BELIZE CITY, Mon. Feb. 20, 2017–The Government of Belize has missed the US$13 million or BZ$26 million payment on the 2038 superbond due today, and if it does not meet payment within 60 days, this could result in the loss of some savings gleaned from the last restructuring in 2012/2013, when creditors agreed to an 11% principal haircut. There is a 30-day grace period before a default is declared, although the missed payment this week could result in a ratings downgrade.
No resolve following talks with bondholders in New York on Thursday
Prime Minister Dean Barrow told reporters on his return to Belize on Sunday that the Government won’t pay today, tomorrow or Wednesday, and he went on to point to the 30-day grace period, adding that he is cautiously optimistic that a deal for softened terms on the bond could be reached before that period lapses.
Since last year, the Government of Belize had asked creditors to agree to debt relief, and last month, the Government made a formal offer for a reduction of the interest rate from the current rate of 5% to 4%, as well as a delay in the commencement of repayment of principal from 2019 to 2036.
Amandala understands that the creditors had made a counteroffer before Prime Minister and Minister of Finance Dean Barrow led a delegation up to New York last week for talks with advisors and creditors, but the Government has indicated that it is unable to accept that offer.
The Government’s formal offer was extended to this Friday, February 24. The 30-day grace period ends on March 22, and the 60-day period expires on April 20.
Amandala understands that although the meeting with the committee representing 60-65% of creditors was “intense,” the Government is optimistic that a revised arrangement can be worked out.
Creditors are concerned over fiscal adjustment measures to achieve debt sustainability, in order to avoid yet another move to restructure the debt; and even as the Government is talking with bondholders, they have also been consulting locally on measures to be effected for the next budget year, which starts April 1.
Prime Minister Barrow has told the press that the measures should yield roughly $100 million or 3% GDP—a target, he said, which the Government is determined to meet through increasing revenue and slashing spending.
Barrow said that it is a “particularly complex conundrum,” and “even if, worst case scenario, there must be new tax measures, you have to be absolutely certain… that they cause the least possible pain, especially to poor people and the least disruption to the business community.”’
We understand that among the options being considered is an adjustment on “sin taxes” as well as new fees for the cruise tourists.
Meanwhile, the Government owes a final tier of salary adjustments to teachers and public officers, which we are told will increase the wage bill, with increments included, by another $20 million. Indications from the unions are that the salary adjustment, deferred last year, would be paid in the upcoming fiscal year.