The downgrade comes on the heels of a downgrade announced two weeks ago by another prominent ratings agency, Standard and Poor?s. S&P downgraded Belize?s money outlook from ?stable? to ?negative.? The downgraded S&P outlook was for Belize?s long-term foreign currency and local currency ratings, and the reason the agency gave for the downgrade was Government?s financing shortfalls, which Government has had to meet with foreign and domestic borrowing, and other forms of credit.

In a statement posted on Moody?s Investor Services? website, www.moodys.com, the agency explained that its August 5 downgrade was ?the result of the country?s significantly high credit risks as reflected by the current external and government debt ratios.?

Moody?s also said that the build-up of debt, which led to their downgrade, was ?largely a direct consequence of expansionary policies.? Expansionary policies focus on economic growth through an increase in government spending and/or increase in taxes and money circulation.

Since it took office in 1998, the Said Musa administration had implemented the policy, claiming that its intent was to drive the economy out of the stagnation created by the former political administration.

While the economy has continued to see economic growth each year, it has come through mounting debt from foreign and local creditors. Central government?s debt as a ratio to our Gross Domestic Product (GDP) grew from 39.1% in 1999 to 82.2% currently, and much of this borrowing has gone to finance the Development Finance Corporation.

Apart from the country?s debt, however, Moody?s said another factor contributing to the downgrade was ?a weak external liquidity position, evidenced by a level of international reserves that, relative to Belize?s external obligations, provides limited financial maneuverability.?

Reacting to the Moody?s downgrade, Fonseca told Amandala today that, ?We are very, very concerned that just a couple months ago, everything was going fine, and then as soon as we made this announcement of this new bond issue, we?ve been having attacks on the market.?

Those attacks, Fonseca claimed, have come from Bear, Stearns, and Co. Inc., which was the agent for Government?s prior bond issues. On top of the $450 million in bonds already sold on the market, Government plans to take out its third major bond issue?the biggest yet!?of $450 million, which would take the total bond stock over $900 million.

?Bear, Stearns has been putting out some ?unusual? and some ?unorthodox? reports about Belize, that have affected the market and it ended up with where we are and it?s affected our stock value?? Fonseca said.

However, in July, Bear, Stearns and Co. said in its Sovereign Latin America Update: Emerging Markets Sovereign Debt Research that ?Belize?s bonds have been under tremendous pressure since April, following a negative Article IV report from the IMF?nervousness in the broader emerging markets, and an announcement by Moody?s that it was placing Belize on a credit watchlist with negative implications.?

Fonseca said that Moody?s yesterday spoke with him, informing him that they would employ a new methodology to factor in Government?s guaranteed debt into the whole debt equation, and that, he suggested, was the reason for the downgrade.

?This morning, we got this result that they had downgraded us, although they said indicators had been better than before,? Fonseca told us. ?We?re confused, but we have to deal with the reality ??

He said that the Moody?s downgrade would have an impact on the timing and pricing of the $450 million bond issue.

?If we can?t keep the price at the level that we want it, then we cannot go to the market?? Minister Fonseca told us.

What then are the options to meet the financing gap for the Government?s budget? Fonseca told us that Government could ?refinance with the same banks that have our paper right now.?

The bulk of Government?s commercial foreign debt (some of it mortgage-backed securities) is with the Royal Merchant Bank of Trinidad and Tobago (RBTT); goverment also has outstanding debt with the International Bank of Miami, Fonseca said.

Belize may face another Moody?s downgrade shortly as the Belize Mortgage Company?s (BMC) $40 million mortgage securitization package, which is tagged Class B, was placed on the agency?s watchlist with an eye for a downgrade on June 22.

According to previous Opposition reports, Novelo?s $30 million loan, for which it had gone into receivership earlier this year, was included in the BMC loans package.

We understand that BMC was the Government-owned entity used as the agent to get up-front money for the mortgages held by the Social Security Board and the Development Finance Corporation.