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| Said Musa (Photo: Belize Magazine) | |
BELMOPAN, Belize, August 17, 2006 - Prime Minister Said Musa has categorically ruled out devaluation as a strategy to reducing the country's heavy external debt.
Reeling under a US$960 million debt burden, Musa said that other avenues are being pursued and devaluation is not one of them.
"It does not make sense it will not assist Belize in any way, it will put our debt burden in a an even worst position ... devaluation will just increase the cost of living which will make the situation worst because we are spending more on what we import than what we export ... even the IMF has concluded that even in Belize the exchange rate, pegged of two to one, has served Belize because it affords stability in the system, where as if you have devaluation and you don't have floating currency you will end up with a situation where it starts maybe at two to one and who knows where it will stop," he said during a national radio talk show on Love FM.
Prime Minister Musa said that his government has made full disclosure on its debt to all creditors and to the public. With all figures, data, and projection on the table and fully available for public scrutiny, the next step is to have a discussion with all the creditors to workout a feasible repayment schedule.
"We have always met our debt obligations we have never defaulted and we will continue to pay our debt so long as the cash flow allows us to," he said, adding that all figures are readily available on the website of the Belize Central Bank.
In October 2004, the Government of Belize began implementing a significant tightening of fiscal policy. This tightening has seen a major reduction in capital expenditure and expansion in Government revenue. As a result, the country's overall deficit has declined from over 8 per cent of GDP in fiscal year 2004/2005 to 3.1 per cent in fiscal year 2005/2006. The budget enacted earlier this year for fiscal year 2006/2007 is also very tight and is expected to reduce the deficit even further.
In this same period, the Central Bank tightened liquidity in the banking system on three separate occasions in order to dampen the demand for foreign exchange and thereby ease the pressure on the balance of payments.
Even with these belt-tightening measures, however, Belize is projecting significant fiscal deficits over the medium term. Considerable shortfalls in the balance-of-payments are also expected to persist, exacerbated by Belize's very low level of international monetary reserves. Belize's ratio of debt to GDP is just over 90 per cent. The country spends - on interest payments alone - more than 27 per cent of the Government's fiscal revenue.
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