For Your Information

At the last House of Representatives Meeting, the following Bills were tabled by the UDP Government:

1. The Central Bank of Belize Amendment Act 2010

2. International Banking Amendment Act 2010

3. Banks and Financial Institutions Amendment Act 2010

4. Treasury Bills Amendment Act 2010

5. The Lotteries Control Amendment Act 2010

The major implications are as follows:

1. Foreign exchange earners will no longer be able to make or ask for payment in any currency other than the BZ dollar.

2. The overdraft that GOB taps from the Central Bank (CB) will be reduced from 20% of the previous year’s total GOB recurrent revenues to 8.5% of this same sum.

3. The ceiling on the amount of debt securities of the GOB held by the CB will be increased to 10 times the Capital and General Reserves of the CB (estimated at $28.1m), from its current level of seven times this sum.

4. The CB will be able to prescribe to the commercial banks the aggregate and the specific proportions of approved liquid assets to be held by these institutions.

5. CFZ and EPZ developers and businesses will now be required to report all transactions with International Banks.

6. GOB will increase the ceiling on its Treasury Bills from $100m to $200m and on its Treasury Notes from $75m to $225 million, while extending the maximum period for Treasury Notes from five years to ten. GOB, therefore, is providing for an additional $250m in domestic debt.

7. GOB will privatize the lottery system.

We can expect that these Bills will be passed when the National Budget is approved later this month. Probably to finance its budget deficits, the GOB is expanding the amounts that it can borrow from commercial banks by coercing the banks to purchase GOB debt instruments. GOB also seeks to reduce the higher-cost CB overdraft and replace this line of credit with lower-cost, longer-term Bills and Notes. Ultimately, these loans will come from individuals and businesses whose savings the banks will use to purchase GOB debt.

Rather than proposing a progessive framework to create a debt securities market, as that which exists in Jamaica, Trinidad, Barbadoes and the East Caribbean, whereby the private sector can raise investment capital by selling debt to the banks and the public, GOB is arranging for a “backdoor” entrance to finance its own operations.

In the case of lottery privatization, the Party Leader had, as you may recall, preemptively raised in the House the threat which this decision represents to the jobs of the many boledo vendors, and cautioned against a ”cozy contract” with a UDP insider. The GOB amendment will allow for the lottery to be privatized for an initial period of 10 years, with an extension of a like period.

You should all be aware of these controversial proposals, which are all but certain to pass into law before month’s end, when the GOB uses its super-majority in the House and the Senate for approval.

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