Will GOB Default on Superbond on May 20th? Pay Cut Set in Stone
The government's top finance man is saying what's in the budget is basically set in stone - and there can be no retreat. And, as government enters the toughest phase of its negations with holders of the super bond - that's how it has to be.
There's no wiggle room because government is trying to get bondholders to accept a 30% haircut - and the next bond payment of about 7 million US dollars is due in 10 days.
Government isn't blinking though - it is insisting it has to get that haircut - and the possibility of a life default is real. Here's what the Minister of State for Finance told us today:
Christopher Coye, Minister of State, Ministry of Finance
"We are looking for relief. And if we are to get that relief that means that there will have to be a give. In any discussion or negotiation there will be a back and forth. It's not just an acceptance of what we want and that is the end of it. We would like that, but this is entirely expected and there is continuing engagement and there will be continuing engagement until there is a resolution that Belize agrees with."
Reporter
"So then, do you expect that this is going to go beyond the May 20th payment due date and what will happen with that payment, where do we find the money, do we have the foreign reserves, etc."
Christopher Coye, Minister of State, Ministry of Finance
"It's a process and we have to expect that it would go beyond May 20th. If the bondholders find that they would prefer to reach an agreement before May 20th then we wouldn't have a default."
Belize's Bad Name As "Serial Defaulter"
But, that probably won't happen and we may well have a default. That's why the creditor committee representing bondholders is characterising Belize as a "serial defaulter."
That's the way international news reports are writing up the story - making it so that, in a manner of speaking, "Belize name sink da road."
Coye said it's regrettable but inevitable if the government of Belize is to focus on what's truly important:
Christopher Coye, Minister of State, Ministry of Finance
"The serial defaulter certainly doesn't sound good. I've never been a serial defaulter, but now looking at where we are as a country obviously there has been multiple restructurings of the bond and looking at the debt profile of Belize its certainly not commendable to see that we had a billion dollars in superbond debt back in 2008. And we have over a billion dollars in superbond debt in 2021. All that sound to me is that we've been paying interest for the last 12-13 years. Interest that we don't get back. That's gone. And we still owe in fact 1.1 billion dollars because we capitalize the interest last year. We owe 1.1 billion dollars. The bond holders are investors in this country and we do look at them as investors in this country, but we still have to give priority or rank in order of priority and when we rank in order of priority Belize comes first, not the investors."
Bondholders Pushing Belize to Embrace The IMF
But the investors aren't moved by language like that. They say the government of Belize has to make right by them - and after 5 restructuring exercises since 2008 - that means bringing in the IMF - because the bondholders can no longer trust the homegrown solution. Government says that indeed, it's strategy must change - but not to an IMF embrace:
Christopher Coye, Minister of State, Ministry of Finance
"What it has been no doubt has been a period of kicking the can down the road and in this administration we feel that cannot occur any longer and I think Mr. Ross would agree with that. It is just the mechanism by which we now deal with the problem that we have. We believe that our homegrown recovery plan is the best way to deal with it and he believes that the IMF approach is the best way. That's just where the difference of opinion is. I believe that looking at our plan, it has more of a conscience, if you will, than what an IMF approach would involve. The reality is we have a tough situation that we face, we are in an economic crisis and a fiscal crisis and the hard decisions have to be made to get us out of it and we feel that our homegrown plan is the best way."
Coye: Pay Cut Set In Stone
And like we said, a central component of that home grown plan is the pay cut and increment freeze for teachers and public officers, which will realise savings of 80 million dollars.
And, to hear Coye tell is, there's just no putting the toothpaste back into he tube when it comes to the pay cut:
Christopher Coye, Minister of State, Ministry of Finance
"The salary adjustment for this fiscal year is part of that fiscal recovery plan and its part of getting to a level of fiscal balance over a period of 3 fiscal years. One year doesn't do the job. We are in such deeper hole that it will take a while to dig ourselves out."
Jules Vasquez, reporter
"So that makes it irreversible, it has to go on as it has been programmed, as it has been written in the budget, as it has been passed by the parliament - because there are those in the union who feel that the government has the power to reverse it. But what you are saying is that we have a program and the program is that the cuts go into effect. That is irreversible, am I right?"
Christopher Coye, Minister of State, Ministry of Finance
"The budget has been passed."
Channel 7