Last night we showed you the confidential report from Houlihan, Lokey, Howard and Zukin, the European investment bank retained by government to come up with a debt management strategy. Their report, presented to government on January 16th, shows that in the coming financial year, government faces a crushing debt service burden and a massive financing shortfall is projected.
According to the report, in the coming fiscal year, government will have only $90 million to service its debt, but the debt service bill will be $280 million in interest and principal, leaving a shortfall of $190 million. The report goes on to say that figure is 250% of the amount available for public debt service. So where will government get all that money? Well that's the $200 million question!
It seems like a crisis, but the Prime Minister coolly dismissed it yesterday, saying his government will manage as it always has. But that's not what the Leader of the Opposition says. Speaking with us today he told us that it is an imminent and very real crisis.
Hon. Dean Barrow, Opposition Leader
"It would seem that we are not going to have a budget read until after Match 1st, until after the elections, and clearly this is one of the reasons. There will have to be increased revenue raising which will come by way of increased taxes. The formula for social difficulties is clear and so I think all of us need to be extremely worried about what this document is saying."
Jules Vasquez,
However the Prime Minister says he is not worried, the Musa administration has never defaulted and he assured me in an interview yesterday that it will not have a default, 'this doom and gloom,' is just chicken littling, they can manage.
Hon. Dean Barrow,
"But this is from their own experts; this is from the people that they commissioned. This is not from the UDP, this is not from the Opposition, this is not from the realists or the skeptics here at home, this is a professional forecast based on the known hard data. Of course the Prime Minister has never defaulted before, he has never owed this kind of money before.
I don't see that the government can opt for default, there will be all kinds of hell to pay. So I believe that the government will simply continue to make the pyramid a little taller and therefore ensure that when the inevitable does happen, the crash will be more resounding. By trying to raise new money to cover the shortfall, in other words to continue with the vicious circle, doing that of course is not only more difficult, even though it is doable, it becomes hellish the more expensive and this why the people talk about postponing the inevitable.
How are they going to get the new money? Again by collateralizing it, by taking out insurance, all of which is hugely costly and so it appears that while that is clearly going to be the preferred scenario, all we will be doing is to dig a hole to fill a hole, to dig a bigger hole to fill a smaller hole. It really is a complete mess."
You Can Read the Confidential Report at FreeBelize.org.
