REPORT #159 Jan 2000

Produced by the Belize Development Trust

( Taken from newspaper Reporter articles )

With a Foreign National Debt somewhere around $970 million, just shy of the billion dollar mark, the end of the first year in office for the PUP sees the interest payments at 6% alone, around $59 million a year from current revenue of the government. Current revenue is running between $450 million and 650 million depending on what the latest figures are. We should soon be able to get that from Belmopan for 1999. (Ha! Ha! Ha! Ha! Joke!)

Assuming the worst case income for Belmopan of $450 million annual revenue, the interest rate at 6% which has been quoted often in the newspapers, the annual interest payments on our Belizean debt is $59 million per year. ( approximately, more or less).

That calculates out to 13% of our annual income going to pay off interest alone on the Foreign National Debt.

Again, using rough figures rounded out to even numbers. If Ecuador with a population went bust, or bankrupt on a Foreign debt of %5.5 billion, with a country of millions of people, an economy based on oil exports, bananas, tourism, tuna, sardines. Then when can we expect Belize to go bankrupt, at what amount? We have a rough billion in debt for a population of 225,000, with an estimated 22,000 adults actually earning some money. The economy based on bananas, tourism, marine exports, and some agriculture. The majority of the 22,000 adults earning a living are in government service which is maintained by foreign loans.

At what point does borrowing tilt the balance to bankruptcy, or make a drag creating a recession? Can one say that a political party that governs by increasing the national debt are "GOOD MANAGERS, or GOOD 'LEADERS?'"

If $60 million a year is converted into foreign exchange and pulled out of the commercial sector by Belmopan to pay interest payments and a like amount is used to reduce principal. What effect does this have on the commercial sector on growth capability? What exactly is our total foreign exchange earning capacity? How much of it, can you pull from the commercial sector and producers without stalling the engine that runs the country? Presuming that government in Belmopan and the PUP need a minimum of $120 million each year in Belize currency to convert to US dollars to pay off some small amount of principal on foreign loans and keep up the interest payments, that leaves only $330 million in low case scenario to actually run the country. In 1999, the PUP borrowed an amount equal to the amount that was available to run the country. Or borrowed from abroad slightly more than we earned. How long can they keep this up and how much of the borrowing went to actually projects that will produce more foreign exchange? What percentage?

The foreign international banks that are permitted by restrictive Belizean laws to dominate the local Belizean economy earned 3%, or slightly more than 3 1/2 million locally on foreign exchange rates, converting Belizean currency back and forth to USA currency, or Euro dollars. The profits above operating bank costs were also taken out of the economy. Banks also earn money for short term treasury notes issued by the Belmopan government and interest on those notes. They then also get a loan portfolio for real estate mostly and some commercial activities, in which they earn between 12% and 18% interest. With fees of various kinds, the actual percentage rate is around 22% on loans. They pay out around 3% interest on savings ( guess?).

If the foreign banks that are permitted to exploit the Belizean economy, pull out around $15 million year in profits from the country, is there enough money here to actually warrant fostering local growth of small Belizean banks? There is an excellent article in Scientific American ( think it is Dec issue) on Bangladesh and a 2 billion dollar bank that is local now and has the biggest loans at $400 dollars which is changing the face of Bangladesh economics. Worthwhile reading! Especially by those MBA's that SJCollege is exporting abroad and government salaried workers they are producing.

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