Belize’s economy in dire straits; banks not accepting deposits
We start tonight’s newscast with a story on the economy. It is safe to say that at this of the year consumers traditionally spend more. But for months commercial banks are turning down fixed deposits because requests for loans have gone down considerably. The local banks fear that they will have to pay interest on local and foreign currency sitting in their vaults. It is a sign that the investment climate is weak and the prospects are not looking too good if the government doesn’t step in. News Five’s Isani Cayetano reports.
Isani Cayetano, Reporting
A profusion of local and foreign currency in the Belizean economy over the last two years has created a surplus in liquidity within the commercial banking sector. There are more deposits that are currently being made to all five lending institutions than there are loans being sought. Investment is at a standstill because of a weak economic climate. It would appear as though an excess in cash flow or financial resources translates to more money being accessed by consumers; however, the unevenness has left several businesses, including First Caribbean International Bank, in a sticky situation. The glut has forced a refusal of deposits being made on the basis that banks, which act as vehicles for the creation of loans, are losing money paying deposit rates for the overage at the Central Bank.
In the fourth quarter of 2010 statistics indicated that there was a surplus of 60.5 million dollars being held at the Central Bank. Recent figures released on November twenty-third are showing that the sum has grown by almost fifty million dollars, bringing it to a total of 109.5 million in overabundance. The banking sector, on the other hand, is making all attempts to attract consumers into drawing down on the overflow by reducing interest rates on various loans being offered.
But looks can be deceiving. A loan with an interest rate of 8.5 percent does not necessarily mean that borrowers are getting away with murder. Instead, the sum being reimbursed throughout the life of the loan is dependent upon the method of calculation being utilized by the bank. More often than not a formula known as an add-on is what is usually applied when calculating the total amount to be repaid, unlike credit unions which use an amortization method. But there too, fixed deposits are being turned down. Despite competitive interest rates, particularly during this Christmas season, borrowers remain fearful of drawing credit, many citing the current economic climate as their primary cause of trepidation.
News Five has fielded a number of questions to the Central Bank but they have not yet provided answers. In Friday’s newscast we’ll expand on this story and we’ll have the empirical data to show the state of the Belizean economy.