G.O.B. says tough financial discipline is working

At a press conference called yesterday by the United Democratic Party, Opposition Leader Dean Barrow painted a grim picture of government’s financial position, going as far as to suggest that a selective default on certain foreign debts might be in the offing. Tonight, Minister Jose Coye, G.O.B.’s point man on financial matters since the isolation of Ralph Fonseca, paints a different picture. In an interview this evening Coye told News Five’s Stewart Krohn that the new measures implemented since the G-7 revolt in 2004 are bearing fruit … and will allow Belmopan to negotiate a satisfactory solution to the present debt crisis as well as promote long term financial stability.

Jose Coye, Minister of Health
?I think the public at large and the opposition in particular needs to be aware of the fiscal adjustment programme, because most of the things we have done will in fact enhance our position now, when it comes down to the question of the debt itself a part from the reduction of the debt. Everything we have done so far is towards reducing the debt, in terms of the debt to the G.D.P. not reducing it in the absolute sense. The reduction of a debt begins with the debt to the G.D.P., which we are doing already. The cause of the size of the debt you need to now look at the debt in terms of not a short term solution, because then we are postponing the problem. It is certainly not to have a default in the debt that is not the answer. We are looking for medium to long term solution if we are to have financial sustainability. So we are at the next stage in dealing with the debt. We have moved in the reduction stage because of the fiscal adjustment programme, but one of the big challenges that faces us is clearly the debt itself, in terms of the cash flow. Now the government has embarked on that programme, and yes we have all the partners involved with us in the I.F.Is: the I.D.B. and the C.D.B. It took us some time to come up with this strategy and to put in the data to tell us exactly how we move forward in doing that. Certainly we are at the point where we are about to begin to engage creditors as to how we can address the debt. Whether it is a re-profiling, a re-structuring or a re-scheduling, but it is certainly to be able to make it manageable, especially in terms of the cash flow over the long term period not in an immediate short term. It is not just refinancing debt at same or higher cost, so you reach the stage now where everything you were doing before is will what will enhance your chances when you go to the table. So when you go to the table as a government just as an investor would do or a person who is indebted to a bank, you don?t go to the bank for the rescheduling of a debt unless you have a well sound plan. So all those things that we were been doing over the many months and that is what is extremely important to this country. It is that you don?t go and rush to the table to bring in creditors without having a sound plan as to what we are going to do. So that when you have done these things over many months and you do have the blessings and the sanctions of the International Financial Institutions those are the things that will enhance our chances when we go to the table. So that we can in fact go there with a position that we think we can succeed, and to give us a position that indeed the debt can be manageable over the longer run. Our strategy is not for an immediate solution; it is not to postpone the problem it is to address it in the long run. This is what I think the opposition and the public at large and we have been engaging the private sector to explain that it is not just jumping up and go see creditors it is that we had to put in place first all the fiscal adjustment programme or the components of that programme. We have them in place. Now the time is there for us to go to the next stage and that is indeed now to engage the creditors.?

Stewart Krohn, Reporting
?Minister with all due respect, those of us in the media that have been following this problem habitually for years, at every point while this crisis was building. The I.F.I.s and even your own technocrats in the Ministry of Finance were telling you we got to get a hold on things. Even while you were running up huge current account deficits, and the international institutions were telling you, look you have to implement these measures now. Instead what do you do? You delayed them for months, you delayed them for years and yes you are saying, oh we are finally getting it together now. But what was the reason that this problem has gotten so bad in the first place and why didn?t you address these things earlier??

Jose Coye
?Stewart your questions are very appropriate. I think the response to it is that the government ? certainly if we go back eight years ago or six years ago, you can say yes you?ve been told that you are going into the upper limits of borrowing and you are running the risk that you will have problems, and that is true. You can say man I was told that four years ago and that is true. The truth about it is that we did take the corrected measures in 2004. We did then went into no formal standby arrangement programme, but the country knew then that we had engaged in fiscal adjustment programme. I think we can all recall what happened in 2004, and I need not go back to that. I was involved myself, in saying to the public in many discussions that we had with the press, that the part was unsustainable. Obviously, coming out of the differences we had back then we come to the consensus that we have to make the change. Since then we have been working with the I.F.I.s, so it is no longer to say that you have been told that and you have been told that up to last year we did not do anything, that is not true. All along the way since 2004, we have been embarked on that programme, and we are seeing the success of the programme. To the point that in the recent visits of the I.F.I.s to Belize about two months ago, in there oral presentation to us they commended us for what we have been doing so far.?

Although it may seem that Barrow and Coye may be speaking different languages, their views can be reconciled. Essentially, the Opposition Leader is saying that the overall public sector debt of over one billion U.S. dollars, standing at ninety-five percent of G.D.P., is so large and at such exorbitant interest rates, that any solution, be it default, refinancing or an I.M.F. bail-out, will come at such a high cost that it will cripple the country’s social and economic development for decades to come. What Coye seems to be saying is that our bankers and creditors are so impressed with our new found fiscal discipline that they will happily cooperate by rewarding us with concessions that will allow us to emerge painlessly from our self induced financial illness.