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Belize Senate approves lifting of T-Notes ceiling

The Belizean Senate passed a Bill lifting the ceiling on the total amount of Treasury Notes (T-Notes) allowed at any given time.

The Bill seeks to raise the ceiling by USD$ 100 million to USD$ 600 million from the current USD$500 million. The present amendment follows the 2017 modification that had lifted the T-Notes’ ceiling from its previous total of USD$250 million.

Upon the final assent of the country’s Governor General, the new law will read as follows: “The principal sums represented by any … Treasury Notes outstanding at any one time shall not exceed in the aggregate … in the case of Treasury Notes, the sum of one billion two hundred million dollars [USD$600 million]”.

According to data published by the Central Bank of Belize (CBB), as of July 2020 there was approximately USD$440 million in T-Notes outstanding, representing roughly a seventeen percent increase over were that total stood in March this year. The increase during the March-July period, while notable, is not unique for the last five years. CBB statistics shows that between March and July 2016 (a recession year), T-Notes outstanding climbed by close to 70%, while the following year it jumped by only 28%. The remaining three years (2015, 2018, and 2019) showed no changes, yielding an average of approximately 20%.

The move, therefore, to lift the ceiling is not entirely unexpected, as the “Great Lockdown” recession brought about by the measures designed to limit the spread of Coronavirus Disease 2019 (COVID 19) has decimated the government’s revenues, a reality common to many other jurisdictions. Belize, like many other Caribbean nations, saw its greatest impact in the Tourism sector that directly and indirectly contributed an estimated 40-45% of the country’s economy.

The International Monetary Fund (IMF)’s, the World Bank’s, and Moody’s Investors Service’s 2020 forecast estimates a 12%, 13.5%, and 15% contraction for the Belizean economy, respectively. TradeScape360’s estimates that—based on published debt levels (as of July 2020)—the realization of any of those forecasts would place Belize’s debt to GDP ratio between 120% and 125%. If the Belize government expands its debt by an additional USD$50 million, under the Moody’s forecast the debt ratio can approach 128% of GDP by the end of the year.

This is not surprising, however, as globally the IMF projects that global public debt will be closer to 101.5% of Global GDP for 2020. This is due to the large number of countries engaging in various fiscal policy measures to combat the pandemic-induced recession, including cutting or delaying taxes while simultaneously augmenting spending on healthcare, providing social assistance, and subsidizing businesses.  

The COVID 19-associated spending aside, the small developing country—like other Caribbean states—is also in the heart of what is described as an “above-average” 2020 Atlantic Hurricane Season, with Hurricane Nana most recently crossing over the southern parts of the country, and, appreciatively, inflicting relatively mild damage. This also serves as salient downside risk that has to be weighed in the Belize government’s planning, even as it approaches General Elections.

For 2021, the economy is expected to rebound by close to 6.7% according to the World Bank, while the IMF places that recovery at 7.6%. If the latter is realized, all else being equal, the projected debt ratio could decline to about 119%.

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