waight, the Financial Secretary. He does warn that Belize's economy cannot handle the strain of diverting anymore of the Central Bank's US Currency Reserves.

He notes in his 3 page letter that quote, "…It is necessary to advise all concerned that it would be destructive for the economy of Belize if the Central Bank were to even attempt to facilitate any such requests to facilitate for an additional amount of foreign currency, given the currently level of official foreign reserves and other external demands facing the bank…the Central Bank…must…exercise careful management of the international reserves by balancing the foreign exchange needs of the Government against those of the domestic banking system, and the wider private sector. " End Quote.

The Central Bank Governor notes that the country's present demand for foreign reserves is at around US 193 million dollars. To accommodate the Ashcroft Alliance Demand would balloon that demand to US 263 million dollars. The Governor ends his letter by stating that given the clear outline of the Belize's Foreign Reserves needs, the Central Bank would be unable to provide the additional US 70 million dollars that the Dunkeld and Trust company is now demanding.

Channel 7

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#516292 - 07/29/16 11:32 AM Re: Central Bank Warns Of Dire Position With Reserves [Re: Marty]
Marty Online   happy

Central Bank Says Payment Would Destroy Belize’s Economy

An official letter which was filed by the Government in the CCJ proceeding comes as close as we’ve ever seen to G.O.B. acknowledging that the sky is falling. It’s dated July twenty-second, and is addressed to Financial Secretary Joseph Waight, from Governor of the Central Bank Glenford Ysaguirre. Ysaguirre wasted no time on niceties, but goes straight to the matter of the additional U.S. seventy million in play on the litigation table. The Governor writes, “it is necessary to advise all concerned that it would be destructive for the economy of Belize if the Central Bank were to even attempt to facilitate any such request for an additional amount of foreign currency given the current level of official foreign reserves and the other external demands facing the bank.” Ysaguirre then throws a left hook, reminding G.O.B. that, “While the Central Bank acts as the fiscal agent for the Government, it also has a wider mandate to protect the fixed exchange rate peg and to promote economic growth and financial system stability.”

So what exactly has the Central Bank Governor so spooked? He explains in great detail in the letter, listing and totaling the demands on the country’s foreign reserves from foreign debt obligations, foreign owned entities in Belize, commercial banks and the offshore sector – a figure of one hundred and ninety-three million U.S. dollars. Ysaguirre states that, “The Dunkeld and Trust requirements would take the demand up to U.S. two hundred and sixty-three million. A recent increase in net outflows has caused the gross official reserves to shrink from U.S. five hundred and thirty-four point seven million one year ago, to U.S. four hundred and twenty-two million today. To address the demands above, along with the additional demands of Dunkeld and the Trust, would immediately push the reserves to crisis levels.”

And then the governor starts with the real bad news, the current state of the economy even without the request by Dunkeld and the Trust. He reminds G.O.B. that both the IMF and the Central Bank are already projecting a sharp downward trend for the reserves in the short and medium term, and he outlines the factors. According to Ysaguirre, “growth in the economy slowed to one percent last year. It is expected that there will be further slowing in 2016. To bear this out, in the first quarter of this year the economy contracted by two percent.” Tourism has been the only good news for the government, but Ysaguirre reveals that, “service providers have been bringing in less U.S. dollars than expected and the growth in foreign exchange inflows is marginal, less than one percent.” There’s no better news from the Free Zones, where Ysaguirre reports that, “once a valuable source of foreign exchange, free zone exports are down nineteen percent up to May 2016.”

And then there is the really, really bad news. Central Bank Governor Glenford Ysaguirre warns G.O.B. that, “without domestic adjustments and increased inflows, it is going to be very difficult, if not impossible, for the Bank to protect the exchange rate peg of Belize two dollars to U.S. one dollar.” Ysaguirre pulls absolutely no punches, claiming that, “when reserves are inadequate, growth is strangled: an unacceptable state of affairs in a country which has a forty percent poverty rate and a very open economy.” He rounds off the crisis factors by writing, “per capita GDP declined by two point four percent last year and it is likely to fall further in 2016. In the absence of foreign exchange our economy suffocates, resulting in increased poverty, crime and risk that we won’t be able to meet obligations to other creditors and trading partners.”

Long story short – Ysaguirre informs G.O.B. that the Central Bank will be unable to provide the additional U.S. demanded by Dunkeld and the Trust, stating that, “coupled with the other current demands, which pre-existed the present demand and some of which must be satisfied in part or in whole as a matter of the country’s economic survival, payment of such an amount would greatly deplete our resources and destroy our already fragile economy.” Ysaguirre closes with the final figurative nail in the economic coffin, stating that the international benchmark for exchange rate sustainability is three months of merchandise imports. Meeting all the demands on the foreign reserves, says Ysaguirre, will deplete our reserves to the point of only six weeks of imports. That, he states quite clearly, would be catastrophic. Prime Minister and Minister of Finance Dean Barrow is due back in the country on Friday.

Central Bank Will Not Provide U.S. to G.O.B.

Government has put forward that it cannot meet a seventy million U.S. dollar payment should the CCJ rule in favor of the previous owners of B.T.L.   While Central Bank has provided an initial twenty-nine million dollars, the Barrow Administration is basically on its own in finding the balance of the payment.

Denys Barrow, Attorney for Government of Belize

“The issue now is that Ashcroft says that the agreement provides that I should get fifty percent of the total award upfront.  The problem is that if it had gone as was expected, seventy-thirty, then you could get fifty percent because that would still leave another twenty to go along with the thirty towards the people of Belize.  But it didn’t happen that way.  So there is not sufficient of the unrestricted amount, there is not sufficient money to pay Ashcroft fifty percent of the total award because that would exceed what he is entitled to by way of the unrestricted amount.  So that’s why we are here.”

Isani Cayetano

“I was made to understand however, that with regards to this particular application, the government is essentially saying that it doesn’t have the amount being requested in U.S. currency and the Central Bank is not forthcoming with providing government that amount.  Correct?”

Denys Barrow

“That is also a significant part of it.  But more fundamental is the part which I mentioned, but equally, almost equally significant is that we have gotten from Central Bank I think twenty-nine million dollars.  We have consulted Central Bank and Central Bank has in fact written a letter to the Financial Secretary setting out, I think in four pages, exactly why they cannot find seventy million or any really other significant portion of money in U.S. dollars to sell to the government now to pay to Ashcroft.”

Channel 5


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#516306 - 07/30/16 11:09 AM Re: Central Bank Warns Of Dire Position With Reserves [Re: Marty]
Marty Online   happy

PM Discusses US Currency Fight With Ashcroft Alliance

Today's press conference by the Prime Minister was dominated by talk of William Danny Mason and John Saldivar, but the press also got to ask about the situation with BTL. Government and the Ashcroft Alliance are back in court arguing over what portion of the judgment should be paid in US dollars and what portion in Belize dollars. The Prime Minister says it is clear enough to government:..

Rt. Hon. Dean Barrow, Prime Minister
"The Central Bank is saying to government you cannot be giving 70 million dollars more in foreign currency to pay Ashcroft. The Central Bank knows why it is saying that. In any event government does not want 70 million dollars more in US currency to pay Ashcroft, because government is absolutely convinced that Ashcroft does not deserve 70 million dollars more in US currency. I need to be careful because the application is before the Caribbean Court of Justice with respect to the settlement agreement, but Ashcroft knows as I know and as God above knows that our agreement was for that award to be split, that is what we asked the tribunal, so that it would be clear how much of it was for the shares and how much of it was for the accomodation agreement and that the entirety of the accomodation agreement minus of course claims for expenses. The entirety of the accomodation agreement was to be spent on the people of Belize. That is the only way I would have agreed to any settlement. For him to come now with an interpretation that would see him not only get this additional amount in US currency, but in consequence short change the 60% of the award that is for the accomodation agreement and so shaft the people of people of this country is absolutely intolerable."

And while Government says it is righteously refusing to pay the Alliance in the US dollars that are being remanded - it is also a practical necessity because to do so would wipe out the US dollar reserves at the cEntral Bank. That;s what hold the currency peg in place and as you saw in the letter form the governor of the Central Bank, it is very tight right now:

Rt. Hon. Dean Barrow, Prime Minister
"Please do not misunderstand what I apprehend the governor to be saying. He must carefully managed the reserves. He must carefully balance the competing claims for him to sell foreign exchange to various entities. He must do all this in such a way as to ensure that we dont run into trouble, that we dont hit a wall in 2020 when the payments for the super bond will reach that astronomical sixty-five million U.S. dollars. It is not that there is currently a foreign exchange problem or let me again be completely candid straightforward with you; to the extent that there is a bit of tightness in the system. That has to do more with the loss of correspondent banking relations. That has caused some sort of tightening, has caused a little bit of a queue. But that a part, there is no immediate problem. The gorvernor is pointing out that unless we do certain things and this is not news, we can get it from the IMF report. In 2020 with the advent of the full force of the super bond, we can hit a wall. Well I am here to assure that we will do whatever is neccessary to ensure that that doesnt happen."

The Prime Minister later suggested that if paying the bond would crash the economy, government would consider its options.

Channel 7


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#516311 - 07/30/16 11:41 AM Re: Central Bank Warns Of Dire Position With Reserves [Re: Marty]
Mike Campbell Offline
I suppose this is a good time to ask who owns The Central Bank??

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#516742 - 08/10/16 06:33 PM Re: Central Bank Warns Of Dire Position With Reserves [Re: Marty]
Marty Online   happy
A demand from British billionaire Michael Ashcroft to have the Government of Belize pay US$70 million more to him in foreign currency, rather than the $134.9 million paid to him in Belize currency a couple of weeks ago, could push Belize to the brink of devaluation if the Central Bank of Belize accedes to a request from the Government of Belize to obtain the foreign currency.

The dispute between the parties is going before the Caribbean Court of Justice (CCJ), for a decision, but Central Bank Governor Glenford Ysaguirre wrote Financial Secretary Joseph Waight last Friday, January 22, warning of the “catastrophic” outcome that would be visited upon the country.

On Monday, July 25, Waight told Amandala that the Government of Belize paid US$29.5 million and BZD$134.9 million in compensation, plus 827,000 British pounds in legal fees and 33,000 Euros in arbitration costs.

However, the Ashcroft group wants the funds that were paid in BZ dollars to be paid instead in US dollars.

A letter to the Government from Ysaguirre said that, “the Central Bank would not be able to provide the additional US$70 million” and to do so would mean that Belize’s US dollar position would shrink from US$422 million to US$159 million, or 1.5 months of imports, which is half the international benchmark of 3 months. Ysaguirre said the result “would be destructive for the economy of Belize.”

“When reserves are inadequate, growth is strangled: an unacceptable state of affairs in a country which has a 40% poverty rate and a very open economy… In the absence of foreign exchange, our economy suffocates, resulting in increased poverty, crime, and risk that we won’t be able to meet obligations to other creditors and trading partners…” he commented.

Current demands for US dollars from the private sector amount to US$193 million, Ysaguirre wrote.

Hinting of the risk of devaluation, he went on to say that, “Without domestic adjustments and increased inflows, it is going to be very difficult, if not impossible, for the Bank to protect the exchange rate peg of BZ$2 to US$1…”

Belize has maintained the peg since 1974 and the Central Bank is responsible for taking action to protect the peg, such as keeping a healthy level of US dollars in reserve.

PetroCaribe is winding down, even as sales of Belize crude have fallen to new lows. Belize’s foreign currency position had already deteriorated substantially since last year, by 20%, or over $100 million, and according to Ysaguirre, the private sector, including exporters and banks, are already demanding a huge chunk of the reserves.

Belize’s export sectors—which bring US dollars into Belize — have been on a persistent decline, with citrus currently being the commodity to hold the strain. Although it had been reported that tourism numbers are up, Ysaguirre noted that tourism services providers have been bringing in less US dollars than expected. Although the sector is reported to have grown by 16%, the amount of US dollars which flowed into Belize barely increased, by a growth rate of less than a percent.

The problems are exacerbated by the loss of correspondent banking—which may be a reason why investors are choosing to keep their money abroad.

Furthermore, Ysaguirre reported that foreign investors who export from Belize had been asking for funds to repatriate. He said that “certain foreign-owned entities” want to remove US$96 mil from Belize.

There are several others in queue, also demanding US dollars. Among them are creditors to the Government of Belize, including bondholders who are due US$13.2 million in interest from the total debt obligations this year of US$45 million.

Ysaguirre also explained how the severing of Belizean banks (by US banks) has worsened Belize’s position.

He warned that, “The offshore sector is also in jeopardy, due to the correspondent banking relationships (CBR) situation, and several banks had recently approached the Central Bank for short-term liquidity loans totaling some US$40 million as a temporary option. So far, the Central Bank has resisted these requests, but it must nonetheless stand ready to assist as the lender of last resort…”

Ysaguirre said that even without the demand from the Ashcroft Alliance, the International Monetary Fund (IMF) and the Central Bank are already projecting a sharp downward trend for the reserves in the short and medium term. This year’s report by the Fund (IMF) on Belize, warned that, “International reserves could decline to uncomfortable levels, especially if compensation for the nationalized utilities is paid and repatriated.”

The loss of correspondent banking has been adversely affecting the Free Zone. Exports from the zone fell by 19% up to May 2016, and there is no telling how much more they will contract given the problems with correspondent banking, Ysaguirre explained.

The Governor noted that Belize’s economy grew by only 1% last year and shrank by 2% during the first quarter of this year, and meeting the demands of the Ashcroft group would put Belize’s economy in peril.

Amandala

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