The Belize Central Bank, this week, released its 2015 second-quarter report, detailing figures regarding the country’s national external debt, labor force statistics, trade imbalance and the contraction of the credit sector.
Business Senator Mark Lizarraga told the Reporter on Thursday, that the report makes it clear that GOB continues to rely on borrowing. Most borrowed money is sourced from the PetroCaribe Fund.
However, Belize needs to start looking for ways to sustain the economy, as that program’s future is now questionable.
According to the Central Bank report, in the first five months of the calendar year, Central Government’s operations yielded an overall deficit of $9.8 million and $48.4 million, respectively, mainly due to increased outlays on wages, transfers and capital projects.
The deficit was largely financed through inflows from the Government of Venezuela, through the PetroCaribe arrangement, which accounted for more than half of the public sector’s external borrowing and contributed to an overall increase of 2.8 percent in the external debt to $2.315 billion.
Lizarraga said the rate at which the current government continues to borrow money is unprecedented in the country’s history. He also noted that the 2038 ‘super-bond’ is less than half of the country’s external debt, at 45.5 percent.
Lizarraga believes the way to correct the trade imbalance, is by boosting exports.
Raising taxes isn’t the answer either, he said, as the productive sector becomes less viable when this is done.
Lizarraga reiterated a position many have held, which is that GOB should have been using PetroCaribe financing to develop the productive sector, resulting in long-term benefits.
According to the report, domestic exports for the period January-June 2015 are down to $293 million from $336.3 million during the same period in 2014.
Lizarraga said the report also indicates there is a lack of confidence in the economy – evidenced in the fact that there is excess liquidity and low interest rates at domestic banks; yet borrowing is considerably low. This has resulted in a widening gap between deposits and loans.
Net domestic credit, the sum of public and private sector loans, shrunk by 1.6 percent over the January-June period.
While there was a slight increase in private business loans, this was offset by the reduction in net credit to Central Government, which was reliant on external funding under the PetroCaribe arrangement.
Conditions of excess liquidity persisted, partly due to the foreign exchange provided by the tourism industry, banana and sugar export earnings and transfers from affiliates of the domestic banks.
This helped lower local interest rates. The average rate on new loans fell to 9.76 percent, while rates on new deposits fell to 1.98 percent.
Lizarraga said although the report indicated the unemployment rate has lowered consistently, the figures show that within the last three years, there has only been an average of 3,800 new jobs per year.
“I really don’t understand the math,” he said, questioning how unemployment could trend down with that average of new jobs when there are between 5,000 and 8,000 students who leave school and enter the labor force every year.