P.M. Musa claimed that the biggest factor causing the country?s economic decline was hurricane expenditure, which he tagged at US$500 million; second, he said, was the Government?s expansionary program, under which the Development Finance Corporation was used as the main vehicle for private sector lending and housing projects; the third he identified as the erosion of prices to almost a third of past levels for major exports such as citrus, sugar, bananas and shrimp; and fourth, P.M. Musa said, was rising fuel cost, increasing from US$15 a barrel in 1998 to nearly US$80 dollars today.

With the Musa administration still facing fervent allegations of financial mismanagement in the public sector, the officials did not want to talk so much about how the country got to the point where Government has publicly and internationally declared that in a matter of only months, GOB just won?t be able to pay all its debts.

The Government of Belize has repeatedly been refinancing its debt, so we asked Prime Minister Musa to explain what is different in what GOB is doing this time around.

To this, he replied that, ?All the past debt refinancing has been to launch new bonds, if you like? What we are saying is that we want to reduce the debt or put the debt on a suitable footing so that we can pay. The difference, of course, is that we are going to the creditors and saying, let us negotiate and work out how we can best put the debt on this sustainable footing so that Belize can meet all its obligations?Before we borrowed in order to pay; now we?re no longer borrowing to pay.?

He said that this time around, GOB is looking at refinancing all its debt, currently totaling roughly US$1 billion.

So what if creditors say no? What if GOB?s refinancing plan fails? What are Government?s alternatives?

When we raised these questions, Musa said that there were no alternative plans in place.

?We are very confident that we will be successful in this debt arrangement, so we?re not looking at alternatives right now,? he commented.

One critical factor threatening Government?s ability to pay its debt is the low availability of foreign reserves.

Governor of the Central Bank, Sydney Campbell, reported this evening that the reserve position is US$75 million, but about US$20 million of that is not usable. A recently leaked Government report has said that the projected reserve position at the end of 2006 is US$43 million, which is less than a month?s import cover.

Government?s debt due in 2007 is now projected at nearly US$150 million, and Government is depending on the restructuring to ease the pressure on its foreign reserves.

There is also the bigger economic picture. It is evident that without reprieve from creditors, end-of-year trade would be crippled and a more severe cash crunch could face the country during the Christmas season than has been seen in previous years.

Governor Campbell told us that, ?The whole rearrangement [for refinancing] is to ensure that in the future, we will be able to continue to meet our debt obligations as they become due. When the rearrangement becomes successful, it will put us on a path that, given the level of reserves that we have and given the earnings of foreign currency, we?ll be able to meet that obligation in the future.?