Central Bank of Belize

Annual Report and Accounts, 2002

Annual Report 2002
Ceta ak fBlz

Abbreviations and Conventions used in this Report

Abbreviations:

African, Caribbean and Pacific
Annual Percentage Rate
Belize Electricity Limited
Banks and Financial Institutions
Acts, 1995
Banana Growers Association
Bank for International Settlements
Belize Sugar Industries Limited
Belize Social Security Board
Belize Tourism Board
Belize Telecommunications Ltd.
Belize Water Services Limited
Caribbean Community and Common
Market
Central American Bank for Economic
Integration
Caribbean Centre for Monetary Studies
Caribbean Development Bank
Common External Tariff
Caribbean Financial Action Task Force
Commercial Free Zone
Citrus Growers Association
Cost Insurance and Freight
Consumer Price Index
Central Statistical Office
Development Finance Corporation
Eastern Caribbean Central Bank
Economic Commission for Latin
America and the Caribbean
European Currency Unit

EDF
EIB
EU/EEC
FY
GDP
GOB
IBC
IBM
IBRD

IDB
IFS
IMF
NFC
OECD

OECS

PAYE
PGIA
ps
RECONDEV

RMB
ROC
SIF
UK
US/USA
WTO
WASA

European Development Fund
European Investment Bank
European Union
Fiscal Year
Gross Domestic Product
Government of Belize
International Business Company
International Bank of Miami
International Bank for Reconstruction
and Development
Inter-American Development Bank
International Financial Statistics
International Monetary Fund
Not from concentrate
Organisation for Economic
Cooperation and Development
Organisation of Eastern Caribbean
States
Pay As You Earn
Phillip Goldson International Airport
Pound solid
Reconstruction and Development
Corporation
Royal Merchant Bank
Republic of China, Taiwan
Social Investment Fund
United Kingdom
United States
World Trade Organisation
Water and Sewerage Authority

Notes and Conventions:
--$ refers to the Belize dollar unless otherwise stated
--mn denotes million
--bn denotes billion
--The figures for 2002 in this report are provisional, and the figures for 2001 have been revised.
--Since May of 1976 the Belize dollar has been tied to the US dollar at the rate of US$1.00 = F. : ,
--Totals in tables do not always equal the sum of their components due to rounding.

ACP
APR
BEL
BFIA

BGA
BIS
BSI
BSSB
BTB
BTL
BWSL
CARICOM

CABEI

CCMS
CDB
CET
CFATF
CFZ
CGA
CIF
CPI
CSO
DFC
ECCB
ECLAC

ECU

April 30, 2003

Hon. Ralph Fonseca
Minister of Finance and Home Affairs
New Administration Building
Belmopan
BELIZE

Dear Minister Fonseca:

In accordance with Section 58 of the Central Bank of Belize Act, 1982, I have the honour
of submitting to you, in your capacity as Minister of Finance, the Report on the Central
Bank of Belize's operations for the period January 1 to December 31, 2002, together with
a copy of the Bank's Statement of Accounts, as certified by the External Auditors.

Yours sincerely,

Jorge M. Auil
Governor

Annual Report 2002

DIRECTORS AND PRINCIPALS

At December 31, 2002

BOARD OF DIRECTORS

JORGE M. AUIL
Chairman

YVETTE ALVAREZ
Vice Chairman

JAIME BRICENO

DEREK COURTENAY

FRANCIS FONSECA

ROBERT SWIFT

JOSEPH WEIGHT
Financial Secretary

PRINCIPAL OFFICERS

JORGE M. AUIL
Governor

YVETTE ALVAREZ
Deputy Governor Operations

SYDNEY CAMPBELL
Deputy Governor Economic Intelligence

CAROL HYDE
Manager, Human Resources & Administration

DWAIN DAVIS
Manager, Finance Department

MARILYN GARDINER
Manager, Banking and Currency Department

CHRISTINE VELLOS
Manager, Research Department

NERI MATUS
Deputy Manager, Financial Sector Supervision Department

KENT HAYLOCK
Chief of Security

TABLE OF CONTENTS

Directors and Principals ......................................................................... iv
Table of Contents ....................................................................................... v
List of Tables ................................................................................................ vi
List of Charts .............................................................................................. vii
List of Boxes ............................................................................................... vii

Overview Of The Bank ................................................................................ viii
Mission, Goals and Objectives .................................................. .................. viii
Organization And Functions ................................ ..................... ix

Economic Review ........................................................ ............................... 1
Overview ........... .. ........................ .......... 1
International and Regional Developments ........................................................... 4
Domestic Production, Prices and Employment........................................................ 10
Monetary and Financial Developments .......................... ..................................... 23
Central Government Operations and Public Debt........ ........ ............................ 31
Foreign Trade and Payments ........................................... ................................. 38
E conom ic P rosp ects ........................ .. ........................................... ................... 52

Administration ..................................................................................54
The B oard of D directors ...................... .... ............... ........................ ................... 54
O overseas M meetings .............................................. .................................................. 54
F in an ce ............................................................. ................................... . ............ 5 4
Internal Audit Activities ........................................................................................ 54
H um an R sources .................................................................. ................................ 5 4

Operations ................................................................................................... 58
Foreign Exchange Operations ..................................................... ................... 58
Relations with Commercial Banks ...................................................... 59
Transactions with Central Government ................................................................ 60
Supervision of the Financial System..................................... ............................ 61
Information Systems Developments ................................................. ......... .... 63

Statistical Appendix ......................................................................................... 64

Auditor's Report ......................................................................................... 73

Annual Report 2002

LIST OF TABLES

Table I.1: M major E conom ic Indicators ....................................................................................................................

International and Regional Developments .................................... .......... 4
Table II.1: Selected Indicators for Some OECD and Newly Industrialized Countries .......................................... 4
Table 11.2: Selected Indicators for Some Caribbean Countries ......................... ........ .................................. 6
Table 11.3: Selected Indicators for Mexico and Central America ............................ ................................ 8

Domestic Production, Prices and Employment................................. .....10
Table III.1: Annual Percent Change in Selected Indicators....... .................................................. 10
Table III.2: Sugarcane D deliveries .......................................................... ......................................... 11
Table III.3: C itrus Fruit D deliveries ...................................................... ................................. ..... 13
Table III.4: Sugar and Molasses Production ........................ ................................. .......................... 17
Table III.5: Production of Citrus Juices and Pulp .......................................... .......................... 18
Table III.6: Bonafide Tourism Arrivals ............................................................ ........................... 19
Table III.7: Quarterly Percentage Change in CPI Components by Major Commodity Group ............. 21
Table III.8: Employed Labour Force by Industrial Group ....................................... ................ 22

Monetary and Financial Developments ..................................... ........ .. 23
Table IV. 1: Factors Responsible for Money Supply Movements ............... ............................................ 23
Table IV.2: M money Supply ...................... ................................ . ...................................................... .. 24
Table IV3: Net Foreign Assets of the Banking System ............................................. .............................. 24
Table IV 4: N et D om estic Credit Sum m ary ........................................................................... ............... .......... 26
Table IV.5: Sectoral Composition of Commercial Banks' Loans and Advances ...................... .................. 27
Table IV. 6 : Commercial Banks' Holdings of Approved Liquid Assets ........................... ................................28
Table IV7: Commercial Bank's Weighted Average Interest Rates ................................................. ...........................30

Central Government Operations and Public Debt.......................................31
Table V 1: Government of Belize-Revenue and Expenditure ........................................................... ................. 31
Table V.2: Central Governm went's D om estic D ebt ........................................................ .................................... 34
Table V.3: Financial Flows onPublic Sector External Debt ................................ ............................... 34
Table V.4: U se of Proceeds from B ond Issue ........................................................................... ....................... 35
Table V 4: Public Sector External D ebt by Source .................................................. ......................................... 36

Foreign Trade and Payments ..................................................................... 38
Table VI. 1: Balance of Payments Summary and Financing Flows ........................................ ................. 38
Table VI.2: Balance of Payments MerchandiseTrade ............................................... .............................. 39
Table V I.3 : D om estic E exports .................................................................................... ........... ................. ....... 39
Table V I.4: Exports of Sugar*and M olasses ........................................................................... ....................... 40
Table V I.5: Export Sales of Citrus Products* ............................. .................................................................... 42
Table V I.6: E exports of B ananas ................................................................................. ............ .................. ....... 44
Table V I.7: E exports of M marine Products ............................................................................. ............................. 44
Table VI.8: OtherMajorExports .......................................................................................46
Table V I.9: D direction of V visible Trade ................................................................................. ............................ 48
Table VI. 10: Balance of Payments Invisible Trade .......... ..........................................49

Table VI. 11: Balance of Payments-Capital and FinancialAccounts..................................................................50
Table V I. 12: O official and International R deserves ................................................ .........................................................51

Operations..................................................................................................... 58
Table IX. 1: Central Bank Dealings in Foreign Exchange 2001 .............. ............................................... 58
Table IX .2: Exte al A assets R atio 2001 .......................................................... ............................................. 59
Table IX.3: Commercial Bank Balances with the Central Bank ........................................ ........................... 59
Table IX .4: Currency in Circulation 2001 ........................................................................................................ 60
Table IX.5: Central Bank Credit to Central Government .......................... ...... .................................. 60
Table IX.6: Government of Belize Treasury Bill Issues ................................................ .............................. 61

Statistical Appendix.................................................................................... 64
Table 1: Gross Domestic Product (GDP) by Industrial Origin.........................................64
Table 2: Percentage Share Of GDP By Industrial Sector at Current Prices ............................ ........................64
Table 3: Real Gross Domestic Product by Industrial Origin at Factor Cost (2000=100) ........................................65
Table 4: Annual Percent Change In GDP By Sector at Constant 2000 Prices ....................................................65
Table 5: GD P by Expenditure in Current Prices ......................................................................... ....................... 66
Table 6: GDP by Expenditure in Constant 2000 Prices.............................. ... ......................................... 66
T ab le 7 : N et D om estic C credit .................................................................................................... ........................67
Table 8: Gross Imports (CIF) by SITC Categories .................................................. .................................... 67
Table9: Balance Of Paym ents Sum m ary ................................... ...................................................... ............... 69
Table 10: Government of Belize Revenue and Expenditure ................. ................................................70
Table 11: Central Governm went's D om estic D ebt ........................................................ ................................. 71
Table 12: Public Sector External Debt by Creditors ................................ ........................................... 72

LIST OF CHARTS

Chart III.1: Banana A creage- Pre and Post H hurricane Iris ....................................................................................... 14
Chart IV 1: Annual Change in Net ForeignAssets of The Central Bank & Commercial Banks ............................26
C hart IV 2 : Excess L iquid A assets ... ................................................................................ ............ ................. ....... 29
C hart IV 3 : E excess C ash R deserves ............................................................................... ....... ................ ........ 29
Chart IV4 : Quarterly Change in Excess Liquidity ......... ..................................................... ..................29
Chart IV 5 : Quarterly Change in Excess Cash Reserves ........................................................... .................. 29
Chart IV6 : Commercial Banks' Weighted Average Interest Rate Spread .........................................................30
Chart V. 1: Central Government's Development Expenditure ........................................ .............................32
Chart V 2: Sources of Central Government's Domestic Debt ................................... ........................................ 33
Chart V 3: Sources of Public Sector External D ebt .................................................................... ....................... 36

LIST OF BOXES

B ox 1: Su gar Indu story U p dates .............................................................................................................................. 12
B ox 2 : T he T im b er Indu story ............................................................................................ ....... ................ ....... 16
B ox 3: Tourism D evelopm ents and Prospects ................................................. ................................................. 20
B o x 4 : C asa de C am b io s ........................................................................................................... ................. ....... 25
B ox 5: E external D ebt R financing, 2002 ............................................................................. ..............................35
Box 6: CGAAcquisition of Del Oro (Belize) Limited .......... ........................................43
Box 7: Tilapia Fish Farming ............................... .............................................................. 45
Box 8: Meetings Attended by the Governor and Deputy Governors during 2002 ..............................................55

Annual Report 2002

OVERVIEW OF THE BANK

Mission, Goals and Objectives

The Central Bank of Belize's objectives are stated in the Central Bank of Belize Act, 1982.

"\\ within the context of the economic policy of the Government the Bank
shall be guided in all its actions by the objectives of fostering monetary
stability especially as regards stability of the exchange rate and promoting
credit conditions conducive to the growth of the economy of Belize."

In light of these objectives, the Bank has the following Mission:

"to foster the development ofan economic and financial environment
in Belize that will facilitate economic growth."

In the pursuit of its mission, the Bank sets a number of goals and operating objectives.
These are listed below Emphasis is added in the first section to indicate the respective
clients) to which each of the Bank's goals is geared.

Goals
Provide prompt and well-considered macroeconomic advice to the Government,
the business sector and the general public.
SProvide efficient banking services to the commercial banks, the government and
various public sector bodies and regional and international organizations that
hold accounts at the Bank.
SProvide guidelines to the banking community on matters such as money supply,
interest rates, credit and exchange rates.
Set high standards of efficiency and organisation so as to encourage higher levels of
attainment in the Bank.

Objectives
SPromote monetary stability.
" Regulate the issue and availability of money and its international exchange.
" Regulate and monitor the financial environment.
SFoster credit and exchange conditions.
SFoster the development of money and capital markets in Belize.

Organization And Functions

The Bank's mission and objectives are pursued through its various departments, with core
functions as follows:

Office of the Governor

* Managing the operations of the Bank.
* Co-ordinating the various functions of
the Bank's Departments.
* Formulating, developing and reviewing
the Bank's policy prescriptions.
* Maintaining security operations within
the Bank.

* Streamlining and monitoring systems
and procedures to ensure appropriate
internal controls.
* Ensuring that all communications
necessary for the deliberations of the
directors are prepared and submitted.

Administration

* As secretariat to the Board, ensuring
that the decisions and relevant
directives of the Board are
communicated to all parties concerned.
* Procuring supplies, and conducting
stock keeping and inventory exercises.
* Managing the Bank's records
management system.

* Disseminating information produced
by the Bank, particularly economic
reports and bulletins, research papers,
relevant acts and regulations and
related guidelines.
* Managing the Bank's numismatic
operations.

Human Resources

* Advising on personnel policy matters.
* Promoting the conditions necessary for
staff development and training.
* Providing employee assistance.
* Administering staff compensation and
benefits.

* Recruiting and selecting suitable staff.
* Fostering healthy industrial relations
between the Bank and its employees'
union.

Annual Report 2002

Finance

*Preparing the Bank's budget and
monitoring and controlling the Bank's
financial activities.

*Performing fiscal agent functions on
behalf of the Central Government
and other public sector entities for the
trading of securities.

Banking and Currency

* Issuing notes and coins.
* Providing banking services to Central
Government, other public sector entities
and financial institutions.

* Management of the Central Bank's foreign
reserve holdings.
* Conducting clearing-house operations for
the domestic banking system.

Financial Sector Supervision

*Screening and processing applications for
domestic and offshore bank licenses.
* Conducting on-site examination and off-
site surveillance of commercial banks and
offshore banks.

* Processing of applications for large credit
exposures under section 21(2) of the Banks
and Financial Institutions Act.
* Promoting and conducting anti money-
laundering surveillance.

Research

* Monitoring economic activities in Belize
on a continuing basis.
* Conducting focused economic research on
the Belizean economy and aspects
pertaining to its development.
* Maintaining the Bank's library of
Information

Office of Deputy Governor (Operations)

* Monitoring and maintaining the Bank's
information technologies.
* Oversight of Internal Audit programme.

* Preparing monthly, quarterly and annual
economic reports.
* Processing and monitoring foreign
exchange transactions of the financial
system.
* Producing appropriate statistics.

* Maintaining the Bank's plant and
equipment.

1)

Table L1: Major Economic Indicators

POPULATION AND EMPLOYMENT

Population (Thousands)
Employed Labour Force (Thousands)
Unemployment Rate (%)
INCOME
GDP at Current Market Prices ($mn)
Per Capita GDP ($, Current Mkt. Prices)
Real GDP Growth (%)
Sectoral Distribution of Constant 2000 GDP (%)
Primary Activities
Secondary Activities
Services
MONEY AND PRICES ($mn)
Inflation (Annual average percentage change)
Currency and Demand deposits (M1)
Quasi-Money (Savings and Time deposits)
Money Supply (M2)
Ratio of M2 to GDP (%)
CREDIT ($mn)
Commercial Bank Loans and Advances
Public Sector
Private Sector
INTEREST RATE (%)
Weighted Average Lending Rate (WALR)
Effective 3-year APR
Weighted Average Deposit Rate
CENTRAL GOVERNMENT FINANCES ($mn)
Current Revenue
Current Expenditure
Current Account Surplus(+)/Deficit(-)
Capital Expenditure
Overall Surplus(+)/Deficit(-)
Ratio of Budget Deficit to GDP at mkt. Prices (%)
Domestic Financing (Net)
External Financing (Net)
BALANCE OF PAYMENTS (US $mn)
Merchandise Exports (f.o.b.)+
Merchandise Imports (f.o.b.)++
Trade Balance
Remittances (Inflows)
Tourism (inflows)
Services (Net)
Current Account Balance
Capital and Financial Flows
Gross Change in Official International Reserves *
Gross Official International Reserves
Import Cover of Reserves (in months)
PUBLIC SECTOR DEBT
Disbursed Outstanding External Debt (US $mn)
Ratio of Outstanding Debt to GDP at Mkt. Prices (%)
External Debt Service Payments (US $mn)
External Debt Service Ratio (%)
Disbursed Outstanding Domestic Debt ($ mn)
Domestic Debt Service Payments ($ mn)
Sources: Ministry of Finance
Central Statistical Office *Mir

Central Bank of Belize n.a

230.0 238.0 243.0 249.8 255.3 262.7
70.7 73.3 77.8 83.7 85.9 84.7
12.7 14.3 12.8 11.1 9.1 10.0

1,312.9 1,382.9 1,468.8 1,665.6 1,738.1 1,856.6
5,708 5,811 6,044 6,668 6,808 7,067
3.6 3.7 8.7 12.1 4.9 4.3

15.6 15.4 15.7 15.6
17.1 16.1 16.1 17.9
67.3 68.5 68.2 66.5

14.9 14.5
16.9 16.5
68.1 69.0

1.0 (0.8) (1.2) 0.6 1.1 2.3
186.0 206.1 255.1 310.2 364.8 358.1
524.1 561.3 585.1 655.7 676.0 705.4
710.1 767.4 840.2 965.9 1,040.8 1,063.5
54.1 55.5 57.2 58.0 59.9 57.3

547.3 625.6 654.5 695.4 788.5 904.5
5.2 18.9 8.4 11.1 12.9 15.9
542.1 606.8 646.1 684.3 775.6 888.6

16.6 16.3 16.3 15.8
28.5 28.0 28.0 27.1
6.7 6.0 5.7 5.0

15.4 14.5
26.4 24.9
4.3 4.5

282.9 294.5 327.1 349.8 372.1 425.8
252.2 260.0 278.8 308.4 333.7 334.4
30.7 34.5 48.3 41.4 38.4 91.4
81.8 93.6 165.3 247.5 267.4 260.3
(25.3) (28.6) (29.1) (139.9) (142.4) (69.8)
(2.0) (2.1) (2.0) (8.4) (8.2) (3.8)
19.5 27.6 (8.6) (74.0) 72.6 (213.8)
5.8 14.2 38.5 213.5 69.8 284.4

200.0 194.4 261.5 281.8 269.1 309.7
280.8 294.1 379.9 484.4 480.8 497.9
(80.9) (99.7) (118.4) (202.6) (211.7) (188.2)
27.8 31.2 33.5 52.6 41.8 37.7
101.5 105.4 105.6 117.1 119.2 129.3
52.1 49.5 46.7 34.2 52.5 52.9
(16.6) (40.9) (73.9) (165.5) (185.0) (164.3)
23.2 17.1 99.7 206.7 179.1 156.1
(1.0) 15.4 (27.2) (51.6) 2.7 5.4
59.3 43.9 71.1 122.8 120.1 114.7
2.5 1.6 2.1 3.2 3.2 3.2

240.7 260.7 252.5 433.7 486.6 574.5
36.7 37.7 34.4 52.1 56.0 61.9
30.7 33.2 33.7 43.1 68.0 75.2
9.0 9.8 8.1 9.8 15.3 15.2
171.9 180.0 171.5 176.0 210.8 174.2
18.4 15.7 12.2 22.6 17.7 19.2

nus = increase + = 1999 to 2001 includes CFZ gross sales
- not available ++ = 1999 to 2001 includes CFZ direct imports

'1)

ECONOMIC REVIEW

Overview

Real GDP expanded by 4.3% in 2002,
notwithstanding lower citrus, banana and farmed
shrimp output, a slowdown in the stay-over tourism
sub-sector over much of the year and a
programmed reduction in Central Government's
expenditure. While growth in the secondary and
primary sectors was quite modest as the economy
recovered from disasters in 2001, the services sector
grew by 6.8% in response to a surge of activity in
the cruise ship and offshore financial sectors.

With several sectors operating below capacity
following the storms, the unemployment rate, which
is determined by an annual survey in April, rose
from 9.1% in 2001 to 10.0% in 2002. The consumer
price index (CPI) also rose by 2.3%, with the largest
cost increase driven by the 'Transport and
Communication' category. The latter reflected a
telecommunication tariff rebalancing that raised
certain basic telephone charges.

Growth in M2 (broad money) slowed to 2.2% as
cambio operations commenced and EPZ's shifted
part of their portfolio to offshore banks. Narrow
money M \1) contracted by 1.8%, a decline that
followed sixteen years of uninterrupted expansion.
While the public's currency holdings rose by $1.6mn,
demand deposits were down by $8.3mn as overdue
payments were made to foreign creditors in the
latter part of the year. On the other hand, quasi-

money grew by 4.3% as commercial banks began
to seek out new time deposits to accommodate
expanded lending to private sector.

The latter, combined with higher external debt
payments and earnings repatriation, led to an overall
decline of $37.9mn in the net foreign assets of the
banking system. While foreign exchange inflows to
the Central Bank rose with increased loan
disbursements and mortgage securitization,
outflows grew even more strongly to cover external
obligations of the public sector and continued
strong demand by the private sector. The result was
a slight deterioration in the Central Bank's net foreign
asset position. Commercial banks also saw a second
year in which outflows exceeded inflows with net
foreign asset holdings decliningby $23.9mn.

Net domestic credit declined by 3.6% as additional
funding from external sources enabled the public
sector to significantly reduce its use of domestic
financing. As well as clearing its Central Bank
overdraft, the Government added $41.3mn to its
domestic deposit holdings. Credit to the rest of the
public sector also declined sharply as Central
Government assisted DFC to reduce its
indebtedness to the Central Bank by $69.0mn as
part of its debt restructuring effort. On the other
hand, commercial bank loans to the private sector
surged by 14.5% with incremental funding being
provided for a wide cross section of activity

SAnnual Report 2002
el Ban ofBl

excepting only for manufacturing and
transportation. The tertiary sector received the largest
increase as activity began to pick up particularly in
the real estate sub-sector. In the primary and
secondary sectors, marine products and the
privatized utilities attracted most of the additional
financing over the period reviewed.

Through much of the year, monetary policy
remained unchanged. As the third quarter drew to
a close, however, the Central Bank took steps to
reduce a lingering liquidity overhang by raising
commercial banks' cash reserves requirements from
3.0% to 5.0% in the case of savings and time
deposits and from 5.0% to 7.0% for demand
deposits. At the end of October, reserve
requirements for all deposit categories were
harmonized at 6.0%. Coupledwith an 8.9% increase
in the banks'loan/deposit ratio, this helped to bring
about a 50.0% reduction in excess statutory liquidity
by year-end. From a total of $51.5mn at the end
of 2001, excess cash reserves subsided to $3.6mn.

Weighted average lending rates maintained a
downward trend reflecting a slight increase in
competitive behaviour following the entry of a new
commercial bank. At year-end, the weighted average
lending rate had fallen by 90 basis points to 14.5%
and rates on new loan were generally lower than
the rates applied at the end of December 2001. In
contrast, the average deposit rate rose by 20 basis
points to 4.5% as a surge in lending forced banks
to seek out new deposits. The spread accruing to
the commercial banks consequently fell from 11.1%
to 10.0%.

Pursuing a commitment to tighten its fiscal stance,
Central Government lowered the overall deficit
from 8.2% of GDP to 3.8% of GDP during the
year. Total expenditure declined by approximately
1.1% with current expenditure rising only marginally
while capital expenditure was rolled back by 2.7%
The revenue side was buoyant with total revenues
up 14.5% bolstered by strong growth in current
revenues and other receipts from the sale of the
Port and grants. The rising current surplus (from
$38.4mn to $91.4mn) not only reflected the healthy
growth in revenues, but also the downsizing of
Central Government partly achieved through the
creation of new statutory bodies in the previous
year. Financing for the overall deficit came principally
from external sources with loan disbursements
significantly exceeding amortization payments.

Increased inflows from abroad enabled a lowering
of Central Government's domestic debt from
12.1% of GDP to 9.4% of GDP Transactions
included a $58.9mn net decline in overdraft balances,
retirement of $6.2mn in debentures and
amortization payments of $1.4mn. These were
partly offset by the issue of an additional $30.0mn
in new Treasury Bills and loan disbursements of
$5.0mn. During the same period, the public sector's
disbursed outstanding external debt grew by
approximately $175.8mn to $1,149.0mn (61.9% of
GDP). Disbursements and positive valuation
adjustments totaled $482.2mn and $10.5mn,
respectively. Amortization, which included payments
made under a debt refinancing programme,
amounted to $293. lmn.

Overview

The year was notable for improvements in the
external trade and current account positions
following five consecutive years of expanding
deficits. From a $370.0mn gap in 2001 the current
account deficit on the balance of payments declined
to a still substantial $328.5mn (17.7% of GDP).
The narrowing was mostly due to a "-4.Omn
reduction in the visible trade deficit as export sales
p ii,,._1. 1,l1- in the Commercial Free Zone) rose

'1)

faster than the growth in imports. Domestic exports
were stable while import growth was mainly linked
to transactions in the CFZ. The current account
deficit was principally financed by additional external
borrowings undertaken by the public and private
sectors, foreign direct investment inflows and, to a
lesser extent, by drawing down on the international
reserves. At year-end the latter stood at $229.3mn,
the equivalent of 3.2 months of imports.

SAnnual Report 2002
er Ban ofBl

International and Regional Developments

The global economy recovered somewhat more
slowly than originally expected, with total output
increasing by 2.8%. Growth occurred mainly in the
first part of the year and was driven by consumer
demand and a broad turnaround in manufacturing
activity. The latter was particularly evident in North
America and the Asian economies. Except for the
Euro area, where prices remained high, central banks
undertook a general easing of monetary policy to
encourage economic activity. In the second part of
the year, economies showed signs of slowing down
as consumer and business confidence were
negatively affected by rising oil prices, weak equity
markets and the uncertainty associated with the
impending war against Iraq. Latin America was no
exception to the downward trend as several
countries, particularly Argentina, Brazil, and Uruguay
faced serious threats to stability.

Developments in Select OECD and
Newly Industrialized Countries

The US economy grew by 2.4% mostly during the
first half of the year driven mainly by increased
government and consumer spending. After declining
in the previous year, industrial production expanded
by 2.1% while inflation fell from 2.8% to 2.4%.
The effects of the terrorist attacks in 2001
nevertheless continued to negatively affect the
economy. Substantial job losses in the airline industry
as well as in other sectors led to a 1.2% rise in the
unemployment rate to 6.0%. Further difficulties
were presented by the shake-up on Wall Street as a
result of several high profile corporate scandals and
the looming threat of conflict with Iraq. As a result,
business and consumer confidence eventually began
to decline leading to fears that the economy could
fall into yet another recession.

Table II.1: Selected Indicators for Some OECD and Newly Industrialized Countries

United States 1.0 2.4 (3.5) 2.1
Canada 1.5 3.9 (6.0) 5.6
Taiwan (2.2) 4.1 (7.5) 10.5
United Kingdom 2.0 2.1 (4.6) (1.3)
Japan 1.0 2.2 (7.5) 5.5
Sources: Economist, Bloomberg, International Financial Statistics

2.8
2.5
(0.1)
2.3
(0.7)

2.4
3.9
1.2
2.9
(0.3)

International and Regional Developments

Preliminary figures indicate that the UK economy
grew by 2.1% as private consumption remained
relatively robust supported by firm labor markets
and increased household borrowing. However, the
services and manufacturing sectors performed
poorly during the year and financial markets were
weak. Industrial production declined, though at a
decreased pace of 1.3% as opposed to the 4.6%
contraction in 2001. Unemployment remained low,
falling by one percentage point to 3.1%, which
helped to sustain consumer confidence and
reinforced the Bank of England's decision to hold
interest rates steady even in the face of a slight increase
in inflationary pressure due to the rising oil prices
and strong consumer demand.

Economic growth in Japan accelerated to 2.2% in
2002, defying expectations of continued recession.
Growth was externally driven as the weak yen
contributed to a large increase in exports. It was
also underpinned by a significant turnaround in
industrial production and modest rise in private
consumption. Deflation nevertheless continued to
grip the economy as prices fell by 0.3% with interest
rates being close to zero. The country's financial
system remained unstable in light of yet unresolved
problems in the financial system, and with the
increasingly uncertain prospects surrounding the
external environment, it was unclear whether the
recent gains would be consolidated and sustained.

After rapid expansion in the first half of 2002, the
Canadian economy slowed, but still achieved an
annual growth rate of 3.9%. This was a considerably
better outturn than any of its fellow G-8 countries

over the same period. While industrial production
grew by 5.6% during the year, inflation also jumped
from 2.5% to 3.9% largely due to increased
demand in the economy and rising crude oil prices.
Meanwhile, the unemployment rate fell by 0.1% to
7.4% with the number of people looking for work
registering a small decline. Initially stimulative,
monetary policy was tightened as the year
progressed with the Bank of Canada enacting
interest rate increases. The spate of monetary
tightening is expected to continue as the authorities
seek to balance the current strong domestic demand
against global political and economic uncertainties.

After experiencing its worst annual slump on record
in 2001, the Taiwanese economy rebounded with
a 4.1% expansion in 2002. Growth was driven by a
10.5% rise in industrial production and a surge in
exports to key Asian and North American markets.
Imports grew marginally, leaving the trade balance
with a surplus of$18.0bn, a $2.5bn increase over
2001. Low interest rates helped to sustain activity
and keep the unemployment level stable during the
year. However, rising domestic demand contributed
to an increase in the price level, which rose from
-0.1% in 2001 to a still relatively low 1.2% in 2002.

Development in Selected Regional
Economies

The Caribbean

The Barbadian economy contracted for the second
year in a row, with GDP declining by 0.4% Exports
of sugar fell by 10% and the tourism sector

SAnnual Report 2002
er Ban ofBl

experienced a 3% decline with lower arrivals of
both long-stay and cruise ship visitors. On the other
hand, manufacturing rebounded modestly as the
negative impact of trade liberalization in 2001 was
countered by the introduction of new import tariffs
and the continuation of a 'buy local campaign'. The
fiscal deficit grew to 4.1% of GDP as the
government increased spending to stimulate
economic activity while unemployment edged
upward to 10.5%. The worsening of the current
account and fall-off in public and private sector
capital and financial inflows contributed to an
$83. lmn decline in net international reserves. The
Central Bank nevertheless ended the year with
$1.3bn in foreign assets, representing nearly 8
months ofimport coverage.

Strong growth in the, n. i _.i- sector along with
recoveries in the agriculture and service sectors
contributed to a 2.9% increase in Trinidad &
Tobago's GDP for 2002. The government
achieved a fiscal surplus ofTT $69mn due to lower
than expected expenditures during the year. With
increased capital inflows, net international reserves
were boosted upward by US $72mn to US
$1969mn (roughly equivalent to 8 months of
imports). This contributed to an appreciation of

the exchange rate and consequent decline in inflation
from 5.7% to 3.9%. During the latter part of the
year, monetary policy began to target interest rates
with a view to stimulating growth. However, while
the objective of lower interest rates was achieved,
credit and i - ., demand remained sluggish
with private sector confidence seeming to respond
more to the uncertainties of the international
environment than to the domestic policy shift.

A moderate recovery in agriculture (particularly
sugar), as well as forestry and mining contributed
to an estimated 2.0% growth in Guyana's GDP
during 2002. The current account strengthened, due
to improvement in the country's terms of trade
and higher trade volumes. While a marginal
improvement in Central Government's fiscal deficit
reflected a conservative fiscal stance, monetary policy
was more expansive with a view to stimulating
domestic activity. However, with the cost of utilities
(electricity and telecommunications) rising, the
accommodative monetary policy helped to push
inflation upwards from 2.6% in 2001 to 4.9% over
the first nine months of the year.

Although still shaky, the Jamaican economy grew
by 2.0% in 2002 led by high consumer demand
and increased activity in the construction sector.

Table 11.2: Selected Indicators for Some Caribbean Countries

Cou~~~~~ ~ ~ ~ ~ ~ ~ n tr GD Grwh IfainRt.ne pomn eii/D
gg gg (%) M) Rg ag gg (%Rto%

Barbados
Jamaica
Trinidad
Source: ECLAC
n.a: not available

(2.7)
1.7
3.3

(0.4)
2.0
2.9

2.1 9.9
7.0 15.5
3.9 10.8

10.5 (3.6)
15.0 (6.3)
11.0 n.a

(4.1)
(6.0)
n.a

International and Regional Developments

However, unemployment remained at around 15%
reflecting the still relatively slowpace of job creation.
After a quick start, expansion eventually slowed as
flood rains hindered growth in the agricultural and
manufacturing sectors and tourism continued to
struggle from the effects of September 11. Tight
monetary policy and Central Bank interventions in
the foreign exchange market helped to support the
exchange rate and thereby reduce inflation by 1.7%
to 7% at year's end. Meanwhile, Central
Government's fiscal deficit remained at around 6%
of GDP due to increased government outlays to
rebuild the country's infrastructure.

OECS

Economic growth continued to falter in the Eastern
Caribbean States as tourism, the economic mainstay
of the region, contracted by 21 I".. over the first nine
months of 2002. Agriculture and manufacturing
remain weak contributing to an overall decline of
1.5% in GDP for the region. Fiscal positions of
central governments also worsened due to the
combined effects of lower tax revenue and
increased expenditures. Antigua and Barbuda, St.
Kitts/Nevis and Dominica recorded their largest
deficits during the year. While the overall rate of
inflation has declined in the region (averaging 2.2" .;,
unemployment is expected to increase due to the
poor performance of the tourism industry and
overall slowdown in economic growth.

Mexico

After its 0. 1 .. decline in 2001, the Mexican economy
rebounded with GDP risingby 1.9%. Growth was
export-led and benefited from the US economic
recovery. Industrial production rose by 1.7% during
the year, helping to keep the unemployment rate
low at 2.8%. During the second semester, increased
liquidity and a moderate currency depreciation
exerted upward pressure on the level of inflation
in the economy prompting the Central Bank to
tighten its monetary policy. These efforts paid off
with core inflation falling by 1 i,.'-" to 3.7% at year's
end. The turnaround in the economy reflected the
Government's commitment to strict fiscal discipline
and domestic demand management. This
combination, along with a bouyant export sector
led to a 21",.. reduction in the trade deficit to
US$8.2bn as the year drew to a close.

Central America

Economies in the region continued to struggle in
light of the weak global economy with GDP
growth averaging 1.6% in 2002 as compared to
2.0% in 2001. Natural disasters in Guatemala,
Nicaragua and Honduras, the continued negative
effects of September 11 on the tourism industry,
and lu. -i -i h international demand depressed the
performance of the external sector. Total exports
consequently declined (except in Costa Rica) by US
$282mn reflecting lower export commodity prices
as well as volumes. Meanwhile, monetary policies
were generally conservative, helping inflation to

SAnnual Report 2002
el Ban ofBl

decline moderately to an average of 5.3%. With

weaker growth, the average rate of unemployment

increased by 1.5% to 8.1% during the year.

The Nicaraguan economy lossed momentum

registering an estimated growth of 0.5% in 2002.

Total exports grew by less than 3% over the first

six months of the year. On the other hand, the

slowdown in economic activity led to a significant

decline in imports, which helped to reduce the

current account deficit from 39% to 33% of GDP

During the year, the government implemented

significant structural reforms aimed at increasing

revenues and reducing the fiscal deficit. Partly as a

result, the public debt fell from 11.5% to 9.0% of

GDP A tight monetary policy helped to keep the

inflation rate stable despite higher real wages and a

weakened currency. On the down side,

unemployment increased as growth faltered,

moving upward by 2.2% and ending the year at

12.9%.

El Salvador's economy remained .-l.. -i -h with

GDP increasing by 2.0%, a modest improvement

over the previous year. While construction and

industrial output rose, the agricultural sector

contracted by 0.5% due in large part to the troubled

coffee industry. As a result, unemployment edged

upwards to 7.1%. Notwithstanding higher inflows

from family remittances, the current account deficit

widened further due to an increased trade gap.

However, the Government's fiscal deficit narrowed

from 3.7% of GDP to 2.7% GDP in 2002 as higher

investment expenditures were offset by increased

tax revenue and reduced consumption spending.

Notably, since adopting the dollar as its official

currency in 2001, interest rates in El Salvador have

remained relatively low, while the level of inflation

declined further to 2.8% at the end of the year.

Boosted by strong growth in the manufacturing

sector, the Costa Rican economy posted a 2.8%

increase in GDP in 2002. Total exports rose by

10% to US$5.2bn led by a resurgence in demand

for Intel's microprocessors. This not only helped to

reduce the trade and current account deficits but

also boosted the net international reserves position.

While core inflation showed signs of declining in

2002, rising international oil prices are expected to

exert some upward pressure. Meanwhile, central

government's spending rose by 19.5% over the first

Table 11.3: Selected Indicators for Mexico and Central America

IICuIIr GDPGrowth I Io t IIpIIomn II I Ta B

Costa Rica
Mexico
El Salvador
Honduras
Guatemala
Nicaragua
Panama
Sources ECLAC,
n a not available

1.0 2.8 11.0
(0.1) 1.9 5.4
1.9 2.0 3.0
2.7 2.0 8.8
2.4 1.0 8.9
3.0 0.5 4.7
0.5 1.5 0.7
Business Monitor International

6.8
2.8
7.1
6.2
n.a
12.9
16.0

(2.9)
(0.7)
(3.7)
(5.5)
(2.5)
(11.5)
(2.0)

(4.3) (0.2)
(1.3) (13.3)
(2.7) (2.2)
(5.2) (1.0)
(1.5) (1.6)
(9.0) (1.1)
n.a (0.1)

n.a
(8.2)
n.a
(1.1)
n.a
n.a
n.a

International and Regional Developments

ten months of the year leading to a projected rise
in the fiscal deficit from 2.9% to around 4.3% of
GDP at year's end.

Growth in the Honduran economy decelerated
to 2.0% in 2002 as a substantial increase in oil prices
coincided with declining revenues from coffee and
shrimp exports. The latter was affected by weak
demand worldwide and depressed prices. The past
two years have seen the economy slow down as
terms of trade have worsened while unemployment
has risen sharply from 3.5% in 2000 to 6.2% in
2002. The reduction in export inflows led to a slight
worsening of the external trade deficit which stood
at US $1.lbn. The fiscal deficit also rose, doubling
to US$1.2bn at year's end, due to increased
government spending and numerous tax
exemptions. Although inflation remained stable

(actually declining by 0.8 percentage point to 8.(1" I ,
the depreciating currency and growing instability of
prices increase the likelihood of a future upward
surge in domestic price levels.

GDP growth in Guatemala slowed to 1.0%, its
lowest level in almost ten years. Traditional exports
continued to be affected by low prices, while
preliminary data showed non-traditional exports
decliningby 13% over the first half of the year due
to high labour costs and reduced competitiveness.
The problem was compounded by weak consumer

and investor confidence due to continuous political
and social disturbances. Persistently high inflation
led the Central Bank to tighten monetary policy
during the last quarter after maintaining a more
relaxed stance in the first part of the year. The
weakened economy and fall-off in revenues also
forced the government to take major steps to reduce
its deficit and strengthen public finances. These
efforts were supported by the terms of
Guatemala's stand-by programme with the IMF
that carried over from the previous year. The
tightening of fiscal and monetary policy contributed
to a decline in the rate of inflation to 6.3% at the
end of the year.

Panama's economy grew modestly by 1.5% with
major economic sectors continuing to experience
difficulty. During the first nine months of the year,
exports declined by 8.7% with low world demand
and depressed prices for agricultural exports such
as sugar and coffee being major factors. Prices for
these two products plunged by as much as 63.4%
and 23.0%, respectively. Foreign investment fell by
over I'" .. reflecting a lower level of confidence in
the government, increased uncertainty and a
perceived deterioration in the investment climate.
Inflation was both low and stable during the period
while the unemployment level remained high at
16.0%.

Annual Report 2002

1)

Production

Notwithstanding hurricane damage to citrus, banana
and farmed shrimp, a slowdown in the stay-over
tourist sub-sector and tightened fiscal controls,
GDP grew by 4.3% in 2002. Growth was led by
the services sector and bolstered by modest
improvements in primary and secondary sector
activities as a storm free 2002 saw a recovery in
agriculture, forestry and construction.

With the recovery in agriculture and forestry
offsetting a fall in fishing, the primary sector achieved
an overall expansion of 1.0%. Sugarcane
production, a surge in papaya yields and extensive
rehabilitation works in banana plantations were all

contributing factors. On the other hand, after
experiencing significant growth in the past, the fishing
sub-sector contracted by 5.7% as farmed shrimp
production suffered from the late stocking of ponds
caused by hurricane damage and low shrimp
survival rates (around 3i 1,) due to the Taura virus.
While farmers were eventually able to identify a more
virus resistant shrimp strain with survival rates of
60% to 70%, its dissemination was too late in the
season to impact on 2002's production. Meanwhile,
large-scale operations to salvage pine trees affected
by the pine bark beetle and trees flattened by the
hurricane in late 2001 before their decay led to stellar
growth in the forestry sub-sector.

The secondary sector grew by 1.8% as heightened

Table III.1: Annual Percent Change in Selected Indicators

1e2000 2001 C2002

GDP at Current Market Prices
Real GDP (2000 prices)

Primary Activities
of which: Agriculture
Fishing
Forestry

Secondary Activities
of which: Construction
Manufacturing

Services
of which: Restaurant & Hotel
Trade
Public Administration
Transport and Communication
Financial intermediation
Consumer Price Index
Average
End of period
Source: Central Statistical Office

Domestic Production, Prices and Employment

13.4
12.1

11.6
9.8
24.5
(27.5)

24.7
39.0
24.0

10.3
10.6
12.1
6.4
12.6
35.9

0.6
1.0

0.4
(2.4)
5.8
16.6

(0.9)
(1.7)
(0.9)

8.0
13.5
7.5
5.8
11.8
6.5

1.1
0.9

1.0
2.9
(5.7)
17.7

1.8
5.2
(0.2)

6.8
2.5
4.1
2.7
11.2
17.3

2.3
3.2

Domestic Production, Prices and Employment

activities in construction and utilities more than offset
a small contraction in manufacturing The sluggish
performance of the latter was mostly linked to the
sharp reduction in citrus juice production,
precipitated by the harvest losses from Hurricane
Iris.

Services grew by a robust 6.8% as the exponential
increase in cruise ship arrivals spurred stronggrowth
in transportation while financial intermediation
expanded substantially with the growth of the
offshore sector. A minimal increase in stay-over
tourists translated into a2. "' .. ::p tI.n i the hotel
and restaurant sub-sector. and Government services
rose by 2.7% as expenditure was reined in to reduce
the fiscal deficit, a primary objective of the
Government during the year.

With several sectors operating below capacity
following the storms, the unemployment rate, which
is determined by an annual survey in April, rose
from 9.1% in 2001 to 10.0% in 2002. The most
significant job losses occurred in 'l. . Forestry
& Fishing', 'Trade, Restaurants & Hotels' and
'Community, Social and PersonalServices'. Meanwhile,
an upswing in the cost of transportation and
communication services helped push inflation up

to 2.3%. This upward pressure was somewhat
offset by reductions in the prices of butane gas and
other selected imports. The latter was largely held
in check by a 1.0% reduction in import costs as
measured by the US export price index.

Agriculture

Sugarcane

Good weather conditions, marred only by Tropical
Storm Chantal in August 2001, boosted sugarcane
production so that deliveries for the 2001/2002
crop rose by 12.4% to 1.2mn long tons. Included
in deliveries were 7,770 long tons harvested from
439 acres of the BSI cane growing project, where
some 2,253 acres were cultivated to boost
production and demonstrate to farmers the financial
benefits of good agricultural practices. To
accommodate the larger harvest, the factory
extended its operations by twenty-two days.

While a sugarcane maturity analysis done at the start
of the crop indicated that it was of above average
quality, the final cane purity (the ratio of sugars to
solids in the juice) fell from the previous crop year's
average of 85.65% to .8 I It.'- due to uncontrolled

Table III.2: Sugarcane Deliveries

1i9/ 66600/01o 6 2 2 6o 6T

Deliveries to BSI (long tons)
Source: Belize Sugar Industries Ltd.

1,098,771 1,023,440 1,150,657

Annual Report 2002
nral f Smize

burning, long delivery times and high mud levels in
the sugarcane arising from the increasingly pervasive
use of mechanical harvesters.

Meanwhile, a global production surplus and higher
than anticipated international sugar inventories
pushed world market prices downward. The local

sugarcane price consequently continued the declining
trend of previous years with the average price per
long ton of sugarcane slipping from $41.13 in
2000/2001 to $38.08 in 2001/2002. To offer some
relief to debt burdened farmers, Government paid
out $1.0mn from the Sugarcane Stabilisation Fund,

Box 1: Sugar Industry Update

The sugar industry continued the phased implementation of the new Sugar Industry Act of
2001, which provides the framework for the future development and survival of the industry
under less preferential trading relationships.

New developments included the reconstitution in December 2001 of the Sugar Industry
Control Board, which assumed responsibility for promoting increased productivity and
competitiveness. The Sugar Cane Production Committee (SCPC), which was charged with
responsibility for ascertaining cane production and matching production with factory
deliveries also became effective. Farmers were allowed to deliver as much sugarcane as
they could produce, effectively deterring the practice of selling surplus production to other
quota holders. A survey revealed that only 4,398 of the 9,036 quota holders were actually
sugarcane farmers. The census also identified the need to rationalize the harvesting system
and assist farmers to improve field yields.

While the Sugar Industry Development Fund was set up, the Sugarcane Quality Control
Authority and the Sugar Industry Research and Development Institute did not start to
function due to lack of capital. The restructuring aims at facilitating migration to a payment
system based on sugarcane quality to encourage farmers to improve their field management.
Another area under consideration is the possibility of obtaining professional management
for a consolidated Cane Farmers' Association that would better defend farmers' interests.

The sugar processor has continued to lower operational costs, while seeking to diversify its
markets and revenue generating options. It has streamlined its factory workforce and closed
its European marketing office while actively pursuing an expanded market within CARICOM
and Central America. The establishment of a co-generation plant also remains a high priority.

Despite the year's accomplishments, the pace of reforms needs to be quickened and must
be forged on a unified and committed front by all industry partners to ensure their long-
term survival.

Domestic Production, Prices and Employment

providing farmers with $0.87 more per long ton.
Farmers also received assistance from the
Sugarcane Industry Development Fund that enabled
a further payment of $0.40 per long ton, bringing
relief payments to a total of $1.27 per long ton for
the 2001/2002 crop.

Citrus

The annual progressive growth in citrus production
as .:., '- -,-, reached maturity came to an abrupt
halt during the 2001/2002 crop year with deliveries
falling by 25.6% to 5.4mn boxes. This performance
was linked to the loss of more than half a million
boxes of fruit due to the impact of hurricane at
the start of the harvest and low input usage by
farmers that have been squeezed by consecutive
years of low prices.

The orange crop experienced the largest decline with
deliveries down by 28.3% to 4.1mn boxes.
Grapefruit fell by a more modest 15.7% to 1.2mn
boxes. A strengthening in prices for orange juices

on the international markets contributed to a $1.51
rise in the box price for orange to $5.88, the highest
level for the past six years. Grapefruit also fared
well, with a $0.69 increase to $4.74 per box.

During the year, the industry began the testing of
pound solids (ps) per box of orange fruit. The
objectives were to familiarize farmers with the testing
process and address any problems before the
official implementation in 2002/2003 of payment
based on pound solids per box of orange. Pound
solid measurements were taken of each fruit delivery
and notified to the farmer. The results showed an
industry average of 5.6ps per box of orange.

Banana

In late 2001, Hurricane Iris devastated most of the
banana plantations, destroying the majority ofplants
at harvest maturity. Rapid field rehabilitation that
involved replanting as well as cleaning out dead
mother plants so that young plants could survive
was immediately undertaken. These efforts paid
off with a trickle of production in January and

Table III.3: Citrus Fruit Deliveries

1.. 1999/0 2000 01 2006602

Deliveries ('000 boxes) 6,
Oranges 5,
Grapefruits 1,
Source: Citrus Grow ers Association

981
590
391

7,195
5,734
1,461

5,354
4,123
1,231

i IZoIo] P ToIoIoIZoll P [oIoll Ko]

SAnnual Report 2002
1) ra-r Sf meiz

gradual increases until pre-hurricane levels were
reached in mid 2002. Given the nine-month
growing period required for a plant to reach harvest
maturity, total annual production amounted to
2.7mn boxes, compared to the 3. lmn boxes realized
after 40 weeks of production in 2001.

Before the hurricane, the acreage under banana
cultivation stood at 6,017 acres, ofwhich 5,512 were
producing and only 505 were plantilla (having trees
too young to produce fruit). Another 93 acres were
ready for planting. In January 2002, the ratio of
producing to non-producing acreage was reversed
with 3,416 acres having non-producing plants and
1,517 acres having harvestable plants. Some 1,214
acres were ready for planting. By the end of
December 2002, the cultivated acreage was

approximately back to pre-hurricane levels, with
some 5,292 acres under harvestable plants and only
641 acres under immature plants. Counting in
another 451 acres ready for planting, total industry
acreage measured 6,384, a 6.1" .. ::p _i'. i. overpre-
hurricane levels.

Papaya

Approximately 1,022 acres were under papaya
cultivation during 2002 with 642 acres having
harvestable trees and 380 acres containing young
non-producing trees. Papaya cultivation was
concentrated in the Corozal District but was also
carried out on a very minimal scale in the Orange
Walk, Cayo and Stann Creek districts. Viral damage

Chart III.1: Banana Acreage Pre and Post Hurricane Iris

Pre-hurricane

To be
planted
2%

January 2002
To be
planted
20%

December 2002
To be
Rantilla planted
10% 7%

Producing/
83%

Plantilla
8%

Producing
90%

Producing
25%

SPlantilla
55%

Domestic Production, Prices and Employment

and rodent infestation were major reasons why
cultivation was greatly minimised in the other
districts.

Small papayas accounted for 39.9% of total acreage
as compared to 49.0% in the previous year. The
other 60.1% of acreage was devoted to cultivation
of the big varieties. The distribution of acreage
between the two varieties was consistent with the
objective of shifting cultivation towards the more
virus resistant large cultivar. This shift influenced
the export mix and accounted in part for the
significant increase in export volume.

Other Agricultural Production

Except for sorghum and soybean, production of
most major grains fell in 2002.

Given the inverse relationship between sorghum and
corn, (they are substitutes in animal feed), sorghum
production was ratcheted upwards from 18.5mn
pounds in 2001 to a record high of 26.7mn pounds
in 2002 while corn yields were down by 9.2% to
84.7mn pounds. The continuation of the
government funded soybean project in the Orange
Walk district, coupled with an assured local market
and some price support for this grain, caused
production to almost double to 2. lmn pounds. By
year-end, the acreage under cultivation had increased
from 730 acres to 3,045 acres.

On the down side, rice paddy production fell by
9.7% to 24.1mn pounds as fears of flooding caused
farmers to delay and reduce field cultivation. Some
farmers even shifted their sowing period from the
traditional June-October period to January.

Although production of other bean varieties was
up, the Red Kidney bean harvest plunged by 60.9%
to 5.7mn pounds. Partly accounting for this were
very sluggish export sales, where 2001 production
was still being sold off in the first seven months of
2002, and bad weather that negatively impacted
yields.

Livestock production expanded for the second
consecutive year. Cattle dressed weights rose by
25.8% to 4.1mn pounds while that of poultry grew
by 12.0%. Milk output amounted to 7.8mn pounds,
consisting of production from large and small
producers. Honey production also improved
modestly as flora recovered from the damages
inflicted by the storms of the previous year. The
only 1 -. .1 .; were egg and pork production that
fell by 25.3% and 10.6%, respectively.

Marine Products

The marine sub-sector continued on the path of
recovery from various setbacks with total
production falling by 7.5% to 10.9mn pounds when
compared to 2001.

This decline was traced to farmed shrimp, whole
fish and conch production. Hurricane damage to
shrimp farms delayed the stocking of ponds and
reduced the harvest by 3.9% to 9.4mn pounds of

Annual Report 2002
nral f Smize

whole shrimp. On the brighter side, a hardy strain
was identified that was more resistant to the Taura
virus. This strain had survival rates of between

of this strain became widespread towards the end
of the harvest, which was too late to impact the
2002 production.

60.0% to 70.0%, effectively doubling the then
existing rate of around 30.0%. However, the use

Box 2: The Timber Industry

Belize started as a settlement of logwood cutters with the timber industry being the mainstay of the
economy for many years. For much of its early history, inhabitants were not allowed to engage in
settled agriculture, which could draw scarce labour away from the timber industry. This didn't change
until the arrival of refugees from the Caste Wars in the Yucatan Peninsula in the late 1800's. After the
near depletion of logwood stocks, harvesting focused on the highly valued mahogany trees.

Indiscriminate cutting with little attention to sustainable forestry management coupled with illegal
poaching eventually took its toll, driving the industry into decline. For example, over the past 11
years, exports have declined by 71.5% to 0.97mn board feet. The Forestry Department estimates
that mahogany, the export wood in greatest demand, is being cut at three times more than the
recommended rate. However, given its limited resources, the department is severely tasked to
adequately police these resources and effectively address the many faceted developmental dimensions
of this industry. Further adding to the problem is the national overcapacity of saw mills (both legal
and illegal) and their obsolescence. Many of these saw mills are inefficient, produce poor quality
lumber and create much wastage.

In more recent events, the 'Convention of International Trade for Endangered Species', of which
Belize is a signatory, listed mahogany as an endangered species. Effective November 2003, Belize will
only export mahogany from forests that are certified as managed in a sustainable, 'green', manner.
Fortunately, exports of other types of wood will be unaffected since they are not listed as endangered
species.

The future for this industry still remains highly positive, if managed properly. Large private tracts of
land are now under conservation-oriented management. To encourage the national adoption of
sustainable management principles for the natural forest, several steps can be taken. The industry
needs modern legislation that covers saw mills and a comprehensive land use policy that dictates the
optimal allocation of land between competing uses. Areas for timber operations should be consolidated
with 1 _in -_ licenses given for an adequate time horizon as this will discourage the rapacious harvest
of trees by small operators trying to make a living from 1 .- -. -. in i that are too small and fragmented.
The implementation of a timber grading system would do much to improve wood quality, while the
initiation of community based forestry could encourage more long term management practices and
create needed employment opportunities. Further, exports of wooden products that have a high
value added will increase foreign exchange earnings. In short, this valuable natural resource can still
yield handsome dividends to the country and make a substantive contribution to further economic
growth, particularly if existing stakeholders are brought on-board with properly targeted incentives.

Domestic Production, Prices and Employment

Conch and whole fish catches fell by 28.8% and
80.0%, respectively declines that were precipitated
by severe disturbance to their habitat caused by the
hurricane and storm in late 2001. On the other
hand, despite some damage to their fishinggrounds,
lobster production grew by 32.7% to 0.6mn pounds
in 2002.

Forestry, Mining and Construction

For the second consecutive year, forestry and
logging activities expanded, registering a 17.7%
growth during 2002. Driving this growth were
several salvage operations to retrieve logs from trees
damaged by the pine bark beetle and Hurricane
Iris before their decay and consequent loss of market
value. The unusual surge in forestry performance
can therefore be considered transitory in nature. A
major occurrence in the yearwith far-reaching future
implications for the industry was the placing of
mahogany on the endangered species list in the
'International Convention on Endangered Species
of \\ il.I Flora and Fauna'. This move places an
international obligation on the country to export
mahogany products only from forests that have

been certified as managed in a sustainable manner.

As the year progressed, construction rebounded
from a 1.7% contraction in 2001, expanding by
5.2% due to the continued bouyancy of housing
construction. Mining, on the other hand, declined
by 5.7% with royalties from mining and quarrying
operations down.

Manufacturing

Sugar and Molasses

Factory operations commenced on 12 December,
2001, and closed onJuly 13, 2002, after some 220
days of operation compared to 198 days of
operation for the 2000/2001 year. The longer
grinding season accommodated the 12.4% surge in
sugarcane deliveries as well as alate request for special
'. I -..1 sugar from CARICOM.

Sugar production consequently rose by 7.2% to
111,313 long tons. The smaller than expected
increase was due to a 0.7% decline in cane purity

Table III.4: Sugar and Molasses Production

1.1999/00 2000/01 2001/066

Sugar Processed (long tons)
Molasses Processed (long tons)
Performance
Overall Factory Efficiency
Cane Purity (%)
Cane/Sugar Ratio
Source: Belize Sugar Industries Ltd.

120,,275
35,633

91.08
86.23
9.14

103,813
34,460

88.6
85.65
9.85

111,313
40,947

93.28
85.08
10.33

Annual Report 2002
Cnra f Smiz

and inefficiencies in the chemical sugar extraction
processes that outweighed a 5.3% improvement in
the factory time efficiency.

The factory faced a major problem due to the high
mud content of the sugarcane caused by the
extensive use of mechanical harvesters. Mud levels
reached a record high of(. I ."'.' ratcheting up costs
associated with mud disposal, slowing down the
sugar production process and causing a higher loss
of sugar. Combined with longwaiting times in the
delivery queues, this adversely affected the cane/
sugar ratio to the point where 4.9% more sugarcane
was required to produce a given unit of sugar.

Molasses production also expanded by 18.8% to
40,947 long tons in response to higher processing
volumes as well as inefficiencies in the sugar
extraction process.

Citrus Juices and Pulp

With fruit volumes down 25.6% as a result of
hurricane damage and lower field productivity, juice

production contracted by 28.9% to 4.8mn gallons.
The largest decline was in not-from-concentrate
juices (NFC), which fell by 36.4% to 0.7mn gallons.
This was closely followed by concentrate juices with
a 27.6% reduction to 4.1mn gallons.

Consistent with the strategy of emphasizing
concentrate juices as the industry's mainstay, the bulk
of fruits went into the production of orange and
grapefruit concentrates, which enjoy a wider and
more stable market than the NFC. Even so, output
of orange and grapefruit concentrates declined by
31.0% to 3.4mn gallons and 5.9% to 0.7mn gallons,
respectively.

Production of NFC juices also fell by 36.4% to
0.7mn gallons, consisting of 0.4mn gallons of
orange and 0.3mn gallons ofgrapefruit. With Brazil
and Spain very competitively positioned and
dominating this niche market, output of NFC juices
was held to a minimum to retain just a small market
presence.

Table III.5: Production of Citrus Juices and Pulp

199/ 2000/0oll 6l6606/l06

Production ('000 gals) 8,960
Orange Concentrate 4,345
Grapefruit Concentrate 716
Not-from-concentrate (NFC) 3,899
Production (pounds)
Pulp 1,983
Sources: Belize Food Products; Citrus Company of Belize.

6,735
4,925
778
1,032

4,787
3,398
732
657

2,427 459

Domestic Production, Prices and Employment

At 0.5mn pounds, pulp production, all of which
was orange, was slightly less than one-fifth the
previous year's output. Grapefruit pulp production
was suspended until adequate quality controls at the
field and factory levels were implemented.

Other Manufacturing Production

The performance of the rest of the manufacturing
sector was largely mixed. Output of flour and
cigarettes fell by 0.2% and 4.5%, respectively. Battery
production also continued its declining trend since
2000 with one battery producer closing down
entirely during the year. On the other hand, output
of fertilizer, soft drinks and beer were all higher.
Building on the expansion in brewery capacity
effected in the previous two years, beer production
rose by 0.1%. Fertilizer production rose by 17.0%
to 27,775 metric tons in response to, among other
things, high fertilizer demand for the replanting of
banana plantations and citrus grove rehabilitation
efforts after the hurricane. Continuing the steady
growth of the past 5 years, soft drink production
also increased by 56.8% to 3.7mn cases.

Tourism

The events of September 11, 2001 in the United
States and the ensuing war against terrorism
reverberated throughout the tourism industry
worldwide. Within the CARICOM/Caribbean
region, most countries saw stay-over tourist arrivals
decline. In contrast, Belize's tourist sector,
specifically the cruise ship sub-sector, was quite
dynamic, and a surge in arrivals of stay-over bona
fide tourists at the end of 2002 counterbalanced
the downward trend exhibited earlier in the year,
leading to overall growth of 0.8% to 177,514
visitors. Approximately 71.7%, came through the
Phillip Goldson International Airport (PGIA) with
the land and sea borders accounting for the
remaining 23.5% and 4.7% of arrivals, respectively.
Air travel, which was hit hardest by the terrorist
events, contractedby 1.3% for the first time in many
years, while sea arrivals also fell by 17.0%. Offsetting
these decreases was a healthy 13.2% surge in land
arrivals.

In a positive development, two new airlines (US
Airways and AirJamaica) inaugurated flights to the

Table III.6: Bonafide Tourism Arrivals

1 ll0s 0lil I2 Sl02

Stayover Arrivals
Air
Land
Sea
Total stayovers

127,838
35,137
9,475
172,451

128,975
36,914
10,144
176,033

127,305
41,793
8,416
177,514

Cruise Ship Arrivals 49,411 40,899 271,737
Sources: Immigration Department, Belize Tourism Board, Central Bank of Belize

,4 Annual Report 2002

country during the last two months of the year. counterbalance the previous months of lower
Alongwith the addition of a new flight by American traffic.
Airlines, this positively boosted air arrivals at the
end of the year, although it was not enough to The main markets continued to be the United States

Box 3: Tourism Developments and Prospects

Developments in 2002

Despite a worldwide contraction in tourist activities after September 11', 2001, tourism performed
relatively well during 2'" '2 An intensification of marketing efforts in the major market, the United
States, was rewarded by a 0.9% rise in total arrivals of stay-over tourists, while the cruise ship sub-
sector grew exponentially as new cruise lines added Belize to their port calls. The year also saw new
investments in tourism infrastructure, enhancement of tourist sites and the training of personnel.

A major accomplishment was the construction of new immigration and customs facilities at the
northern and western land borders. Also, the southern highway rehabilitation project was almost
completed, paving the way for the promotion of tourism in the south.

To cope with the dramatic surge in cruise ship arrivals, the Belize Tourism Village, as the principal
entry port, was expanded to three terminals and is now equipped to manage six ships daily. The
enhancement of archaeological sites across the country was almost completed in 2 "'2 The first
phase of this project involved refurbishing of the Mayan temples and plans to construct amenities
such as restaurants and souvenir shops on site.

Through its Tourism Training Unit, the Belize Tourism Board provided training to approximately
2,500 individuals during the year in areas such as tour guide operations and various aspects of service
provision.

During the last quarter of the year, another major development was the inauguration of flights by US
Airways and Air Jamaica to Charlotte, North Carolina, and to Montego Bay, Jamaica, respectively.
American Airlines also added a second flight to Miami, while Continental Airlines started a weekly
flight to Newark, New Jersey.

Prospects:

During 2003, the tourism industry should accomplish the following:

The construction of a fourth terminal at the Belize Tourism Village.

The construction of the initial phases of a Tourism Village in the Toledo District.

Completion of the archaeological sites enhancement project.

Commencement of the marine parade extension project to ease the traffic congestion
presently caused by buses servicing the tourism village.

Domestic Production, Prices and Employment

and Europe, with Americans accounting for 59.2%

and Europeans for 1 .'-.. of all arrivals. An intensive
marketing campaign in the US was a significant

factor in keeping visitor volumes up during this very
difficult year for global tourism.

The number of cruise ship visitors climbed

spectacularly from 40,898 in the previous year to

271,737 in 2002. The growth was the result of
highly successful efforts at attracting several new

cruise lines to Belize and the addition of more port

calls by existing lines. For the first time since its

inception, cruise ship calls were year-round, so tourist

activity continued throughout the once dormant May
to October months.

Prices

Price pressures increased, leading to an annual

inflation rate as measured by the Consumer Price

Index (CPI) of 2.3%. Average prices of all categories

of goods and services rose except for 'C.- '-' a and

Footwear and 'Rent, Water, FuelandPower'. The largest
increase (10.4" ., was in 'Tranportand Communication'

and resulted from a tariff rebalancing by the
telecommunication company, which raised the cost

of certain basic telephone services albeit while
lowering certain call charges, increased national bus

fares and higher fuel prices at the pump.

The next largest increases were in '.\1 'Care'

(2.6" ,, 'Recreation, Education Q& Culture' (1 S.'-" and

'Food, Beverage and Tobacco' (1.2" .. More modest
increases were experienced in 'Personal Care' and

'Household Goods andMaintenance', which rose by 0.8%

and 0.4%, respectively.

On the other hand, the general price levels for
'C.;,. ':' andFootwear and 'Rent, Water, FuelandPower

declined by 1.1% and 0.6%, respectively, the latter
benefitting from lower butane gas prices in the early
months of 2002.

The relatively low to negative price changes in those

Table III.7: Quarterly Percentage Change in CPI Components by Major Commodity Group

Inflation
Mao Cr 0n 00it Weiht 2-Fe 2-M 0u 2o Rat

Food, Beverage and Tobacco
Clothing and Footw ear
Rent, Water, Fuel and Pow er
Household goods & Maintenance
Medical Care
Transport and Communication
Recreation Education, Culture
Personal Care
All items
Source: Central Statistical Office

346.6
92
167
85.3
20.1
170.1
80.4
37.9
1000

1.9
-0.5
1.5
0.7
2.2
10.5
3.6
1.3
3.2

Annual Report 2002
Cnra -a S o -fBlz

CPI categories of goods that have a high import
content reflected the 1.0% decline in the US export
price index, since approximately half of the
country's imports are sourced from the United
States.

Employment

With several sectors of the economy operating
below capacity following the storms, the
unemployment rate (measured by annual surveys
in the month of April) rose from 9.1% in 2001 to
10.0% in 2002. The labour force decreased by 0.3%
to approximately 94,172 individuals and the the total
employed labour force fell by 1.3% to 84,720
persons. Partially contributing to the rise in
unemployment was a contraction in the fishing (the
introduction of Taura resistant shrimp was too

late to affect production) and manufacturing sub-
sectors. The progressive shift within the sugar
industry towards mechanization of the harvest also
had an impact. In the tertiary sector, the largest job
losses occurred in'Trade, Restaurants & Hotels' and
'Community, Social and Personal' services. The
primary and tertiary sector activities accounted for

the largest share of the employed population.
'A ' ; Foresty and Fishing led the job market

with 22.6% of the employed labour force, while

'Trade, Restaurants and Hotels' activities accounted
for 27.0%. Secondary activities such as Construction
and Manufacturing accounted for 8.4% and 7.5%
of the employed labour force, respectively.

Table III.8: Employed Labour Force by Industrial Group

Indutrial Grop0 20ss SI

Agriculture, Forestry & Fishing
Mining and Quarrying
Manufacturing
Electricity & Water
Construction
Trade,Restaurants & Hotels
Transport and Communication
Financing, Real Estate & Business Services
Community, Social & Personal Services
Commercial Free Zone
Activities not classified elsew here
Total, All Sectors
source: Central Statistical Office

22,712
302
7,880
1,090
4,860
19,275
4,509
3,166
19,634
N.A
237
83,665

19,391
346
6,471
749
7,194
23,182
3,173
3,164
20,296
1,613
290
85,869

19,131
342
6,385
739
7,098
22,872
3,131
3,122
20,024
1,591
286
84,720

'1)

Monetary and Financial Developments

Money Supply

Monetary growth decelerated from 7.8% in 2001
to 2.2% in 2002, a development which may be

partly explained by legislative changes that cleared
the way for cambio operations and EPZ use of
offshore bank services. While private sector credit

expanded by 14.5% and was further supplemented
by DFC's lending of funds withdrawn from the
Central Bank, net domestic credit to Central
Government and loans to statutory bodies plunged
in view of the reduced fiscal deficit and additional

recourse to external financing in August and
December. A significant portion of these borrowed
funds was used to refinance Central Government's

external debt portfolio and simultaneously reduce
DFC's liabilities to the Central Bank and the latter's
long-term external liabilities. Even so, the net foreign

asset component of the money supply declined by
12.9% due to higher outflows for imports, dividend
and profit repatriation, and external debt payments.

Contrasting sharply with its 17.6% increase in the

previous year, M1 declined by 1 8" the first such

contraction since 1985. Currency holdings of the

public rose by $1.6mn, but demand deposits were

$8.3mn lower with importers making overdue

payments to foreign creditors using foreign exchange

advanced by commercial banks during the latter

half of the year.

Building further on its 3.1% increase in 2001, quasi-
money rose by 4.3%, the growth primarily reflecting
a $29.4mn increase in time deposits that reversed
the latter's $12.1mn decline in 2001. Most of this
occurred during the first two quarters of the year
as commercial banks actively pursued new time

deposits contracts in order to accommodate the
robust expansion in loans. Individuals and a private
utility were the main contributors to the expansion.

Table IV.l: Factors Responsible for Money Supply Movements
$mn
Positon a at Cange

Net Foreign Assets
Central Bank
Commercial Bank

Net Domestic Credit
Central Government (Net)
Other Public Sector
Private Sector

Central Bank Foreign Liabilities(Long-term)

Other Items (net)

Money Supply M2

325.8
243.9
81.9

822.5
41.9
94.5
686.1

102.0

80.4

965.9

294.2
237.3
56.9

986.3
110.9
97.0
778.4

93.5

146.1

1,040.8

256.3
223.3
33.0

951.2
30.4
29.5
891.3

18.5

125.6

1,063.4

-37.9
-14.0
-23.9

-35.1
-80.5
-67.5
112.9

-75.0

-20.6

22.6

Annual Report 2002

Table IV.2: Money Supply

$mn

Duing
Dec 2000 Dec 200 Dec 200 200

Money Supply (M2)

Money Supply (M1)
Currency with the Public
Demand Deposits

310.2
96.0
214.2

Quasi-Money 655.7
Savings Deposits 184.5
Time Deposits 471.2
*Includes Non-Residents Foreign Currency Time Deposits of

Holdings by private financial institutions and

statutory bodies also rose with an almost equal

amount being withdrawn by non-residents, other
organizations, cooperatives and credit unions.

Net Foreign Assets

The acceleration in loans to the private sector plus

higher external debt payments caused a $37.9mn

(12.9%) contraction in the banking system's net

foreign asset holdings with declines in Central Bank

and commercial banks' net foreign assets of

$14.0mn and 2'. 9mn, respectively.

The Central Bank's foreign asset holdings dipped

by $10.9mn with outflows of :.:,4.3mn and

inflows of $673.4mn. Approximately 84.0%

($565.6mn) of the latter came from loan

disbursements to the public sector (including

Table IV.3: Net Foreign Assets of the Banking System
$mn

Position asa.hag
I- 666 I- 66Duri6n6

Net Foreign Assets of Banking System

Net Foreign Assets of Central Bank
Central Bank Foreign Assets
*Central Bank Foreign Liabilities(Demand)

325.8 294.2 256.3

243.9
245.6
1.7

237.3
240.2
2.9

223.3
229.3
6.0

Net Foreign Assets of Commercial Banks 81.9 56.9 33.0 -23.9
Commercial Bank Foreign Assets 138.7 133.7 113.5 -20.2
#Commercial Bank Foreign Liab. (Short-Term) 56.8 76.8 80.5 3.7
* Does not include Central Bank Long-term Foreign Liabilities of $18.5mn
# Does not include Non-residents Foreign Currency Time Deposits of $42.4mn held with Commercial Banks.

965.9 1,040.8 1,063.4

364.8
105.2
259.6

676.0
216.9
459.1
$42.4mn

358.1
106.8
251.3

705.3
216.8
488.5

22.6

-6.7
1.6
-8.3

29.3
-0.1
29.4

-37.9

-14.0
-10.9
3.1

Monetary and Financial Developments

:"': .-,__i from the Bear Stearns bond issue for
debt refinancing) and mortgage securitization
proceeds. Purchases from BSI contributed another
"'.2 i.,i, (9.3%). The remainder consisted of grants,
purchases from a commercial bank, revaluation
gains and interest earnings. Outflows were
dominated by sales of "493.9mn to Central
Government and statutory bodies with the external
debt refinancing programme accounting for much
of the 107.5% increase. Although sales to cover

BEL imports of fuel and debt servicing rose by
81.1%, sales to the commercial banks declined by
16.2% to $128.1mn as banks were able to fund
some transactions with US dollars received via the
citrus industry's shift from domestic to offshore
financing.

A $3.1mn increase in the Central Bank's short-term
foreign liabilities reflected increases in the EU
'Banana Support Programme' deposits and the

Box 4: Casa de Cambios

Exchange Control Regulations that allowed the licensing and operation of Cambios businesses that
can buy and sell foreign exchange became effective in January 21 2

After successful lobbying to amend certain conditions in the Cambio legislation, eleven companies
were issued licenses in April. Another two companies were licensed in August, bringing the total
number of Cambios to thirteen during 21 '2

The legislation calls for applicants to satisfy certain fit and proper criteria before qualifying for a
license. Included among these conditions are the need for proper business and financial competence,
honesty and proof that the business is financially sound and has capitalized a minimum of
BZ$150,000 in unencumbered equity.

The license authorizes the Cambio to buy and sell foreign exchange (up to certain limits) but
prohibits the purchase of foreign currency arising from the sale of the country's major export
commodities, namely, sugar, citrus, banana and shrimp. All purchases of foreign currency must be at
the official exchange rate, although a maximum service fee of 6.25% is allowed on sales. The
licensee is also required to sell 5.(0"' of its gross hard currency purchases to the Central Bank at the
official exchange rate. Reporting requirements are similar to those required from the commercial
banks.

During the first nine months of operation, Cambios reported foreign currency purchases of $12.6mn
from the public and sales of $11.9mn. The data provided by the Cambios show that purchases and
sales amounts to 1.6% and 1.3%, respectively, of the national total.

SAnnual Report 2002
Cenra Bank .f Belize

CARICOM Bilateral Clearings Balance that

outweighed withdrawals from CDB's 'Ordinary

Capital Resources' account.

Commercial banks' net foreign assets also declined

for the second consecutive year with gross foreign

assets being drawn down by ^" 2i- l-i as payment

obligations for imports, loan servicing and earnings

repatriation coincided with lower inflows from

citrus and banana. Short-term foreign liabilities rose

slightly with increases in IBC demand deposits and

foreign cheques outstanding being only partly offset

by a decline in amounts owed to foreign affiliates.

Net Domestic Credit

Increased access to foreign financing and a reduced

fiscal deficit enabled a 3.6% contraction in net

domestic credit. This followed the rather robust

19.9% expansion in 2001 and average increases of

14.0% over the previous five years. While private

sector loans rose by 14.5%, credit to statutory
bodies and net credit to Central Government

declined.

Chart IV.: Annual Change in Net Foreign Assets of
The Central Bank & Commercial Banks

3a0

2a

-- Corm-ercid Banks -*- Central Bank

December inflows in the form of loans, grants and

the privatization of the Port were largely

instrumental in bringing about an $80.5mn reduction

in net domestic credit to Central Government.

Apart from clearing its Central Bank overdraft, the

Government was also able to add $41.3mn to its

total deposit holdings. Other transactions led to a
$6.6mn increase in access to commercial bank

overdraft financing.

Table IV.4: Net Domestic Credit Summary

Postio a atC nge

Total Credit to Central Government
From Central Bank
From Commercial Banks

Less Central Government Deposits

Net Credit to Central Government
Plus Credit to Other Public Sector
Plus Credit to the Private Sector
Net Domestic Credit of the Banking System

149.8
62.7
87.1

107.9

41.9
94.5
686.1
822.5

166.0
78.2
87.8

55.1

110.9
97.0
778.4
986.3

9 97W 9 99 o 01

126.8
63.8
63.0

96.4

30.4
29.5
891.3
951.2

-39.2
-14.4
-24.8

41.3

-80.5
-67.5
112.9
-35.1

Monetary and Financial Developments

In secondary market trade, commercial banks sold
$31.5mn in Treasury Bills particularly after the
Central Bank raised the cash reserve requirement
by 2.0% around the beginning of the fourth quarter.
The private sector purchased $8.2mn and the Central
Bank took up the balance. The Bank also took up
an extra $30.0mn worth of new Bills in October as
Central Government increased the total brought to
the market from $70.0mn to $100.0mn at around
the same time that the commercial banks were
reducing their existing holdings. In related
developments, Central Government's 10.0%
debentures valued at $2.2mn matured and were not
reissued.

As one component of the debt restructuring effort,
Central Government assisted DFC to reduce its
outstanding Central Bank loan balance by $69.0mn,
which largely accounted for the $67.lmn decline in

credit to statutory bodies over the period reviewed.
Commercial bank lending to the sector rose by
$1.5mn as one bank's purchase of $5.0mn in DFC
bonds, together with advances to the Belize
Marketing Board and local government entities,
exceeded loan payments by DFC, the Belize Port
Authority and RECONDEV

With activity by non-bank institutions such as the
DFC easing up, commercial banks took the

opportunity to increase the pace of lending to the
private sector for the third consecutive year. This
was led by a $49.9mn increase in loans for the
tertiary sector, the bulk of which underwrote an
upsurge in real estate transactions. While personal
loans and funding for distributive trade accelerated,
lending for tourism related activity slowed
somewhat. In the secondary sector, substantial
increases in funding for the private utilities and

Table IV.5: Sectoral Composition of Commercial Banks' Loans andAdvances
$mn
Psito as at Changes
Duing
Dec 2000 Dec 200 Dec 200 200

Primary Sector
Agriculture
Marine Products
Forestry
Mining & Exploration

Secondary Sector
Manufacturing
Building & Construction
Utilities

Tertiary Sector
Transport
Tourism
Distribution
Other*

Personal Loans
TOTAL

77.3
65.5
10.1
0.8
0.9

198.3
44.5
153.3
0.5

252.3
32.9
25.8
133.0
60.6

96.2
73.8
16.4
1.3
4.7

226.5
44.3
177.7
4.5

292.8
40.1
44.0
136.3
72.4

116.7
77.5
25.6
1.7
11.9

253.6
23.0
201.7
28.9

342.7
27.2
51.8
150.5
113.2

167.5 173.0 191.5

20.5
3.7
9.2
0.4
7.2

27.1
-21.3
24.0
24.4

49.9
-12.9
7.8
14.2
40.8

18.5

695.4 788.5 904.5 116.0

* Includes government services, real estate, financial institutions, professional services & entertainment.

27

SAnnual Report 2002
Cenra Bank of Bmeliz

commercial construction coincided with net
repayments from manufacturers that principally
reflected the shift from domestic to offshore
financing of the citrus industry. Financing for the
primary sector facilitated expansion of marine
products (mainly shrimp and tilapia farming),
"mining & exploration" as well as recovery in the
hurricane affected banana industry.

Liquidity

As the fourth quarter approached, the Central Bank

took steps to address the liquidity overhang that

had been developing in the banking system since

the latter part of 1998. Cash reserve requirements

were raised from 3.(0'" to 5.0% for average savings

and time deposit liabilities, and from 5.0% to 7.('" ,

for average demand deposit liabilities effective

September 28h, 211112 A month later, the cash

reserve requirements on average demand, savings

and time deposit liabilities were harmonized at 6.0"'...

This tightening of monetary policy coupled with

an 8.9% increase in the loans/deposits ratio of the

commercial banks drove excess statutory liquidity

of the commercial banks down by approximately

50.('" to $60.8mn. Holdings of approved liquid
assets fell by $50.0mn against a $10.9mn increase in

the required level of liquid assets. The contraction

was shown mostly in a $31.5mn reduction in
holdings of Treasury bills and a ^22-'-' 7', decline in
balances held with the Central Bank.

Excess cash reserves (the immediate target of the

policy change) subsided from $51.5mn at the end

of 2001 to $3.6mn with daily average holdings

falling by -'22 2'ir while the required level of cash

reserves rose by '^2 7mn. After increasing by
$6.3mn in the first quarter, declines of $12.5mn

and $10.6mn in the second and third quarters

occurred in consonance with the upswing in lending
The tightening of policy in late September and

Table IV. 6: Commercial Banks' Holdings of Approved Liquid Assets
$mn
Position asa.hne
I- IIII- I IDurIing

Holdings of Approved Liquid Assets
Notes and Coins
Balances with Central Bank
Money at Call and Foreign Balances (due 90 days
Treasury Bills maturing in not more than 90 days
Other Approved assets
Required Liquid Assets
Excessl(Deficiency) Liquid Assets
Daily Average holdings of Cash Reserves
Required Cash Reserves
Excessl(Deficiency) Cash Reserves

348.4
22.1
71.0
121.4
65.1
68.8
216.8
131.6
72.2
32.4
39.8

354.3
22.9
87.2
97.2
64.6
82.4
232.5
121.8
86.6
35.1
51.5

304.2
27.4
64.8
91.7
33.1
87.2
243.4
60.8
64.4
60.8
3.6

-50.0
4.5
-22.3
-5.5
-31.5
4.8
10.9
-60.9
-22.2
25.7
-47.9

Monetary and Financial Developments

Chart IV.2: Excess Liquid Assets

140

120

100

| 80
80

E 60

20

93 94 95 96 97 98 99 00 01 02

clearing of certain pending external obligations

contributed to an additional $31.1mn decline during

the fourth quarter.

Interest Rates

Prior to the shift in monetary policy, the weighted

average lending rate of the commercial banks

showed a tendency to move downward as the

commercial banks appeared to be engaging in more

competitive behaviour in response to the recent

Chart IV.4: Quarterly Change in Excess Liquidity

160

140--

120I

100- 4

60
S60 - - -- -^

40

20-- 4

0
Q3-'01 Q4-'01 Q1-'02 Q2-'02 Q3-'02 Q4-'02

S30

20

Chart IV.3: Excess Cash Reserves

93 94 95 96 97 98 99 00 01 02

addition to their number. Declines were across the

board with weighted average rates on existing

portfolios of personal, commercial, residential

construction and other loans all decreasing. At the

end of the year, weighted average interest rates on

new loans were generally lower than rates applied

to such loans a year earlier. While the weighted

average deposit rate remained relatively flat during

the first half of the year, the increase in cash reserve

requirements and the further surge in lending forced

commercial banks to actively seek new deposits,

Chart IV.5 : Quarterly Change in Excess Cash
Reserves

0 I
Q3-'01 Q4-'01 Q1-'02 Q2-'02 Q3-'02 Q4-'02

SAnnual Report 2002
Ceta Bank of Bmeliz

Table IV.7: Commercial Banks' Weighted Average Interest Rates

Percentages

I- III I- II I I I-irl~r II

Weighted Lending Rates
Personal Loans
Commercial Loans
Residential Construction
Other
Weighted Average

Weighted Deposit Rates

Demand
Savings/ Cheque
Savings
Time
Weighted Average

Weighted Average Spread

n.a. not available

which helped to push the weighted average deposit

rate up by 20 basis points to 4.5%. With the weighted

average lending rate having fallen by 90 basis points

to 14.5%, the spread accruing to the commercial

banks narrowed from 11.1% to 10.0"(,.

Chart IV.6: Commercial Banks' Weighted Average Interest Rate Spread

12

11

7 It 1 I1 I I L
7

6

5- - - - - - -
5
4 ---------------------------------

4
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02

16.5
15.5
14.7
14.5
15.8

n.a.
n.a.
5.4
7.2
5.0

10.8

16.8
14.8
14.0
12.6
15.4

0.2
n.a.
5.4
6.1
4.3

11.1

15.9
14.3
13.3
10.1
14.5

0.4
5.2
5.1
6.5
4.5

10.0

-0.9
-0.5
-0.7
-2.5
-0.9

0.2
5.2
-0.3
0.4
0.2

-1.1

'1)

Central Government Operations and Public Debt

Central Government Operations

Strong revenue growth and reduced outlays enabled
a $72.7mn improvement in the overall fiscal deficit
(from 8.2% of GDP to 3.8% of GDP) during the
year. Current transactions yielded a surplus of
$91.4mn (4.9% of GDP) as a marginal increase in
current expenditures was eclipsed by a 14.4%
expansion in current revenues.

The $53.7mn growth in the latter reflected healthy
increases of $31.8mn in tax and $21.9mn in non-
tax revenue receipts over the period reviewed. Most
of the increase in tax revenue was due to a 20.2%
rise in revenues from international trade &

transactions. Revenues from goods & services,
income and property taxes rose moderately. The
$21.9mn rise in non-tax revenue reflected higher
receipts from the repayment of old loans 'pfi n..ivp il' -
by DFC, dividends from privatised enterprises and
collections by other government departments.

At $67.5mn, capital revenue was 8.5% below the
amounts received in the previous year with the
privatization of the Port accounting for $40.0mn
or 59.2% of these inflows. Grant receipts more
than doubled to $31.7mn due to the early arrival
of funds that were originally programmed for
receipt in 2003.

Table V.1: Government of Belize-Revenue and Expenditure

Ja-De Jan-De Jan-De Chang
durin
2000 gg0 200 200

Current Revenue
Tax Revenue
Non-Tax Revenue
Current Expenditure
CURRENT BALANCE
Capital Revenue
Capital Expenditure (Capital II local sources)
OPERATING SURPLUS
Total Grants
(of which non-project)
Total Revenue and Grants
Total Capital Expenditure
of which Hurricane Reconstruction
Total Expenditure
OVERALL BALANCE
balance excluding Hurricane ERF
FINANCING
Domestic Financing
Financing Abroad
Other

Ratio of Overall Balance to GDP (%)
Sources: Central Bank of Belize; Ministry of Finance

31

349.8
286.6
63.2
308.4
41.4
49.2
69.4
21.2
17.0

416.0
247.5
20.3
555.8
(139.9)
(119.6)
139.9
(74.0)
213.5
0.3

(8.4)

372.1
322.3
49.8
333.7
38.4
73.8
81.6
30.6
12.8

458.7
267.4
57.8
601.1
(142.4)
(84.6)
142.4
72.7
69.8
(0.1)

(8.2)

425.8
354.0
71.7
334.4
91.4
67.5
108.8
50.1
31.7

524.9
260.3
7.8
594.7
(69.8)
(61.9)
69.8
(213.8)
284.4
(0.8)

53.7
31.8
21.9
0.7
53.0
(6.3)
27.1
19.6
18.9

66.3
(7.1)
(50.0)
(6.4)
72.7
22.7
(72.6)
(286.5)
214.6
(0.7)

(3.8)

SAnnual Report 2002
C t B o

Chart V.1: Central Government's Development Expenditure

100%

80%

60%

40%

20%

0%

1999 2000 2001 2002

* Capital II

E Capital III

Current expenditure rose by 0.2% to $334.4mn, a
considerable deceleration from the 8.2% increase
recorded in 2001. Except for wages, salaries and
pensions, which rose by a total of 14.5%, all
categories of current outlays contracted. The
reduced rate of expansion was partly accounted
for by the downsizing of the Ministries of
Education and Agriculture through the creation of
new statutory bodies (University of Belize and Belize
Agricultural Health Authority) in the previous year..
The expenditures for these new statutory bodies
were father recorded under the developmental
expenditure categories.

After rising by 8.1% in 2001, capital expenditure
recorded a decrease of 2.7% to a total of $260.3mn
as a $27.1mn expansion in Capital II expenditure
was offset by declines in Capital III expenditure
and capital transfers of $13.9mn and $20.3mn,
respectively. The larger outlays under Capital II were
for projects such as land development &
acquisitions, general infrastructure and counterpart

funding for the southern highway which together
accounted for 18.2% ($23.4mn) of the amount
budgeted. The balance of $105.1mn covered a
multiplicity of small projects ranging from tertiary
level scholarships to hurricane preparedness.

A substantial portion of Capital III outlays
(approximately $76.0mn) was also used to fund a
wide cross-section of small projects. The remaining
balance of $56.2mn was devoted to rehabilitation
works on the Southern Highway, 'programmed
development projects', infrastructure projects,
housing projects, municipal roads and drainage, and
the Social Investment Fund (SIF).

The overall deficit of $69.8mn was financed mainly
from external sources with foreign loan
disbursements of $475.3mn outweighing
amortization payments of $153.7mn, and a
$37.2mn sinking fund deposit. Net financing from
the Central Bank and commercial banks was
negative as government increased its deposits while

Central Government Operations and Public Debt

reducing overdraft balances. Government also made
prepayments on loans for the DFC amounting to
$137.9mn. Financing received from non-bank
entities totaled $6.0mn.

Central Government's Domestic
Debt

The Government's domestic debt declined by
$36.6mn during the year as a $63.9mn net
contraction in overdraft balances, amortization
payments of $1.4mn and retirement of $6.2mn
worth of debentures were only partly offset by a
new Treasury Bill issue valued at $30.0mn and a
loan disbursement of $5.0mn from the Belize Bank.
These transactions resulted in a domestic debt to
GDP ratio of 9.4% as compared to 12.1% in 2001.
After starting the year at $65.5mn, the government's
overdraft with the Central Bank was completely
cleared by the end of December as receipts from
the sale of the Port and and the new Treasury Bill
issue were posted to the account.

The largest amortization payment of$6.2mn went
to holders of debentures that matured during the
year. Other smaller payments went to the Belize Bank
Limited for the Cohune Walk Housingproject loan,
the DFC for a debt-restructuring loan and the GOB
debt for nature swap account.

As a result of activity in the primary and secondary
markets, the Central Bank raised its holdings of
Treasury Bills by a total of $53.3mn during the year.
Treasury Bills valued at $23.3mn were purchased
from the commercial banks in secondary market
transactions and the Bank also subscribed to the
entire new Treasury Bill issue of $30.0mn that was
brought to the market by the government. Non-
bank institutions and individuals also purchased a
total of $8.2mn worth in secondary trade as the
commercial banks further reduced their holdings
to accommodate a surge in lending.

Chart V.2: Sources of Central Government's Domestic Debt

Central Commercial Social Other
Bank Banks Security
O 2000 2001 mE 2002

100.0
90.0
80.0
70.0
.2 60.0
E 50.0
N 40.0
30.0
20.0
10.0

Annual Report 2002

Table V.2: Central Government's Domestic Debt

Loans & Advances 60.8 95.6 35.2
Treasury Bills 70.0 70.0 100.0
Treasury Notes 24.0 24.0 24.0
Defence Bonds 15.0 15.0 15.0
Debentures 6.2 6.2
Total 176.0 210.8 174.2
Sources: Ministry of Finance, Central Bank of Belize

Interest payments totaled $11.5mn, of which
approximately 48.7% ($5.6mn) was paid on Central
Government's overdraft balance with the Central
Bank. Another $4.3mn went to holders of
government securities and debentures. The latter
included $2.6mn to Treasury Bill holders, most of
which (approximately 80.8%) went to the
commercial banks. Holders of Treasury Notes
received $1.0mn and another $0.4mn was paid to
Defence Bond holders. Interest payments on loans
totalled $1.6mn and was shared among the DFC,
the Belize Bank and the GOB debt for nature swap.

External Public Debt

The disbursed outstanding external debt of the
public sector rose by 18.1% to $1,149.0mn, raising
the debt to GDP ratio from 56.0% in 2001 to 61.9%
in 2002. Central Government's share of the debt
stood at $1,009.3mn, which represented 54.4% of
GDP compared to a ratio of 39.2% in 2001. While

Table V.3: Financial Flows on

Central Government's share rose to 87.8% of the
total debt, the share for the financial and non-
financial public sector fell from 25.8% to 10.8%
and 4.1% to 1.4%, respectively. The decline in the
former was due to the privatization of the Port,
which caused some $23.8mn to be re-classified as
private sector debt although it remains a contingent
liability of the government. The repayment of loans
for DFC under the debt refinancing programme
accounted for the reduction in the external
indebtedness of the financial public sector. The
share of the debt from bilateral and multilateral
sources remained steady at approximately 21.0%
and 26.0%, respectively. On the other hand, the
share from commercial banks rose from 46.7% to
48.9%, while debt contracted from commercial
suppliers fell from 6.0% to 3.8%.

Disbursements and upward valuation adjustments
totalled $482.2mn and $10.5mn, respectively.
Amortization payments totalled $293.1mn with

Public Sector External Debt
$mn

1 202II0 1I2

Disbursements
Repayments
Net Financing Flows
Interest Payments
Net Transfers

409.5
69.4
340.1
39.1
301.1

219.9
70.3
149.6
60.1
89.5

482.2
293.1
189.2
55.7
133.5

Central Government Operations and Public Debt

Box 5: External Debt Restructuring, 2002

During August, the Central Government successfully concluded a public offering of US$125.0mn
on the US market through its underwriter, Bear, Stears and Company Inc. The notes, which were
offered at 9.5% are due in 2012, and were earmarked for the refinancing of the public sector external
debt. To this end, the net proceeds (US$119.2mn) from the offeringwere used to prepay certain
public sector external debts and to establish a sinking fund to repay a central government bond that
matures in 2005. The prepayments included US$74.4mn worth of debt which related to the DFC.
This refinancing reduced short-term foreign liabilities by US$72.5mn and will result in debt service
savings of L 7mn over a ten-year period.

Table V.4: Use of Proceeds from Bond Issue
(US$ '000)

SUPPLIERS CREDIT AND COMMERCIAL LOANS:
Amtrade-Gefco Purchase of Well Drilling
(BBPL) Barclays Bank P. L. C.
(CASL) Crown Agents Services Ltd.
(ABM) Allfirst Bank of Maryland
(CFSC) Caterpillar Financial Services
Provident Bank & Trust of Belize
International Bank of Miami
Royal Merchant Bank, Trinidad
Deutche Bank of Germany- La Democracia
SINKING FUND:
Salomon Smith Barney
TOTAL

99,200
813
4,261
1,713
2,917
1,656
10,206
75,607
1,474
553
20,000
20,000
119,200

prepayments under the debt refinancing programme
of 2002 accounting for some $198.4mn (see Box
5). These prepayments were excluded from
calculations in which the debt service ratio of 15.2%
was derived.

Approximately 98 <*"" of total disbursements during
the year went to Central Government. Commercial
creditors provided $368.3mn, including $250.0mn
from Bear Stearns & Co, and $89.4mn from the
International Bank of Miami (IBon) to fund
various investments in the country. Another $52.7mn
came from multilateral creditors such as the IDB,

which disbursed $28.5mn for projects such as the
construction of the Southern Highway, tourism
development, and hurricane rehabilitation among
others. Bilateral creditors (principally the Republic
of China/Taiwan) supplied '4.2mn, of which
-.4-.8mn was used for various housing projects.

New Holland of Brazil and the CDB made
disbursements of $1.3mn and $2.4mn, respectively
to DFC. The non-financial public sector (namely
the Port prior to privatization) also received a single
disbursement of $3.3mn.

SAnnual Report 2002
Central Ban o-fBeli.ze

Table V.4: Public Sector External Debt by Source

Ousadn neeto Ousadn
Debt & Other Valuation DeIb
31/12/2001 Disbusement Amortizaton Charges Adjusments 12/31/200

Bilateral 206.7 54.2
Multilateral* 253.4 55.2
Commercial Banks* 454.9 359.7
Suppliers Credit 58.3 13.2
Total 973.2 482.2
* Effective 31/12/02 the Port Authority loans were classified as

As a consequence of the debt refinancing
programme, Central Government amortization
payments increased to $153.7mn. Approximately
$131.3mn went to commercial creditors, the largest
of these payments being $65.4mn to the
International Bank of Miami and $23.1mn to
commercial suppliers. Payments on bilateral loans
amounted to $15.2mn, including $6.7mn to the
ROC, $4.4mn to the UK Government and $1.3mn
to the Government of the United States.
Multilateral agencies such as IBRD, CDB and the
OPEC Fund received a combined total of $7.1mn.

16.3 8.5 3.0
11.7 11.0 3.2
236.9 32.8 4.2
28.1 3.4
293.1 55.7 10.5
private sector debt following its full privatization.

247.6
296.2
561.9
43.4
1,149.0

Amortization payments by the financial public sector
amounted to $136.2mn, of which $132.7mn was
paid to commercial creditors, $3.1mn to multilateral
agents and $0.4mn to bilateral agents. At $104.0mn,
loan repayments to the IBoM accounted for 78.3%
of payments to commercial creditors during the
year. Amortization payments by the non-financial
public sector totaled 2i, 1-, ofwhich, 43.8% went
to multilateral creditors, 37.5% to commercial banks
and 18.7% to bilateral creditors.

Interest and other payments fell by 7.3% to $55.7mn
in 2002. Central Government accounted for
approximately 74.5% '.4 t.5mn) of these outflows

Chart V.3: Sources of Public Sector External Debt

600.0
500.0
400.0
300.0
200.0
100.0
0.0
2000 2001 2002

D Bilateral M Multilateral m Commercial Banks i Suppliers Credit

Central Government Operations and Public Debt

with sizeable payments going to commercial
creditors such as the Royal Merchant Bank,
Salomon Smith Barney, Citibank of Trinidad and
IBoM. Other Central Government payments to
multilateral and bilateral creditors totalled $8.5mn
and $8.0mn, respectively. Interest payments by the
financial public sector amounted to $11.8mn,
including $9.5mn to commercial creditors and the
balance to multilateral agents and bilateral lenders.
Approximately 73.1% of the interest paid by the
non-financial public sector went to commercial

creditors, while the remaining 12.2% and 14.7%
went to bilateral and multilateral creditors,
respectively.

The appreciation of the Euro, Sterling and Dinar
against the US dollar led to upward valuation
adjustments on loans denominated in these
currencies during the year. The upward adjustment
of euro, sterling and dinar-denominated loans
totaled $7.5mn, $2.1mn, and $0.9mn, respectively.

Annual Report 2002
SAnnual Report 2002
C t Bn of Bl -

Foreign Trade and Payments

During 2002, economic transactions in the external

sector resulted in net outflows of $10.9mn. Gross
international official reserves consequently declined

from $240.2mn to $229.3mn, the equivalent of 3.2

months of imports.

The year was notable for improvements in the
external trade and current account positions after the

previous five consecutive years of expanding deficits.

The current account deficit declined by $41.5mn to

$328.5mn (17.7% of GDP) with the narrowing being
mostly due to a contraction in the visible trade gap.
The latter benefited from activity in the Commercial

Free Zone (CFZ) where export sales rose substantially

faster than the growth in imports. A marginal rise
in invisible trade outflows was recorded while current

transfer receipts dipped due to a fall-off in
remittances from abroad.

The current account deficit was mostly financed by

additional external borrowings undertaken by the

public and private sectors and, to a lesser extent, by
foreign direct investment inflows.

Merchandise Trade

International trade volume expanded as exports

(f.o.b.) and imports (fob) grew by 14.2% and 3.6%,

respectively. The visible trade deficit consequently

contracted by 11.1% to $376.5mn.

Activities in the CFZ featured prominently in the

trade sector as an $81.3mn rise in total exports was

solely due to the estimated $99.3mn increase in CFZ

sales. On the other hand, the value of domestic

exports remained stable. Gross imports rose by
'4.3mn to $995.9mn as a 67.7%0 increase in imports

Table VI.1: Balance of Payments Summary and Financing Flows
$mn
2000 II. II.

CURRENT ACCOUNT
Visible Trade
Invisible Trade
Services
Factor Income
Current Transfers
CAPITAL ACCOUNT
FINANCIAL ACCOUNT
NET ERRORS & COMMISSIONS
OVERALL BALANCE
FINANCING
Memo Items
Import cover in months
Current AccountlGDP Ratio (%)

-330.9
-405.2
-45.2
68.3
-113.5
119.4
-4.5
417.8
20.9
103.3
-103.3

3.2
(19.9)

-370.0
-423.5
-44.8
105.0
-149.8
98.4
2.3
355.8
4.9
-5.5
5.5

3.2
(21.3)

-328.5
-376.5
-45.3
105.6
-150.9
93.3
22.9
289.4
5.4
-10.9
10.9

3.2
(17.7)

Foreign Trade and Payments

Table VI.2: Balance of Payments MerchandiseTrade

$mn
2000I6 2001]6 2002I6

Goods Exports, f.o.b.
Goods Imports, f.o.b.
Visible Trade Balance

into the CFZ overshadowed a 6.1% decrease in

imports into the customs territory.

Domestic Exports

Notwithstanding the dampening of agricultural and

marine production as a result of storm damage in

late 2001, the value of domestic exports was stable,

declining only marginally by $0.2mn to $322.3mn.

This resiliency was due to a 25.0% increase in non-

traditional exports that offset a 2.4% contraction in

traditional exports.

Except for citrus, banana and garments, the value

of all domestic exports increased. Sugar export

value rose in response to larger sale volume, unlike

the previous year when production and sales had

been negatively affected by hurricane. Molasses

benefited from increases in both sale volume and

price. Despite a fall in export volume, earnings from

marine products and sawn woods rose in response

to price improvements. In the marine sub-sector,

farmed shrimp production declined due to the late

stocking of ponds and the effects of the Taura virus,

while the conch catch fell due to the disruption of

this species' habitat by the hurricane and storm in

Table VI.3: Domestic Exports

666 2000 26

Traditional Exports 371.1
Sugar* 74.2
Citrus Juices** 118.7
Citrus Concentrate 94.5
Not-from-Concentrate 24.2
Molasses 0.3
Bananas 65.8
Marine** 67.6
Garments 39.8
Sawn Wood 4.7
Non-traditional Exports 28.9
Total 400.0
Source: Central Statistical Office
* Based on estimates and not sales
** Value of export shipment and not sales.

563.6
968.8
-405.2

538.1
961.6
-423.5

619.4
995.9
-376.5

295.3
59.4
95.1
88.6
6.5
1.6
42.8
63.7
30.4
2.3
27.2
322.5

288.3
65.9
78.9
64.0
14.9
2.7
41.0
67.7
29.5
2.6
34.0
322.3

)Annual Report 2002
) Annual Report 2002
Cnr Ban of Beliz-e

late 2001. Exports of non-traditional products,
including papaya, rose mostly due to larger sale
volumes. On the other hand, supply constraints
arising from the combination of low input usage
on farms and hurricane losses pushed citrus exports
lower. Despite rapid replanting and rehabilitation
efforts after the 2001 hurricane, banana export
volume fell with the corresponding revenue decline
being exacerbated by a $1.43 reduction in the
average box price. In a bid to ameliorate the
progressive reduction in prices, the industry made
efforts to diversify markets and increase value added
by varying its packaging of the product.

Sugar and Molasses

Sugar exports rebounded in 2002 after declining in
each of the previous two years. Although the
average price per pound slipped from $0.15 in 2001
to $0.14 in 2002, revenues rose by 11.2% due to a
13.8% rise in volume to 102,545 long tons.

Even with this improvement, the processor
reported its third consecutive year of loss, although
not as large as that suffered in the previous years.
The loss not only reflected the reduction in world
sugar prices, but also a weaker Euro/US dollar
exchange rate, and lower cane quality (due to high
mud levels) that caused the tons cane to tons sugar
ratio to move from 9.86 to 10.34.

Exports to the EU totaled 48,929 long tons
('.4.7mn), as compared to 44,633 long tons
($37.7mn) in 2001. Unlike the previous year when
a downward adjustment compensated for the pre-
shipment of part of that year's quota in 2000, the
EU Protocol Sugar was back to its usual quota
level. On the other hand, the sale of Special
Preferential Sugar (SPS) contracted as no additional
allocation was received, unlike the previous year
when other suppliers had failed to fill their quotas.
Gradual reductions in SPS exports are expected
with the implementation of the "Everything But

Table VI.4: Exports of Sugar and Molasses
($mn)

Sugar (long tons) 107,597 74.2 90,128 60.5 102,545 67.3
E.U. (Quota long tons) 54,855 51.5 44,633 37.7 48,929 43.7
USA(Quota long tons) 11,015 8.3 10,858 8.8 11,014 9.6
Other (World, long tons) 41,727 14.4 34,637 14.0 42,602 14.0
Molasses 33,424 0.4 31,228 1.6 36,482 2.8
Sources: Belize Sugar Industries, Central Statistical Office
* Reflects actual sales value as reported by the processor and not an estimate of exports value
as reported by the CSO.

Foreign Trade and Payments )

Arms" (EBA) program, which started in 2001 and
will be fully implemented by 2009. (The EBA
program grants immediate duty and quota-free
access to all products, including sugar but excluding
arms and ammunition, coming from the world's
48 least-developed countries (LDC's)). On the
compensatory side, the SPS sugar price rose by
12.2%, which, alongwith lower freight rates, caused
the average price to improve by 3.7% to US$0.20
per pound.

The US quota was 11,014 long tons, an increase of
156 long tons over the previous year. Although
this quota is fixed annually, small variations around
the amount are allowed, once compensatory
adjustments in deliveries are made in the subsequent
quota year. The small volume increase coupled with
a US$0.01 per pound price improvement resulted
in an 8.7% rise in export value to $9.6mn.

Residual sales to the world market expanded by
23.0% to 42,602 long tons. However, revenues
declined by 0.4% to $14.0mn as the average price
per pound fell from US$0.09 to US $0.07 in
response to positive harvest growth and burgeoning
global inventories. To improve margins, the
processor courted the CARICOM market,
promoting sales of bagged brown sugar and
initiating sales of plantation white sugar, products
that both command higher prices. With the closure
of several sugar factories in CARICOM and sugar

shortages occurring in countries like Trinidad &
Tobago and Jamaica, the growth outlook in this
market appears rather favourable.

Exports of molasses rose by 16.8% to 36,482 long
tons with earnings rising by 72.8% to $2.8mn. The
latter reflected a substantial recovery in prices (from
$52.81 to $78.09 per long ton) due to the upward
climb in prices for grain substitutes in animal feed
during 2002.

Citrus Products

With citrus deliveries and production of concen-
trates and juices both declining, export sales of cit-
rus products experienced reductions of 47.7% in
volume and 33.8% in value. The revenue loss was
however partly ameliorated by an overall strength-
ening in orange juice prices during the year.

Exports of concentrate juices amounted to 3.7mn
gallons valued at i'.3mn, down 2. mn gallons and
$21.7mn from the previous year. Orange
concentrate accounted for the largest revenue decline
($17.1mn), particularly the freeze concentrate
product where sales were sharply cut back in
response to sluggish demand in theJapanese market.
For the second consecutive year, the bulk of orange
concentrate juices went to the USA, where prices
improved from $11.88 to $13.79 per gallon. Sales
to Europe, a market dominated by the Brazilian
competition, revived somewhat with a $4.22 per

-4
SAnnual Report 2002

Table VI.5: Export Sales of Citrus Products*

Concentrate ('000 gals) 3,432 5,799 3,718
Orange 2,707 5,008 3,210
Grapefruit 725 791 508
Concentrate value ($mn) 50.8 76.0 54.3
Orange 39.5 63.3 46.2
Grapefruit 11.3 12.7 8.1
Not-from-concentrate Exports ('000gals) 2,024 2,650 704
Orange 1,231 2,024 266
Grapefruit 793 626 438
Not-from-concentrate Value ($mn) 9.6 11.0 3.3
Orange 5.6 7.9 1.1
Grapefruit 4 3.1 2.2
Pulp Export ('000 pounds) 1524 2,074 0.7
Pulp Value ($mn) 1.0 1.4 0.4
Source: Del Oro (Belize) Limited
Reflects actual sales as reported by the processor and not the value of export shipments
as reported by the CSO. Export shipments go into inventory for sale at a later point in time.

gallon price increase, while revenues from the
Caribbean rose by 9.8% as a 2.0% decrease in
volume was more than offset by a $1.85 increase in
the unit price. Revenues from grapefruit concentrate
also declined by $4.6mn due to supply constraints.
Most of this concentrate went to Europe under a
new marketing agreement that resulted in shipments
being diverted from the USA. The renewed focus
on the regional market also saw Caribbean sales
rise by more than half to $1.6mn. Like the orange
product, the cooling ofJapanese demand caused
sales of grapefruit freeze concentrate to shrink by
some $1.lmn.

Not-from-concentrate (NFC) sales were minimal
and aimed solely at retaining some presence in this
niche market where Brazil and Spain have the
competitive advantage. NFC exports therefore
declined by 73.4% in volume and 69.7% in value as

compared to 2001 when i- -, -i-- marketing
succeeded in selling off a costly inventory overhang
from the previous year.

With its reputation still impugned by the quality
problems of the previous year, pulp sales declined
to 0.7mn pounds ($0.4mn), comparedwith 2.1mn
pounds ($1.4mn) in 2001. Orange pulp sales were
just one-third the previous year's volume while that
of grapefruit was slightly under one half.

Banana

After Hurricane Iris abruptly halted exports in
October of 2001, banana sales recommended on a
very small scale in January and steadily increased
until pre-hurricane levels were achieved in June.
Subsequent poor weather conditions restricted
production so that exports contracted to 42,970
metric tons ($41.0mn), down from 48,185 metric

Foreign Trade and Payments )

tons '-42 .S.~ 'ii for the 40 weeks of 2001. Also
influencing the revenue decline was a $1.43 reduction
in the average box price to $14.49 as compared to
$15.92 received in the previous year.

In preparation for a more open market in 2006,
the marketer (Fyffes) has been reducing the average

2000. In an attempt to increase the value added as
well as establish a market identity in the UK, the
industry initiated two specially wrapped packages
for direct use by end consumers in the UK a
large package for institutional use and a small one
for retail in supermarkets.

box price by approximately $1.50 each year since

Box 6: CGA Acquisition of Del Oro (Belize) Limited

In October 2002, the Belize Citrus Growers Association Investment Company Limited (BCGAICL),
a subsidiary of the Citrus Growers Association (CGA), acquired Del Oro (Belize) Ltd. from the
UK's Commonwealth Development Corporation (CDC) Capital Partner. The acquisition included
the two citrus processing facilities, groves and other holdings. Del Oro Belize Ltd, renamed Citrus
Products of Belize (CPB) is now 99.1" .. owned by citrus growers. In this vertical integration, BCGAICL
is the buffer between the growers and the processing unit, allowing each to function as separate cost
centres.

While the purchase was a major achievement for the growers, the industry must now utilise the
advantages arising from this consolidation to meet its challenges. Of major importance is reduction
in production costs. Consequently, there is a move to combine the two factories into one unit or have
both factories operating, though specialising in different products. The consolidation of the two
factories would cost between US$4.Omn to US$5.0mn and engender annual savings of US$1.0mn.

Another strategic move is to maximise the industry's value added by improvingprocessing efficiency
andmore i -, -. i--e!. -marketingby-products such as oils, essences andpulp. To achieve this, additional
investments will be made in a new evaporator, oil recovery equipment and a new pulp wash system.
This US$1.2mn investment should increase factory yields by 4.0% to 5.0%, garnering additional
revenues of some US$1.6mn per year. Furthermore, CPB is seeking strategic alliances with companies
such as Jumex, Grace Kennedy or Nestle to package their citrus juices. The company also intends to
sell more on the future options market where they can secure better prices. The industry is also
exploring market and product diversification, looking at Central American markets and the revival
of pineapple, passion fruit and lime concentrate juice production.

With challenging times ahead, the industry must become more nimble and explore all avenues for
regaining a sound financial footing.

-4
SAnnual Report 2002

Table VI.6: Exports of Bananas

Volume (metric tons) 64,912 48,125 42,970

Of which: (metric tons)
Traditional Quota Market 64,912 48,125 40,122
Non-traditional Markets 2,848
Other EU Market 2,025
Transit Market -- 823

Value ($mn) 65.8 42.8 41.0
Sources: Central Statistical Office, Banana Grow ers Association

To accommodate a larger export volume, Fyffes

agreed to accept all produce above the guaranteed

75,000 boxes weekly and to sell the surplus on a

consignment basis to other EU markets and to the

'Transit' market (eastern European countries

formerly in the Communist bloc). Some 6.6% (or

2,848 metric tons) of annual shipments went to these

non-traditional markets, ofwhich 2,025 metric tons

were sold to other EU countries, fetching an average

price of $6.54 per box. The remaining tonnage

(823mt) was sold to the Transit market at an average

price of only $1.35 per box. While prices in these

new markets were highly volatile, the revenues helped

to minimize losses when compared to the alternative

of abandoning the surplus production in the field

altogether.

Marine Products

Marine exports declined by 3.4% to 7.2mn pounds,

mainly reflecting lower shrimp and conch volumes.

Overall revenues nonetheless expanded by 6.3% to

$67.7mn when compared to the previous year.

Table VI.7: Exports of Marine Products

6660 2001 2002
Volu m e Value Volu m e VaSlue -u m e VSalue
('00 lbs ($-000 (666 lbs ($-000 6660 ls ($-000

Lobster Tail 573
Lobster Head 49
Shrimp* 4,897
Conch 564
Whole Fish 97
Other 4
Total 6,184
Source: Central Statistical Office
* Reflects value of export shipments, not sales.

16,760
289
46,418
3,950
143
42
67,603

433
28
6,381
622
11
0
7,475

12,198
241
46,665
4,596
14
0
63,714

582
45
6,120
438
38
0
7,223

13,687
275
50,305
3,311
125
0
67,703

Foreign Trade and Payments

Box 7: Tilapia Fish Farming

Belize's aquaculture industry has been dominated by shrimp farming for several years. However,
recent diversification initiatives have resulted in several tilapia fish farm projects with the largest being
a multi-million dollar investment by Fresh Catch Belize Limited.
A fully owned Belizean company, Fresh Catch Belize Ltd. commenced operations in late 2002. The
tilapia farm is located near La Democracia off the Coastal Highway and occupies 400 acres of land.
Once fully operational, the project should cost BZ$16.0mn and is expected to yield a total of 4,000
tons of fresh fish per year, providing employment for about 380 persons at the completion of the
three-phase project.

The commencement of phase one in 2002 saw 80 acres of ponds constructed and the setup of the
initial brood stock. By the end of 2003, the production line, processing plant and other auxiliary
systems should be in place. Due to the 10 to 12 month growth cycle for tilapia, the harvest will not
be commencing in any significant levels until early 2004. The company is targeting the fresh fish
market and should eventually be shipping fillet on a daily basis to the US. A company formed by a
consortium of Central American companies, including Belize, will do all marketing. Phases two and
three will replicate phase one, increasing fish ponds by another 160 acres. Anticipated foreign exchange
earnings are in the region of US$9.0mn per year. Should all go well with this investment, the industry
should be able to build on its success by expanding through satellite farms.

Exports of lobster rebounded with volume
increasing by 23.6% to 0.6mn pounds. Although
the average price per pound fell by $4.71 to $22.27
due to sluggish demand in the dining-out market,
this was offset by the volume increase and export
revenue consequently rose by 12.2% to $14.0mn.

Meanwhile, higher mortality rates arising from the
presence of the Taura virus and the late stocking
of ponds after the hurricane caused farmed shrimp
export volume to decline by 4. 1" r. > 6.1mn pounds.
At $50.3mn, value received was 7.8% above that
of 2001.

Conch exports also contracted by 29.6% to 0.4mn
pounds while earnings declined by $1.2mn to
$3.3mn. The smaller catch was partly due to
hurricane and storm damage to their habitat in the
previous year. On the up side, rising demand in the

United States contributed to a slow recovery in the
average price per pound of conch by some $0.17
to $7.56.

Motivated by a substantial price improvement
(from $0.78 to 0 29 per pound), exports of whole
fish revived somewhat, rising from 0.01mn pounds
($0.01mn) in 2001 to 0.04mn pounds ($0.1mn), in
2002.

Other Major Exports

Garment exports totalled 3.8mn pieces valued at
$29.5mn, an increase of 90% in volume but a
reduction of 3.0% in value when compared to 2001.

Annual Report 2002
SAnnual Report 2002
C t Bn of Bl -

While the volume of garments almost doubled, the
marginal decline in revenue reflected an export mix
consisting of more low valued pieces.

Sawn wood exports declined further to 0.97mn
board feet valued at $2.6mn. While volume fell by
5.7%, revenues rose by 13.0% as an overall
improvement in quality, a by-product of improved
forest management, led to an increase in the average
price per board foot from $2.25 to $2.63. In
other developments, already dwindling supplies of
mahogany, the main export lumber, were further
affected by the forest destruction caused by
Hurricane Iris in late 2001. The Government also
began to implement its policy of gradually
overseeing the phasing out of lumber exports in an
attempt to encourage exports of more value added
wooden products such as doors, plywood and
furniture, which command higher export prices.

Papaya exports did exceptionally well during the
year with export volume surging upward by 74.7%
(from 14.2mn pounds to 24.7mn pounds).

Similarly, export revenue increased by 54.4% from
$10.3mn to $15.9mn. The larger export volume
reflected an increase in acreage and more large

papayas in the export mix. The higher proportion
of large papaya also caused the average export price
to decline from $0.73 to $0.64 per pound, since
prices for bigpapayas were about 1r" lower than
that for the smaller variety.

Non-traditional Exports

Non-traditional exports expanded by 6.4% to
$18.6mn, mostly due to increased exports of

pepper sauces, veneer sheet/plywood, citrus oils,
and other miscellaneous products. Favorable export
prices and more i -. i- i- marketing saw exports
of orange and grapefruit oil doubling to $1.0mn.
Likewise, export revenues from veneer sheets/
plywood quadrupled to $0.4mn, as timber
exporters geared up their value-added production.
Exports of beans (red kidney and black eye) did
not fare so well with revenues plunging by 25.6%

Table VI.8: Other Major Exports

1gg 200 2

Garments
Volume (mn pieces)
Value ($mn)
Sawn Wood
Volume ('000 bd ft.)
Value ($mn)
Papayas
Volume ('000 Ibs)
Value ($mn)
Source: Central Statistical Office

2.6
39.8

2,393
4.7

12,307
12.8

2.0
30.4

1,030
2.3

14,153
10.3

3.8
29.5

971
2.6

24,727
15.9

Foreign Trade and Payments )

(from $6.0mn in 2001 to $4.5mn in 2002) due to a
60.1% contraction in export volume as demand
slowed in CARICOM.

Re-exports

Re-exports rose by 51.1% to an estimated $319.0mn
in 2002, largely reflecting activities in the CFZ where
estimated gross sales rose by an impressive 49.8%
to $298.6mn. While falling fuel prices in Mexico at
the start of the year dampened CFZ fuel sales to
Mexicans, the zone was successful in attracting duty
free shoppers for non-fuel merchandise such as
clothing, electronics and other goods. For much
of the year, CFZ sale activities were brisk, except
for a temporary lull during September and October
caused by the Mexican government's decision to
lower its duty free allowances from US$1,000 to
US$50 per persons resident inside the border state
of Quintana Roo and US$150 for Mexicans living
in the other states.

Re-exports from the customs territory also
increased from $11.8mn to $20.4mn, mostly due
to a $9.4mn increase in re-exports of 'Machinery
and TransportEquipment. This was partly offset by a
$2.5mn reduction in fuel re-exports that was due
to the halting of diesel fuel re-exports to Guatemala.

Gross Imports

Gross imports (fo.b.) of goods and electricity as
recorded in the Balance of Payments (BOP) rose
by 3.3% to $1.0bn as a sharp increase in CFZ
imports offset a modest contraction in imports into
the customs territory.

Most imports fell, as 'Fuel and Lubricants', 'Food
and Live Animals' and 'Manufactured Goods'
contracted by 12.8%, 9.3% and 5.9%, respectively.
The 'Fuels and Lubricants' category fell due to a
halt in diesel sales to Guatemala. Additionally,
imports by export processing zones also declined
as citrus juice and farmed shrimp production
contracted.

Direction of Visible Trade

The United Kingdom (UK) and the United States
continued to be Belize's major trading partners in
2002, accounting for more than three-quarters of
total exports. The share of exports to Europe
(including the UK) rose from 23.4% to 30.1% in
2002 as a result of increased sugar and citrus juice
exports. On the other hand, the US export share
declined slightly due to lower sales of citrus juices,
caused by supply constraints resulting from hurricane
damage. A surge in re-exports was the main cause

-4
SAnnual Report 2002

Table VI.9: Direction of Visible Trade

Percentage
S.oteIn ot
2000 200 200 2000 200 200

United Kingdom
Other EU
United States
Mexico
CARICOM
Other Countries
Total

Source: Central Statistical Office
* excludes CFZ sales

of the increase in Mexico's export share and the
slight increase in CARICOM's share was explained
by additional sales of sugar and citrus juice to the
region. In contrast, the export share of other
miscellaneous countries halved from 11.1% in 2001
to 5.5% in 2I '2 due to the sharp contraction in
citrus freeze concentrate sales to Japan.

The US remained the primary source of imports,

supplying 60.9% of the total. Other EU imports
rose from 3.1% in 2001 to 3.8% in 2002, reflecting
imports of agricultural machinery from Belgium
and Spain. Mexico's share of imports declined from
7.7% to 7.1% primarily due to a decrease in the
importation of dairy products.

Invisible Trade

Net outflows on the invisible trade account rose by
$0.5mn to $45.3mn as a $0.6mn improvement in
net earnings from services was overshadowed by a
$1.lmn increase in factor income payments. Receipts
from services rose to $105.6mn, as robust growth

in revenues from cruise ship tourism outweighed
increased expenditure for other goods and services
and a fall-off in inflows to embassies, military
agencies and other non-governmental organizations.

Services

With the number of cruise ship port calls leaping
from 48 in 2001 to 200 in 2002, revenues earned
by the domestic agents servicing these ships more
than doubled, pushing inflows for transportation
services up by $12.5mn. Travel receipts also rose
by $20.2mn reflecting increased spending by cruise
ship tourists and, to a much lesser extent, by stay-
over visitors. On the other hand, payments for
international transportation and freight, and expenses
related to health, education and non-business travel
abroad by residents rose by a combined $3.7mn.
Outflows for financial services and reinsurance
premiums also increased, with the latter being
affected by the higher perceived risks of hurricanes
and terrorism. Meanwhile, net official inflows to
embassies and other government agencies fell by
$16.9mn to $12.4mn.

14.3
8.1
51.5
1.3
3.6
21.2
100.0

16.2
7.2
58.3
0.9
6.3
11.1
100.0

21.6
8.5
56.3
1.6
6.5
5.5
100.0

2.1
4.3
54.3
7.3
2.7
29.2
100.0

2.2
3.1
56.9
7.7
3.0
27.1
100.0

2.0
3.8
60.9
7.1
2.9
23.2
100.0

Foreign Trade and Payments

Table VI.10: Balance of Payments -

Invisible Trade

1)

2Dug 2DS ASO
Credi Deit -le Credi Deit -le Credi Deit

II\MSIBLETRADE
Services
Transportation
Travel
Other Goods and Serices
Govt Goods and Serces, N.I.E
Factorncorme
Labour income
Investment Income
Current Transfers
Govemment
Private
Invisible Trade and Current Transfers

332.0
318.2
21.6
234.1
26.8
35.6
13.8
4.1
9.7
122.1
17.0
105.1
454.1

377.2
249.9
74.6
81.0
76.7
17.6
127.3
18.9
108.5
2.7
0.6
2.1
379.9

(45.2)
68.3
(53.0)
153.1
(49.9)
18.0
(113.5)
(14.8)
(98.8)
119.4
16.4
103.0
74.2

Income

363.9
347.3
23.7
238.5
38.9
46.2
16.6
4.0
12.6
102.1
18.4
83.6
466.0

408.7
242.3
72.2
81.5
71.8
16.9
166.4
25.4
141.1
3.7
0.5
3.2
412.4

(44.8)
105.0
(48.5)
157.0
(32.9)
29.3
(149.8)
(21.4)
(128.5)
98.4
17.9
80.4
53.6

3746
366.7
36.2
258.7
41.6
30.2
7.9
3.8
4.1
97.4
21.9
75.4
472.0

419.9
261.1
75.0
85.1
83.2
17.8
158.8
21.5
137.3
41
0.4
3.7
424.0

(45.3)
105.6
(38.8)
173.6
(41.6)
12.4
(150.9)
(17.7)
(133.2)
93.3
21.5
71.7
48.0

Current Transfers

Net income outflows rose modestly to $150.9mn

as a contraction in wages for seasonal and border

workers almost overshadowed a net increase in

payments for interest, profits and dividends over
the year. In the early part of the year, wages paid

to non-resident citrus and bananaworkers declined

as the agricultural sector reeled from damages

inflicted by the October 2001 hurricane. On the

other hand, a $7.8mn drop in the Central Bank's

interest earnings on foreign deposit holdings more

than offset a $3.8mn decline in interest payments

(from $141.lmn to $137.3mn) that resulted from

the restructuring of the public sector's external debt

during the year. The latter was facilitated by the Bear

Stearns international bond issue in August.

Notwithstanding a $3.6mn increase in grants to the

government, net current transfers declined by

$5.1mn to $93.3mn reflecting reduced Western

Union net settlements, lower inflows to religious

and non-profit organizations and credit unions and

a drop in overseas remittances.

Capital and Financial Accounts

A surplus of $22.9mn was recorded on the capital

account (up from $2.3mn in 2001) as a result of

debt forgiveness to the government and private

sector. In addition to the reinstatement of the United

Kingdom debt forgiveness programme in 2002, a

loan of $16.0mn was written off for the citrus

industry by a direct foreign investor as part of its

sell-out package.

-4
SAnnual Report 2002

Table VI.11: Balance of Payments Capital and Financial Accounts
$mn
200 II. II

CAPITAL ACCOUNT
General Government
Other Sectors
FINANCIAL ACCOUNT
Direct Investment Abroad
Direct Investment in Belize
Portfolio Investment Assets
Portfolio Investment Liabilities
Financial Derivatives Assets
Financial Derivatives Liabilities
Other InvestmentAssets
Monetary Authorities
General Government
Banks
Other Sectors
Other Investment Liabilities
Monetary Authorities
General Government
Banks
Other Sectors
CHANGES IN RESERVES
(Minus = increase)

-4.5
0.6
-5.1
417.8
0.0
46.7
0.0
226.3
0.0
0.0
-93.5
0.0
-22.1
-52.4
-19.0
238.4
83.6
113.6
31.0
10.2
-103.3

2.3
0.6
1.8
355.8
0.0
119.8
0.0
-29.7
0.0
0.0
7.8
0.0
-6.1
5.0
9.0
257.9
-1.2
245.2
23.3
-9.3
5.5

22.9
5.9
17.0
289.4
0.0
49.6
0.0
253.2
1.7
0.0
14.3
0.0
-8.0
18.5
3.8
-29.4
-66.0
-22.2
-2.8
61.6
10.9

Net inflows on the financial account totalled

$289.4mn, compared to $355.8mn in 2001. The

smaller surplus was due to a decline in direct foreign

investment, the acceleration of payments abroad

to holders of mortgage securities and loan

prepayments by central government as part of the

debt restructuring programme.

At $49.6mn, foreign direct investment was

substantially below the $119.8mn realized in the

previous year. Unlike 2001 when the privatization

of the water and sewerage company attracted

$49.6mn in foreign capital, no similar foreign

investment occurred with the privatization of the

port in 2002. In addition, lower levels of hotel

investments and reinvested earnings (arising from

larger payouts of profits and dividends) were

reported.

Transactions involving portfolio investment liabilities

swung from net outflows of $29.7mn in 2001 to

net inflows of $253.2mn as repayments of $6.0mn

on the Central Bank building bonds and 4.9mn

on mortgage securities were set against inflows of

$250mn (from the Bear Stearns bond issue) and

$66.2mn from new mortgage securitization

proceeds. Meanwhile, financial derivatives consisting

of the US Dollar to Yen swap, yielded savings of

$1.7mn.

Foreign investment holdings by general government

rose by $8.0mn (largely due to the establishment

Foreign Trade and Payments

of a sinking fund for the Salomon Smith Barney

L O''-J.0mn bond that matures in 2005). However,

a $22.3mn decline in the foreign holdings of

commercial banks and other sectors during the year,

generated a net outflow of$14.3mn under the 'other

investment assets' account.

External loans declined by $29.4mn with incoming

funds from loan disbursements to the private sector

being largely offset by loan prepayments and regular

amortization. Under its debt restructuring

programme, the government prepaid loans

amounting to $64.0mn and $133.2mn for the

Central Bank and general government, respectively.

Official International Reserves

Gross official reserves fell by $10.9mn to $229.3mn

during the year as reserves were drawn down to

partially finance the current account deficit. Central

Bank's holdings of foreign assets rose by

$4.1mn,while central government's position

decreased by $15.0mn. With foreign liabilities of

$6.0mn, the net international reserves stood at

$223.3mn, the equivalent of 3.2 months of imports.

Table VI.12: Official International Reserves

$mn
Poito as at Chage
De-0 66 I-0 Dc-0 duin
200

Gross Official International Reserves
Central Bank of Belize
Holdings ofSDRs
IMF Reserve Tranche
Other
Central Government
Foreign Liabilities
CARICOM
Other
Net Official International Reserves

245.6
229.4
3.1
11
215.3
16.3
1.7
0.2
1.4
243.9

240.2
208.4
3.4
10.6
194.4
31.8
2.9
0.6
2.3
237.3

229.3
212.5
4.0
11.4
197.1
16.8
6.0
1.5
4.5
223.3

-10.9
4.1
0.6
0.8
2.7
-15.0
3.1
0.9
2.2
-14.0

Annual Report 2002
SAnnual Report 2002
C t Bn o Bli-z

Economic Prospects

The year 2003 should prove to be very challenging
as the country copes with the global effects of the
US-Iraq war and targeted fiscal and monetary
controls aimed at positioning the economy for
sustained and balanced growth.

Following a much needed respite from tropical
storms and hurricanes, most industries, particularly
in the agricultural sector, used 2002 to effect
improvements and rehabilitations to boost
performance in 2003.

While sugarcane deliveries should remain stable at
1.2mn long tons, sugar production is forecasted to
increase by 3.2% to 115,000 long tons due to an
anticipated improvement in the cane/sugar ratio
from 10.33 to 10.00. Molasses output should
consequently fall by 11.9% to 36,000 long tons,
given its inverse relationship to sugar.

Facilitated by a larger export volume, greater
penetration of the CARICOM market and possible
appreciation of the Euro against the US dollar,
sugar export revenues are forecasted to rise by 7.3%
to $70.8mn. After enjoying an upswing in 2002,
the price for molasses is expected to decline
moderately in 2003, and along with a reduction in
export volume, should cause export revenues to
fall by 25.9% to $2.0m.

With yields still recovering from the residual effects
of Hurricane Iris and productivity depressed by
low input usage, citrus deliveries for the crop year

are forecasted to expand modestly from the 5.3mn
boxes realized in 2001/2002 to 5.8mn boxes in
2002/2003, consisting of 4.5mn boxes of oranges
and 1.3mn boxes of grapefruit. Production of
citrus juices should grow by 13.5% to 31.2mn
pounds solid, assuming that farmers respond to
the new payment incentives by achieving a higher
yield of pound solid per box of fruit. Concentrates
remain the flagship products, while NFC output,
particularly for orange, should remain at 2002 levels.
Production of freeze concentrate juices will be
down slightly because of lower Asian demand.

With production up and some reorganization of
sales and marketing efforts under the processor's
new management team, citrus exports are forecasted
to rise by 43.6% in volume to 37.2mn pound solids,
matched by a 44.1% increase in value to $83.7mn.

Rapid field rehabilitation coupled with some
replanting after the hurricane devastation has
brought banana acreage to slightly over the 6,000
level and positioned the industry for a near doubling
of production and exports. Export volume is
anticipated to rise by 75.1% to 74,386 metric tons,
an all time historic high, while export value, because
of a $1.50 fall in the average box price, should grow
by 31.6% to $53.3mn.

With a switch to emphasis on the large variety,
papaya production and export volume should
increase by 45.6% to 36.0mn pounds, while export
value will almost double, moving from $15.9mn in

Economic Prospects

2002 to $28.7mn in 2003. It is expected that the
large papaya will make up more than three-quarters
of all shipments.

The marine sub-sector is also poised for substantial
growth during 2003, with production more than
doubling to 18.0mn pounds and export revenues
almost doubling to $133.6mn from the $67.7mn
realized in 2002. While exports of all marine
products are expected to increase, farmed shrimp
is the principal commodity driving the tremendous
expansion. Exports of farmed shrimp are
projected to reach 16.7mn pounds (more than
doubling 2002's outturn) because of pond
expansions and the extensive use of a Taura resistant
shrimp. The latter should raise survival rates from
an average of 30.0% to 60.0% or 70.0%. Export
revenues should consequently increase from
$50.3mn to a substantial $110.6mn, a much needed
revenue recovery after the financial losses suffered
in the recentpast from hurricanes and disease. Finally,
investments into Tilapia fish farming during 2002
should begin to bear fruit during 2003, as Tilapia
output is expected to equal 1,300 tonnes with a value
of $6.0mn. The Tilapia output is mostly for the
export market.

Modest growth should occur in the secondary sector
with manufacturing activity benefiting from the
resurgence in sugar and citrus juice production. On
the other hand, construction activity should slow
with the wrap up of major construction projects
from 2002 and a shift of emphasis to low cost
housing projects by the government. With the
construction of the Challilo Dam and the generating

plant at Mile 8 on the Western Highway and on-
going improvements by the water company, should
result in modest growth in the electricity and water
sub-sectors.

Growth in the services sector should be quite
modest because of mixed performance in different
activities. While the doubling of cruise ship arrivals
should imp act positively on transportation and trade
services, the US-Iraq war and fears of terrorist
reprisals may keep arrivals of stay-over tourists
down and thereby restrain growth in the hotel and
restaurant sub-sectors. The continuation of
tightened fiscal controls should hold growth in
government services down, as well. On the positive
side, competition in the telecommunications market
may increase the market size if prices improve and
new customers are captured.

Inflation is expected to stay at approximately the
same level as 2002 1 ., r 1. 2% to V' .. since rising
fuel prices caused by the US-Iraqwar are expected
to keep overall prices high. The rate of
unemployment will remain stable if the expansion
in job opportunities keeps pace with growth in the
work force.

In the monetary sector, the move to separate
offshore deposits from onshore deposits should
help to control credit and consumption growth.
Consumption should also slow further as fiscal policy
tightens in view of the government's commitment
to bring its deficit to within 3% of GDP.

1P

I Annual Report 2002
Central.BankJof B.e-li

Administration

The Board of Directors

The Board of Directors held 10 meetings in 2002
and considered 80 submissions.

Overseas Meetings

The Governor, Deputy Governors and other staff
represented the country and the Bank at various
meetings during the course of 2002, some ofwhich
are shown in Box 8.

Finance

The Central Bank's financial statements for the year
ended December 31, 2002 along with comparative
figures for the previous year are annexed to this
report. During the year, the total assets of the Bank
decreased by 19.8% to $325.3mn with external
assets risingby 2.0% to $212.5mn, whilst domestic
assets shrank by 41.6% to $112.7mn.

At year's end, the net operating surplus amounted
to $3.1mn as compared to $4.7mn in 2001. Gross
earnings totaled $17.7mn and consisted of$15.4mn
in interest income and $2.3mn in commissions and
other income. Current expenditure totaled $14.6mn
with staff costs, interest payments and other
operating costs accounting for 30.5 %, 40.0%,
29.5%, respectively.

Approximately $0.3mn or 10% of the net operating
surplus will be paid into the Central Bank's General
Reserve Fund in accordance with Section 9(1) of

the Central Bank Act. The remaining balance of
$2.8mn will be transferred to the Accountant
General for the Government of Belize's
Consolidated Revenue Fund.

Internal Audit Activities

In view of the recent high profile international
financial scandals that were linked to lax accounting
and auditing standards, the Central Bank enhanced
its own internal audit system by providing
specialized training in fraud detection, auditing in a
modern banking environment and sound practices
for the management and supervision of operational
risk.

In addition to the annual programmed audit of
internal processes and systems to ensure adequate
internal controls, assistance was provided to the
Central Bank's Staff Club and Pension Fund Board
of Trustees. In the former case, assistance was given
to the Staff Club in re-defining the roles and
functions of executive officers, while in the latter
case, assistance was provided in the implementation
of the Pension Deeds and Rules.

The Audit Committee reviewed proposals for
amendment to the Abandoned Property Legislation
alongwith other Central Bank operational guidelines.
The -.-,-. r d.l amendments were vetted by the
Bank's legal counsel and subsequently submitted to
the Board of Directors for its decision. Other

Administration

Box 8: Meetings Attended by the Governor and Deputy Governors during 2002

Nam of Metn/oneec Mot Place

Annual Meeting of Central Bank Governors

CDB Board of Directors Meeting

Annual Meeting of Board of Governors IDB and IIC

International Conference of Financing for Development

Regional Course on Governance Arrangements and
Communication Policies for Central Banks

XVI Meeting of IDB Governors of the Countries of the
Central American Isthmus and the Dominican Republic

CDB Board of Governors Meeting

CEMLA Annual Governors' Meeting

32nd Annual Meeting of the Board of Governors of CDB
CARICOM Central Bank Governors Meetings

2nd Annual Seminar for The World Bank/IMF/Federal
Reserve System

XI Cycle of Economic Lectures

Bank of England's Central Bank Governors' Symposium,
Bank for International Settlement's Annual General
Meeting, and Commonwealth Secretaries Conference

CDB Board of Directors Meeting

IMF/World Bank Annual Meeting

CARTAC Steering Committee Meeting and 6th Meeting of
the Council for Finance and Planning

CDB Board of Directors Meeting

42nd Annual Governors Meeting of CABEI
Bimonthly Meeting of Central Bank Governors

CARICOM Central Bank Governor's Meetings

CDB Board of Directors Meeting

February

March

March

March

April

April

May

May

May

May

June

June

July

July

September

September

October

October

November

November

December

Barbados

Barbados

Fortaleza, Brazil

Monterrey, Mexico

Jamaica

San Salvador

Grand Cayman

Netherlands Antilles

Grand Cayman

Nassau,Bahamas

Washington, D.C.

Guatemala City

London and Basel

Barbados

Washington, D.C.

St. Kitts & Dominica

Barbados

Honduras

Mexico City

Freeport, Bahamas

Barbados

I Annual Report 2002
Central.BankJof B.e-li

matters of dispute that were long pending were
also reviewed and submitted to the Board for
decision.

Human Resources

In 2002, the Human Resources Department (HRD)
sought to enhance operational efficiency by
providing additional avenues for training,
development and deployment of the Bank's staff
A key objective was to foster development of
"career centralbankers" with a view to raising overall
performance and efficiency levels.

Staff Development & Training

Overseas training initiatives focused mainly on
strengthening the Bank's economic intelligence arm.
Seventeen staff members attended a total of twenty-
four courses/workshops regionally and in the
United States. Sixty-three members of staff had
the opportunity to develop their grammar, writing,
and administrative skills through both local and in-
house training. Staff members were also trained
in the use of a customized attendance system.

Subsequent to the Board of Directors' approval,
measures were taken to restructure and strengthen
the management and professional levels of the Bank
in uly. The structural changes resulted in the Deputy
Governor (Operations) assuming additional
responsibilities for human resources and security
functions, the Deputy Governor (Economic
Research) assuming responsibilities for financial
sector supervision and receiving a change of title

to Economic Intelligence to reflect the broadened
responsibilities, the appointment of a Chief
Economist/Manager for the Research Department,
the amalgamation of the Human Resources and
Administration Departments, and the establishment
of a new post at the management level in the
Financial Sector Supervision Department.

As part of the organizational strengthening, four
newly created positions of Bank Examiners at the
grade IV level were filled through the promotion
of existing staff in other departments of the Bank.

Staffing

As at 31 December 2002, the Bank's staff
complement was 136, comprising 98 permanent
employees, 34 contract staff and 4 temporary
persons. Total established positions rose from 120
inJanuary (ofwhich 113 positions were staffed) to
132 at 31 December 2002. This 10% increase was
mainly the result of the structural changes to
strengthen the management and professional levels
of the Financial Sector Supervision and Research
Departments.

A 4% improvement in staff turnover was recorded,
with the ratio declining from 11% in 2001 to 7% in
2002. Nine separations occurred and 28 persons
were hired over the year.

One notable separation occurred on 31 March 2002
when Mr. Keith Arnold completed his contractual
term of office as Governor. Mr Arnold held the
governorship for ten years and three months
beginninginJanuary 1992. His replacement was Mr.
J. Meliton Auil who took office as the new
Governor of the Central Bank on 1 April 2002.

Administration

In another notable occurrence, Ms. Cecile Reyes
became the Central Bank's first retiree effective 31
October 2002. Ms. Reyes had been with the Bank
for twenty years and retired as Manager of the
Administration Department.

Staff Club

In keeping with its mandate, the Staff Club's
executive committee organized several social
functions during the year. These included a number
of informal staff mixers to foster improved staff
relations and cohesiveness, the annual Family Day,
which was held in the southern part of Belize for
the first time and a formal Christmas party.

Community Service

In 2002, the Bank continued its SummerEmployment
Programme, which is aimed at developing the skills
ofBelizean youths at the secondary and tertiary levels

of education while affording some economic
benefits. Eight students had the opportunity to
perform work/study and get first hand experience
of certain aspects of central banking over an
average of three weeks. The Bank also participated
in the University of Belize's Internship programme
by permitting a senior student from the University
to work at the Bank for credits towards a
baccalaureate.

Last, though not least, the Central Bank sustained
its tradition of active concern for less privileged
Belizeans with staff members and the Bank making
generous contributions to the SalvationArmy'sAnnual
ChristmasAppeal as the year drew to a close.

I Annual Report 2002
Central Bank ofB.e-liz

OPERATIONS

Foreign Exchange Operations

Trade in US and Canadian dollars, and the British
Pound Sterling netted $3.0mn for the Central Bank
in 2002. Foreign currency purchases exceeded sales
in four of the twelve months, (specifically, January,
April, August and December) when inflows from
mortgage securitization and loan disbursements
were at their highest. During the remaining months,
sales exceeded purchases by an average of $25.0mn.
Trade in CARICOM currencies (largely in Barbados
and Eastern Caribbean dollars) resulted in net
outflows in each month with net sales totaling
$3.19mn by the end of the year.

External Assets Ratio

Under section 25(2) of the Central Bank of Belize
Act 1982, the Bank is required to maintain external
asset reserves of not less than 40.0% of the

i -* i '. amount of notes and coins in circulation
and the Bank's liabilities to customers for sight and
time deposits. The external assets were comprised
of foreign notes, deposits with foreign central banks
and correspondents banks abroad, securities of
foreign governments and holdings of Special
Drawing Rights at the International Monetary Fund.
Supported by asset securitization inflows in
December 2001, the external asset ratio started the
year at 89.3% but declined thereafter to a low of
59.1% in August as outflows for external debt
servicing and other public and private sector
commitments exceeded inflows. Subsequent
increases were facilitated by inflows from foreign
bonds and commercial bank loan disbursements,
which pushed the ratio to a high of 92.1% at the
end of the year.

Table IX.1: Central Bank Dealings in Foreign Exchange 2002

$mn
Month US & Canadian $ and- UKEIC urnie

49.6
11.7
15.1
83.7
33.2
22.9
12.2
258.3
53.6
9.6
10.3
130.5
690.7

25.3
50.6
42.1
39.2
55.8
58.5
28.9
192.3
61.3
49.1
22.6
62.0
687.7

24.3
(38.9)
(27.0)
44.4
(22.5)
(35.6)
(16.7)
66.0
(7.7)
(39.5)
(12.2)
68.5
3.0

0.10
0.12
0.01
0.01
0.07
0.01
0.05
0.01
0.20
0.00
0.01
0.01
0.59

0.44
0.38
0.36
0.33
0.25
0.36
0.20
0.19
0.18
0.32
0.02
0.76
3.78

(0.34)
(0.26)
(0.35)
(0.32)
(0.19)
(0.35)
(0.15)
(0.19)
0.02
(0.31)
(0.01)
(0.75)
(3.19)

January
February
March
April
May
June
July
August
September
October
November
December
Total

Operations

Table IX.2: External Assets Ratio 2002

231.5
192.7
165.7
210.4
188.1
153.0
136.2
202.3
194.5
155.0
142.8
211.7

259.2
224.1
218.8
260.2
234.8
216.5
211.4
342.4
269.5
201.1
189.7
229.8

89.3
86.0
75.7
80.9
80.1
70.7
64.4
59.1
72.2
77.1
75.3
92.1

Relations with Commercial Banks

Cash Balances

Responding to a substantial liquidity overhang in
the banking system, the Central Bank raised the cash
reserve requirement of the commercial banks from
3% to 5% for average savings and time deposits,
and from 5% to 7% for average demand deposit
liabilities with effect from 26 September 2002. A
further increase in the cash reserve requirement was

effected on 26 October 2002, when the cash reserve
requirements on average demand, savings and time
deposit liabilities were harmonized at 6%. As
expected, these measures contributed to a marked
contraction in excess liquidity over the last four
months of 2002.

Currency in circulation rose by $7.3mn to 1 2.7mn
as, after fluctuating monthly and reaching a
somewhat unusual low in October, the year ended
with the expected peak in December. Of the total

Table IX.3: Commercial Bank Balances with the Central Bank

$mn
MonthAverag e De t R d C Ac l C
I Liblte Reere Hodig Exces

January
February
March
April
May
June
July
August
September
October
November
December

985.5
993.8
1,000.1
1,008.2
1,023.3
1,037.2
1,037.4
1,044.2
1,070.8
1,054.6
1,025.0
1,015.2

January
February
March
April
May
June
July
August
September
October
November
December

Mot Aset Libiite Exera Assets

1) Annual Report 2002

Table IX.4: Currency in Circulation 2002

$mn
Mot Nts Con Toa Comrca Ban Curec wit
Vault- CahtePbi

January
February
March
April
May
June
July
August
September
October
November
December

103.9
105.9
111.6
107.0
107.5
105.7
104.4
105.7
104.5
103.2
107.4
120.7

115.1
117.1
122.9
118.4
118.9
117.2
115.9
117.3
116.2
114.9
119.1
132.6

17.0
18.8
15.4
10.1
14.7
14.4
18.7
15.9
16.9
19.4
16.9
25.8

98.1
98.3
107.5
101.3
104.2
102.8
97.2
101.4
99.3
95.5
102.2
106.8

increase, some $5.8mn was in the form of vault
cash holdings, the remaining $1.6mn being added
to holdings by the public, which rose to $106.8mn.

Total notes and coins in circulation at the end
of the year stood at $120.7mn and $11.9mn,
respectively.

Transactions
ment

with Central Govern-

Under Section 34 of the Central Bank of Belize
Act, 1982 as amended in 1993, the Bank may extend
advances to Government up to a maximum of
2n".. of current revenue collected during the
preceding financial year or a sum of $50.0 million,
whichever is greater.

Table IX.5: Central Bank Credit to Central Government

$mn

January 0.0 0.02 10.0 26.1 0.45 7.71
February 0.0 0.02 10.0 31.1 0.45 9.20
March 0.0 0.02 10.0 54.0 0.45 15.95
April 0.0 0.02 10.0 52.1 0.45 12.87
May 0.0 0.02 10.0 45.4 0.45 11.22
June 0.0 0.02 10.0 62.7 0.45 15.50
July 0.0 0.02 10.0 71.1 0.45 17.56
August 0.0 0.02 10.0 66.7 0.45 16.47
September 1.5 0.02 10.0 70.5 0.45 17.42
October 49.9 0.02 10.0 42.2 0.45 10.43
November 44.1 0.02 10.0 42.3 0.45 10.46
December 54.1 0.00 10.0 0.0 2.89 0.00
A: Central Bank Holdings of Government Securities as a multiple of Central Bank's paid up Capital and Reserves.
B: Adavnce to Government as a percentage of Government's estimated recurrent revenue of the previous fiscal year.
Estimated for FY 2001/2002 $369.7mn (Revised) Estimated for FY 2002/2003 $404.8mn

Operations

Table IX.6: Government of Belize Treasury Bill Issues

Nube Dat $m $m Dicon (% Yil%) Dt

03/01/02
31/01/02
14/02/02
13/03/02
04/04/02
02/05/02
16/05/02
12/06/02
04/07/02
01/08/02
15/08/02
11/09/02
03/10/02
31/10/02
14/11/02
11/12/02

34.3
30.1
13.4
67.6
38.7
35.6
13.4
46.4
40.9
25.0
14.4
56.6
45.4
13.2
5.8
35.6

15.4
13.2
5.8
35.6
15.4
13.2
5.8
35.6
15.4
13.2
5.8
35.6
45.4
13.2
5.8
35.6

4.41
4.42
4.24
3.72
3.47
3.47
3.47
3.47
3.25
3.25
3.25
3.25
2.98
2.98
3.22
3.22

4.46
4.47
4.28
3.75
3.50
3.50
3.50
3.50
3.28
3.28
3.28
3.28
3.00
3.00
3.25
3.25

04/04/02
02/05/02
16/05/02
12/06/02
04/07/02
01/08/02
15/08/02
11/09/02
03/10/02
31/10/02
14/11/02
11/12/02
02/01/03
30/01/03
13/02/03
12/03/02

In this case, twenty percent of the preceding year's
current revenue mounted to $80.95 million, which
formed the upper threshold of Central Bank
advances to the Government for 2002. These
advances peaked at $71.1 million during the month
of July but declined in the latter part of the year
following the issuance of an additional $30.0mn in
Treasury Bills and other inflows from the
privatization of the Port and external loans. As a
result, the Government was able to reduce its
overdraft balance with the Central Bank to zero by
year-end.

Treasury Bills

The Central Bank carried outTreasury bill operations
on the Government's behalf in a market that
continued to be dominated by the commercial
banks in 2002. Subsequent to the reinstatement of
the biddingprocess in December 2001, the average
discount rate exhibited a generally downward trend,
bottoming out at 2.98% in October before

beginning to move upward again. In October, the
statutory limit on the Treasury bill issue was raised
by $30.0mn to $100.0mn and total bills outstanding
at 31 December 2002 stood at the legal maximum.

Treasury Notes

Under the 1993 amendment to the Treasury Bill
Act, the Government of Belize may issue up to
$25.0 million in Treasury Notes. These notes have
a one-year maturity period and carry a 9% interest
rate. At the end of 2002 total Treasury Notes
outstanding amounted to $25.0 million, all of which
were held by private sector institutions and
individuals.

Supervision of the Financial Sector

Three unrestricted "A" Class International Banking
Licenses were issued in 2002, bringing the total
number of offshore banks licensed in Belize to seven.
Of these, six operate under "A" class licenses and

1/2002
2/2002
3/2002
4/2002
5/2002
6/2002
7/2002
8/2002
9/2002
10/2002
11/2002
12/2002
13/2002
14/2002
15/2002
16/2002

I Annual Report 2002
Central.BankJof B.e-li

are Provident Bank and Trust of Belize Ltd,
Investment & Commerce Bank Ltd, Oxxy Bank
Ltd, Handels Bank and Trust Company Ltd,
Atlantic International Bank Ltd and Elca
International Bank and Trust Ltd. Market Street
Bank Ltd carried out offshore business as well, but
under a restricted "B" class license. The Central
Bank also issued a domestic banking license to
FirstCaribbean International Bank (Barbados)
Limited, which took over the operations of Barclays
Bank PLC's branches in Belize.

As in previous years, general supervision of the
banks entailed both on and off-site surveillance. In
2002, the former consisted of three full scope
examinations and one limited scope examination.
These examinations used the standard CAMEL
analytical framework that focuses on the capital
adequacy, asset quality, management, earnings and
liquidity of the banks with a view to ensuring their
continued soundness and compliance with the
provisions of the Banks and Financial Institutions
Act (BFIA) and the International Banking Act (IBA).
Off-site surveillance methods involved the analysis
on a continuous basis of the weekly and quarterly
returns submitted by the domestic and international
banks. Trends and changes in the financial
environment were also monitored and assessed to
determine their actual or potential impact on the
financial sector.

On several occasions during the year, commercial
banks sought Central Bank permission to grant
specific loans since they are prohibited from
extending total credit facilities that exceed 25% of
paid-up or assigned capital and reserves to a single
borrower without Central Bank approval. In

response to such applications, the Central Bank
granted six approvals for large credit exposures that
totaled $231.5mn, some 154.7% above the level
approved in 2001.

In other developments, the Offshore Banking Act
(OBA) was amended effective October 5,2002 with
a view to increasing its conformity with BASLE
core principles. In addition to changing its name to
the International Banking Act (IBA), and replacing
the term "Offshore Banks" with "International
Banks", a new clause was inserted which mandates
these banks to seek Central Bank permission where
loans in excess of 25% of their fully paid-up and
unimpaired capital and reserves are concerned. The
Central Bank subsequently approved four
applications for large credit exposures totalling
US$37.0mn during the period October to
December 2002. Section 3(4)a of the Act was also
amended to expand the clientele of the international
banks, (hitherto restricted to non-residents), to
include domestic companies with EPZ status
though any loan to the latter in excess of US$1.0
mn will require Central Bank approval.

In other efforts to maintain the health of the financial
system, the Central Bank conducted its first ever
inspection of a building society in 2002. In doing
so, the Bank was exercising the authority granted
under Statutory Instrument (SI) No. 50 of 2000,
which specifically places building societies within the
regulatory scope of the Central Bank, requiring these
institutions to file financial statements (and other
returns if requested) with the Central Bank and
empowering the Bank to periodically examine their
books and records.

Operations I

Another notable development occurred on
September 16 when the Financial Intelligence Unit
Act 2002 came into force, a piece of legislation
that set the stage for the establishment of the
Financial Intelligence Unit. As a new statutory body,
the FIU assumed the role of supervisory authority
under the Money Laundering (Prevention) Act and
took over responsibilities and functions that had
been previously assigned to the Central Bank.

Information Systems Developments

During 2002, the IS Unit continued and completed
the testing process for the Fixed Assets module of
the Prophecy Open financial application enabling
its full implementation to take place in June. The
Unit also oversaw the acquisition of a disaster/
recovery license for the Prophecy Open database,
which was subsequently installed on a back-up
server. In addition, work was done to upgrade all
computer workstations to the Windows 2000
operating system and update anti-virus software on
all workstations and servers.

In-house development of two new systems was
successfully undertaken in response to the needs of
the Bank's Research Department. These included a

system to capture and analyze information on
purchases and sales of foreign exchange by Casas
de Cambio and one that facilitates the recording
of foreign exchange receipts, utilization and sales
data that are submitted by the tourism sector.
Software was also developed to assist the Human
Resources Dept. in monitoring employee attendance
with a view to identifying the personnel that qualify
for the perfect attendance bonus.

After the Bank's pre-existing dial-up internet
connection was replaced by a dedicated line, the
Unit oversaw the installation of third party proxy
software to share the dedicated Internet connection
and protect the computers that are connected to
the internet. A firewall was also installed to protect
the Bank's e-mail server and internet servers as well
as the corporate network.

As part of its ongoing work to facilitate the
development of a web site for the Central Bank,
the Unit ensured that the domain name
"centralbank.org.bz" was registered in the first part
of the year and put in place an interim website with
the address www.centralbank.org.bz.

STATISTICAL APPENDIX

Table 1: Gross Domestic Product (GDP) by Industrial Origin
$mn

Primary Industries 205.8 230.8 259.8 241.0 249.0
Agriculture & forestry 160.2 173.2 188.5 170.6 174.0
Fishing 39.0 50.4 62.2 60.9 65.9
Mining 6.7 7.2 9.0 9.4 9.0
Secondary Industries 232.7 237.6 298.7 297.9 304.9
Manufacturing 130.6 131.8 159.2 155.4 155.2
Electricity & Water 51.4 46.6 56.7 60.4 62.1
Construction 50.7 59.2 82.8 82.1 87.6
Tertiary Industries 775.1 850.5 944.0 1,017.5 1,101.4
Wholesale & retail trade 213.3 236.8 272.2 289.2 302.8
Hotels & restaurants 47.1 52.1 58.5 66.8 68.4
Transport & Communications 114.8 127.3 141.1 158.9 187.0
Finance intermediation 68.7 84.9 108.3 110.0 122.8
Real estate & business services 90.5 100.0 98.2 112.0 124.8
Community, social & other services 93.7 96.8 100.7 105.4 109.4
General government services 147.0 152.5 165.0 175.2 186.1
Less: Financial Services Indirectly Measured 33.1 37.7 45.5 55.2 62.3
All Industries at basic prices 1,180.6 1,281.2 1,457.1 1,501.2 1,592.9
Taxes less subsidies on products 202.4 187.6 208.6 236.9 263.7
GDP at market prices 1,382.9 1,468.9 1,665.6 1,738.1 1,856.6
Source: Central Statistical Office

Table 2: Percentage Share Of GDP By Industrial Sector at Current Prices *

Primary Industries 14.9 15.7 15.6 13.9 13.4
Agriculture & forestry 11.6 11.8 11.3 9.8 9.4
Fishing 2.8 3.4 3.7 3.5 3.5
Mining 0.5 0.5 0.5 0.5 0.5
Secondary Industries 16.8 16.2 17.9 17.1 16.4
Manufacturing 9.4 9.0 9.6 8.9 8.4
Electricity & Water 3.7 3.2 3.4 3.5 3.3
Construction 3.7 4.0 5.0 4.7 4.7
Tertiary Industries 56.0 57.9 56.7 58.5 59.3
W wholesale & retail trade 15.4 16.1 16.3 16.6 16.3
Hotels & restaurants 3.4 3.5 3.5 3.8 3.7
Transport & Communications 8.3 8.7 8.5 9.1 10.1
Finance intermediation 5.0 5.8 6.5 6.3 6.6
Real estate & business services 6.5 6.8 5.9 6.4 6.7
Community, social & other services 6.8 6.6 6.0 6.1 5.9
General government services 10.6 10.4 9.9 10.1 10.0
Less: Financial Services Indirectly 2.4 2.6 2.7 3.2 3.4
All Industries at basic prices 85.4 87.2 87.5 86.4 85.8
Taxes less subsidies on products 14.6 12.8 12.5 13.6 14.2
GDP at market prices 100.0 100.0 100.0 100.0 100.0
Source: Central Statistical Office
* Figures in Table 1 may not reflect these percentages due to rounding

64

Appendix i

Table 3: Real Gross Domestic Product by Industrial Origin at Factor Cost (2000=100)
$mn

Primary Industries 210.6 232.7 259.8 260.8 263.3
Agriculture & forestry 165.1 175.4 188.5 185.6 192.4
Fishing 38.6 50.0 62.2 65.8 62.1
Mining 6.8 7.3 9.0 9.3 8.8
Secondary Industries 219.5 239.5 298.7 296.0 301.3
Manufacturing 120.6 128.4 159.2 157.8 157.5
Electricity & Water 47.7 51.6 56.7 56.9 58.2
Construction 51.1 59.6 82.8 81.4 85.6
Tertiary Industries 793.0 856.0 944.1 1,019.7 1,089.0
Wholesale & retail trade 222.5 242.9 272.2 292.6 304.6
Hotels & restaurants 47.2 52.9 58.5 66.4 68.0
Transport & Communications 112.0 125.3 141.1 157.7 175.4
Finance intermediation 68.3 79.7 108.3 115.4 135.4
Real estate & business services 91.7 101.1 98.2 110.8 121.5
Community, social & other services 97.1 99.1 100.7 102.2 104.9
General government services 154.2 155.0 165.0 174.6 179.3
Less: Financial Services Indirectly Measured 33.8 36.2 45.5 57.2 68.1
All Industries at basic prices 1,189.2 1,292.0 1,457.1 1,519.4 1,585.6
Taxes less subsidies on products 177.5 194.2 208.6 228.3 236.5
GDP at market prices 1,366.7 1,486.2 1,665.6 1,747.8 1,822.0
Source: Central Statistical Office

Table 4: Annual Percent Change In GDP By Sector at Constant 2000 Prices *

Primary Industries 2.3 10.5 11.6 0.4 1.0
Agriculture & forestry (1.8) 6.2 7.5 (1.5) 3.7
Fishing 24.6 29.3 24.4 5.8 (5.6)
Mining 3.5 7.4 23.3 3.3 (5.4)
Secondary Industries (2.4) 9.1 24.7 (0.9) 1.8
Manufacturing (3.8) 6.5 24.0 (0.9) (0.2)
Electricity & Water 1.2 8.2 9.9 0.4 2.3
Construction (2.3) 16.6 38.9 (1.7) 5.2
Tertiary Industries 5.5 7.9 10.3 8.0 6.8
Wholesale & retail trade 7.1 9.2 12.1 7.5 4.1
Hotels & restaurants 16.8 12.1 10.6 13.5 2.4
Transport & Communications 5.3 11.9 12.6 11.8 11.2
Finance intermediation 11.6 16.7 35.9 6.6 17.3
Real estate & business services (1.4) 10.3 (2.9) 12.8 9.7
Community, social & other services 1.8 2.1 1.6 1.5 2.6
General government services 4.6 0.5 6.5 5.8 2.7
Less: Financial Services Indirectly Measured 12.1 7.1 25.7 25.7 19.1
All Industries at basic prices 3.2 8.6 12.8 4.3 4.4
Taxes less subsidies on products 7.2 9.4 7.4 9.4 3.6
GDP at market prices 3.7 8.1 12.1 4.9 4.3
Source: Central Statistical Office
* Figures in Table 3 maynot reflectthese percentages due to rounding
65

Annual Report 2002
Ceta Ban ofBlz

Table 5: GDP by Expenditure in Current Prices

GDP in $mn
GoVt. final consumption expenditure 197.5 197.9 215.3 229.3 250.4
Private final consumption expenditure 1,074.3 1,139.8 1,252.1 1,362.4 1,470.5
Gross capital formation 259.0 360.4 477.0 436.9 420.6
Changes in inventories including discrepancy 3.8 (0.1) 55.9 (6.2) 23.0
Gross Domestic Expenditure 1,534.5 1,698.1 2,000.3 2,022.5 2,164.6
Exports: goods & services 724.6 806.8 865.8 881.3 974.2
Imports: goods & services 784.5 987.1 1,226.0 1,204.9 1,233.4
Net Exports (59.9) (180.3) (360.2) (323.6) (259.2)
Discrepancy (91.7) (49.1) 25.6 39.1 (48.9)
GDP market prices 1,382.9 1,468.8 1,665.6 1,738.1 1,856.6

Percent Distribution of GDP
GoVt. final consumption expenditure 14.3 13.5 12.9 13.2 13.5
Private final consumption expenditure 77.7 77.6 75.2 78.4 79.2
Gross capital formation 18.7 24.5 28.6 25.1 22.7
Exports: goods & services 52.4 54.9 52.0 50.7 52.5
Imports: goods & services 56.7 67.2 73.6 69.3 66.4
Net Exports (4.3) (12.3) (21.6) (18.6) (14.0)
GDP market prices 100.0 100.0 100.0 100.0 100.0

Table 6: GDP by Expenditure in Constant 2000 Prices

GDP in $mn
GoVt. final consumption expenditure 205.7 200.7 215.3 228.2 241.6
Private final consumption expenditure 1,070.8 1,161.7 1,252.1 1,377.1 1,466.7
Gross capital formation 266.2 364.4 477.0 439.7 419.1
Changes in inventories including discrepancy 3.9 (0.7) 55.9 (5.3) 24.0
Gross domestic expenditure 1,546.6 1,726.1 2,000.3 2,039.7 2,151.4
Exports: goods & services 717.8 811.0 865.8 923.2 1,006.8
Imports: goods & services 819.3 1,020.9 1,226.0 1,228.6 1,275.2
Net Exports (101.5) (209.9) (360.2) (305.4) (268.4)
Discrepancy (78.3) (30.0) 25.6 13.5 (61.0)
GDP market prices 1,366.7 1,486.2 1,665.6 1,747.7 1,822.0

Percent Distribution of GDP
GoVt. final consumption expenditure 15.1 13.5 12.9 13.1 13.3
Private final consumption expenditure 78.3 78.2 75.2 78.8 80.5
Gross capital formation 19.5 24.5 28.6 25.2 23.0
Exports: goods & services 52.5 54.6 52.0 52.8 55.3
Imports: goods & services 59.9 68.7 73.6 70.3 70.0
Net Exports (7.4) (14.1) (21.6) (17.5) (14.7)

GDP market prices 100.0 100.0 100.0 100.0 100.0
Source: Central Statistical Office

Appendix

Table 7: Net Domestic Credit

$mn
Poito asaIhne

I. III I* I IDurIing

Total Credit to Central Government
From Central Bank
Loans and Advances
Gov't Securities
From Commercial Banks
Loans and Advances
Gov't Securities
Less Central Government Deposits
With Central Bank
With Commercial Banks
Net Credit to Central Government
Credit to Other Public Sector
From Central Bank
From Commercial Banks
Plus Credit to the Private Sector
Loans and Advances
Securities
Net Domestic Credit of the Banking System

149.8
62.7
45.0
17.7
87.1
1.0
86.1
107.9
91.9
16.0
41.9
94.5
84.2
10.3
686.1
684.6
1.5
822.5

166.0
78.2
65.5
12.7
87.8
0.0
87.8
55.1
47.0
8.1
110.9
97.0
84.0
13.0
778.4
775.9
2.5
986.3

126.8
63.8
0.0
63.8
63.0
6.6
56.4
96.4
83.6
12.8
30.4
29.5
15.0
14.5
891.3
888.8
2.5
951.2

-39.2
-14.4
-65.5
51.1
-24.9
6.6
-31.4
41.3
36.6
4.7
-80.5
-67.5
-69.0
1.5
112.9
112.9
0.0
-35.1

Table 8: Gross Imports (CIF) by SITC Categories

$mn
gig9 g9i9i 20. 201.SI0

Food and Live Animals
Beverages and Tobacco
Crude Materials
Fuels and Lubricants
of which electricity
Animal and Vegetable Oils
Chemicals and Related Products
Manufactured Goods
Machinery and Transport Equipment
Miscellaneous Manufactured Goods
Commodities & Transactions N.E.C
Total
Commercial Free Zone
Grand Total

99.3 107.1
9.8 11.0
3.8 5.4
70.5 125.9
2.4 7.2
3.6 3.8
63.3 73.1
113.5 113.1
152.2 200.4
75.1 86.5
3.9 20.2
595.0 746.5
N.A N.A
595.0 746.5

106.3
7.5
8.0
170.1
15.0
4.0
84.8
143.8
237.1
64.5
104.1
930.2
114.5
1,044.7

118.8
7.7
11.6
159.7
16.9
3.2
71.7
136.2
230.5
75.9
91.7
907.0
132.0
1,039.0

107.80
8.30
7.50
139.3
23.80
3.10
85.00
128.20
208.50
80.50
83.40
851.6
221.3
1,072.9

Annual Report 2002

Table9: Balance Of Payments Summary

$mn

CURRENT ACCOUNT -330.9 -370.0 -328.5
Goods: Exports f.o.b. 563.6 538.1 619.4
Goods: Imports f.o.b. -968.8 -961.6 -995.9
Trade Balance -405.2 -423.5 -376.5
Services: Credit 318.2 347.3 366.7
Transportation 21.6 23.7 36.2
Travel 234.1 238.5 258.7
Other Goods & Services 26.8 38.9 41.6
GoVt Goods & Services 35.6 46.2 30.2
Services: Debit -249.9 -242.3 -261.1
Transportation -74.6 -72.2 -75.0
Travel -81.0 -81.5 -85.1
Other Goods & Services -76.7 -71.8 -83.2
GoVt Goods & Services -17.6 -16.9 -17.8
Balance on Goods & Services -336.9 -318.5 -270.8
Income: Credit 13.8 16.6 7.9
Compensation of Employees 4.1 4.0 3.8
Investment Income 9.7 12.6 4.1
Income: Debit -127.3 -166.4 -158.8
Compensation of Employees -18.9 -25.4 -21.5
Investment Income -108.5 -141.1 -137.3
Balances on Goods, Services & Income -450.4 -468.3 -421.8
Current Transfers: Credit 122.1 102.1 97.4
Current Transfers: Debit -2.7 -3.7 -4.1
CAPITAL ACCOUNT -4.5 2.3 22.9
Capital Account: Credit 3.7 4.9 25.1
Capital Account: Debit -8.2 -2.5 -2.2
FINANCIAL ACCOUNT 417.8 355.8 289.4
Direct Investment Abroad 0.0 0.0 0.0
Direct Investment in Belize 46.7 119.8 49.6
Portfolio Investment Assets 0.0 0.0 0
Portfolio Investment Liabilities 226.3 -29.7 253.2
Financial Derivatives Assets 0.0 0.0 1.7
Financial Derivatives Liabilities 0.0 0.0 0.0
Other Investment Assets -93.5 7.8 14.3
Other Investment Liabilities 238.4 257.9 -29.4
NET ERRORS & OMISSIONS 20.9 6.4 5.4
OVERALL BALANCE 103.3 -5.5 -10.9
RESERVE ASSETS -103.3 5.5 -10.9
(Minus = increase)

Appendix

Table 10: Government of Belize Revenue and Expenditure
$'000
l e Ja-Dc Ja-Dc J-

Yea Budget II I I

TOTAL REVENUE & GRANTS (1+2+3)
1 ).Current revenue
Tax revenue
Income and profits
Taxes on property
Taxes on goods and services
Int'l trade and transactions

Non-Tax Revenue
Property income
Contributions to pension fund
Transfers from NFPE's
Repayment of old loans
Other

2). Capital revenue
3). Grants

TOTAL EXPENDITURE (1+2)
1). Current Expenditure
Wages and Salaries
Pensions
Goods and Services
Interest Payments on Public Debt
Subsidies & current transfers

2). Capital Expenditure
Capital II (local sources)
Capital III (foreign sources)
ofwhich Hurricane ERF
Capital Transfer & Net Lending

CURRENT BALANCE
OVERALL BALANCE
balance excluding Hurricane ERF

FINANCING
Domestic Financing
Central Bank
Net Borrowing
Change in Deposits
Commercial Banks
Net Borrowing
Change in Deposits
Transaction with DFC (debt)

441,689
402,376
326,111
76,987
2,764
107,947
138,413

76,265
1,777
0
250
40,028
34,210

446,143
390,036
352,611
85,325
5,401
117,357
144,528

37,425
4,000
515
500
3,635
28,775

415,973
349,796
286,576
74,149
2,036
99,863
110,528

63,220
2,039
411
5,411
13,739
41,620

458,653
372,057
322,253
77,626
2,641
107,397
134,589

49,804
1,777
0
500
11,409
36,118

524,933
425,759
354,036
78,025
2,724
111,447
161,840

71,723
3,323
0
500
31,927
35,973

21,101 41,650 49,167 73,833 67,523
18,212 14,457 17,010 12,763 31,651

622,608
338,080
163,577
24,994
66,851
53,634
29,024

284,528
122,200
125,311
36,965
37,017

64,296
(180,919)
(143,954)

180,919
100,339
98,280
6,128
92,152
390
(3,157)
3,547

491,596
331,491
168,859
22,393
60,131
54,538
25,570

160,105
63,295
94,231

2,579

58,545
(45,453)
(45,453)

555,838
308,367
152,510
20,731
72,698
36,403
26,025

247,471
69,420
178,051
20,272
0

41,429
(139,865)
(119,593)

45,453 139,865
(2,434) (73,955)
(68,606)
(5,060)
(63,546)
(4,415)
7,004
(11,419)

601,071
333,669
162,196
22,594
66,839
53,875
28,165

267,402
81,640
148,745
57,776
37,017

38,388
(142,418)
(84,642)

142,418
72,691
61,868
15,470
46,398
8,927
756
8,171

594,685
334,374
167,519
25,115
61,597
52,687
27,456

260,311
108,771
134,840
7,821
16,700

91,385
(69,752)
(61,931)

69,752
(213,788)
(52,728)
(14,360)
(38,368)
(29,195)
(24,891)
(4,304)
(137,911)

Annual Report 2002

Table 11: Central Government's Domestic Debt

$'000

Overdraft 65,503 5,596 (63,913) 1,590
Central Bank 65,473 5,596 (65,473)
Commercial Banks 30 1,560 1,590

Treasury Bills 70,000 30,000 2,621 30,000 100,000
Central Bank 495 30,000 136 53,300 53,795
Commercial Banks 64,575 2,124 (31,451) 33,124
Other 4,930 361 8,151 13,081

Treasury Notes 24,000 959 24,000
Commercial Banks 23,269 930 23,269
Other 731 29 731

Defence Bonds 15,000 429 15,000
Central Bank 10,000 425 10,000
Commercial Banks 100 4 100
Other 4,900 4,900

Debentures 6,200 6,200 310 (6,200)
Central Bank 2,170 2,170 109 (2,170)
Other 4,030 4,030 201 (4,030)

Loans 30,077 5,000 1,447 1,605 33,630
DFC (Debt Restructuring) 9,322 429 688 8,893
BSSB (Housing) 721 13 71 708
BBL (Cohune Walk) 3,387 206 537 3,181
GOB/US Debt Swap 16,647 799 309 15,848
BBL (Infrastructure dev.) 5,000 5,000

TOTAL 210,780 35,000 7,647 11,520 (40,113) 174,220
R = Revised
P= Provisional
* Since October of 1998 Treasury Notes are being subscribed to in $US.
They are now, therefore, considered part of Foreign Liabilities. However interest is still paid in local currency.

Appendix

Table 12: Public Sector External Debt by Creditors

($'000)
M &. 111111111111
Dibre TRNACIN DUIN 200 Disbursed.

CENTRAL GOVERNMENT
Caribbean Development Bank*
European Economic Community
Int'l Bank for Reconstruction Dev.
Int'l Fund for Agricultural Dev.
Gov't of United Kingdom
Gov't of Trinidad and Tobago
Gov't of United States of America**
Suppliers Credit
OPEC Fund for International Dev.
Government of China
Republic of China
Deutsche Bank of Germany
Fondo de Inversiones de Venezuela
Inter-American Development Bank
Government of Spain
Government of Kuwait
Citicorp Merchant Bank Ltd.
Citibank of Trinidad
Provident Bank & Trust
Solomon Smith Barney
Royal Merchant Bank
All First Bank of Maryland
International Bank Of Miami
KBC Bank
Bear, Stearns & Co. Inc
REST OF NON-FINANCIAL
PUBLIC SECTOR
Caribbean Development Bank*
CIBC Bank & Trust Co.
Government of Kuwait
KBC Bank ***

FINANCIAL PUBLIC SECTOR
Caribbean Development Bank
European Economic Community
Paine Webber Real Estate Securities Inc
Gov't of United States of America
Citicorp Merchant Bank Ltd.
Citibank Trinidad & Tobago
International Bank of Miami
Deutsche Bank of Germany
Provident Bank & Trust
Private Export Funding Corporation
Commerz Bank of Belgium
CSSL/New Holland of Brazil
TOTAL

682,151
36,295
15,316
67,593
2,121
21,998
35
11,772
34,182
3,909
290
142,620
5,220
3,580
68,682
830
12,484
17,143
22,286
21,667
52,030
91,711
6,387
44,000

39,598
5,170
7,937
9,785
16,706

251,430
47,017
7,258
2,500
3,279
8,750
20,750
104,000
25,782
8,000
16,055
5,650
2,389
973.179

475,251
9,659

10,970
81

11,855
3,595

47,774

28,518

6,382

3,437

4,200
89,434
9,346
250,000

3,294

3,294

3,691
2,356

1,335
482.236

153,670
727
542
5,208
241
4,445
4
1,283
23,138
533
58
6,729
1,305
1,019

611
1,114
2,857
3,429
20,634

8,006
6,387
65,400

3,187
1,360
1,171
656

136,198
2,542
584
300
368
2,500
8,500
104,000
4,969
7,459
4,014
565
397
293.055

41,474
1,528
129
3,963
104

1
414
2,246
291

6,922
179
115
2,518
12
568
1,553
2,118
1,354
5,384
9,319
204
1,953
452
147

2,463
280
877
381
925

11,757
1,952
223
118
96
383
1,635
4,481
1,192
573
609
387
108
55.694

5

2

2

,554 1,009,286
22 45,249
,772 17,546
73,355
(3) 1,958
,091 19,644
1 32
10,489
22,899
6,971
232
183,665
3,915
2,561
97,200
109 328
562 18,314
14,286
18,857
4,470
52,030
83,705
4,200
68,034
9,346
250,000

281 16,164
12
6,766
269 9,398

4,630 123,553
19 46,850
418 7,092
2,200
2,911
6,250
12,250

4,193 25,006
541
12,041
5,085
3,327
10.465 1.149.003

*Effective 31st March 2001, WASA loans were re-classified as private sector debt as a result of its full privatization
** USAID Debt for Nature Swap Agreement as at 2nd August, 2001 was implemented on 30th November, 2001 for BZ $17,168
***Effective 31st December, 2002 BPA Loans of Bz $23 8 mn were re-classified as private sector debt as a result of its full privatization
Outstanding external debt of privatized enterprises and Securitization proceeds remained as contingent liability of Central Government
"" Proceeds of the Bear Stearns bond (US$125 million) also assisted in the setting up of a US$20 million sinking fund the settle the
Salomon Smith Barney bond in 2005

Annual Report 2002
Ceta Ban ofBlz

AUDITOR'S REPORT

CENTRAL BANK OF BELIZE

2002 FINANCIAL STATEMENTS

CENTRAL BANK OF BELIZE

2002 FINANCIAL STATEMENTS

CONTENTS

PAGE

Auditors' report 1

Balance sheet 2 3

Statement of income 4

Statement of cash flows 5 -6

Notes to the financial statements 7 -17

Chartered Accountants

PO Box 756 Jasmine Court Telephone 501-227-6860
Belize City 35A Regent Street 501-227-6861
Belize Suite 201 501-227-6629
www.kpmgbelize.com Belize City, Belize Fax 501-227-6072
E-rrail marw!ck@b-i.net

Page 1

AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF
CENTRAL BANK OF BELIZE

We have audited the accompanying balance sheet of Central Bank of Belize as of 31 December
2002 and the related statements of income, and cash flows for the year then ended. These
financial statements are the responsibility of management. Our r.. p.., ,1 1,1 is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing as promulgated
by the International Federation of Accountants. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.

In our opinion, the financial statements give a true and fair view of the financial position of
Central Bank of Belize as of 31 December 2002, and of the results of its operations and its cash
flows for the year then ended in accordance with International Accounting Standards adopted by
the International Accounting Standards Board.

28 March 2003

H I E :

CENTRAL BANK OF BELIZE
BALANCE SHEET AT 31 DECEMBER 2002 (CONT'I))

In Belize dollars.

LIABILITIES, CAPITAL AND RESERVES NOTES

DEMAND LIABILITIES
Notes and coins in circulation
Deposits by licensed financial institutions 12
Deposits by and balances due to Government and Public
Sector Entities in Belize
Deposits by international agencies 13

BALANCES DUE TO CARICOM CENTRAL BANKS

OTHER LIABI1LITIES 14

COMMERCIAL BANK DISCOUNT FUND 15
GOVERNMENT SINKING FUND 16

BELIZE CREDIT FACILITY 17

LOANS PAYABLE TO FOREIGN INSTITUTIONS 18

CONSTRUCTION BONDS

TOTAL LIABILITIES

REVALUATION ACCOUNT

CAPITAL ACCOUNT
Paid up capital (Authorized capital $10,000,000)

2(c), 20

6,000,000 12,000,000

301,577,669

1,188,317

379,741,678

10,000,000 10,000,000

GENERAL RESERVE FUl ,D

T TT IT ,1 I' B11 ITIF<(- \ lT.

,.'

21 12,493,003

D'. RESERVES 325,258,989

)GOVERNOR

) DIRECTOR

) DEPUTY GOVERNOR OPERATIONS

The accompanying notes form an integral part of these I'i. ,i i statements.

Page 3

132,673,605
57,007,542

34,944,093
4,464,131

229,089,371
1,499,704

3,131,614

1,959,445
40,170.058

7,227,477

12,500,000

125.280,374
80,718,126

64.942,478
2.315,732

273,256,710
622,197

3,989,105

1,945,946

6,427,720

81,500.000

12,184,831

401,926,509

--

CENTRAL BANK OF BELIZE
STATEMENT OF INCOME FOR THE YEAR ENDED 31 DECEMBER 2002

In Belize dollars.
NOTES 2002
INCOME
Interest
Approved external assets 4.104,824
Advances to government 5.667,937
Local securities 2d 801.527
Loans to statutory bodies 4.408,738

14.983,026
350,654
2.329,141

17,662.821

(5,826,802)

11.836,019

Discounts on local securities
Commission and other income

TOTAL INCOME

LESS: Interest expense

Income from operations

EXPENDITURE
Printing of notes and minting of coins
Salaries and wages, including superannuation
contributions and gratuities
Depreciation
Administrative and general

Total expenditure

(1,017,542)

(4,315,727)
(813,121)
(2,607,913)

(8,754,303)

NET PROFIT
Transfer to revaluation account in accordance with
section 49 of the Act
NET PROFIT TRANSFERABLE TO THE GENERAL.
RESERVE FUND AND CONSOLIDATED FUND

Transfer to general reserve fund in accordance with
Section 9(1) of the Act
Balance credited to the accountant general for the
consolidated revenue fund

3.081,716 5.240.192

S (575,882)

3,081,716 4.664,310

(308.172) (466.431)

2,773,544 4.197,879

The accompanying notes form an integral part of these financial statement,.

Page 4

2001

12.496,037
6,390.797
1,0)9,755
5,949,401

25,855.990
7,474
1,769,522

27,632,986

(14.471.156)

13.161,830

(1,008,735)

(4,032,096)
(796,090)
(2,084,717)

(7.921,638)

Page 5

CENTRAL B \NK OF BELIZE
STA I I'\I \ r OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2002

In Belize dollars.

CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit transferred to the general reserve and consolidated
fund
Adjustments to reconcile net profit to net cash provided
by operating activities:
Depreciation
Cli..i-.. in assets and liabilities that provided (used) cash:
Other assets
Other liabilities
Revaluation account
L.i.-. i niI on disposal

Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Belize Government current account
Loans to public sector
Repayment of loans by public sector
Acquisition of property and equipment
Reserve Tranche in the IMF
Construction bonds
Belize Government securities

Net cash (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes and coins in circulation
Deposits by licensed financial institutions
Deposits by and balances due to Government and Public Sector
Entities
Government Sinking Fund
Deposits by International Agencies
Balances due to Caricom Central Banks
Commercial Bank Discount Fund
Belize Credit Facility
Loan repayments made to foreign institutions

Net cash (used in) provided by financing activities

2002

308,172

813,121

1,405,517
(857,491)
1,188,317

2001

466.431

796,090

(444,582)
(263,919)

(1,198)

2.857,636 552.822

61,274,654 (18,051,304)
69,000.000
S 187,500
(5 1i'-r, i (692,132)
(836,606) 398,901
(6,000,000) (6,000,000)
2,188,000 (18,000)

125,107,786 (24,175,035)

7,393,231 10,105,207
(23,710,584) 4,376,868

(29,998,385) (16,075,525)
40,170,058
2,148,399 866,039
877,507 398,132
13.497 200,978
799,757 818.295
(69,000,000) (2,500,000)

(71,306,520) (1,810,006)

The accompanying notes form an integral part of these financial statements.

Page 6
CENTRAL BANK OF BELIZE
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2002 (CONT'D)

In Belize dollars.
2002 2001

NET INCREASE IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR

CASH AND CASH EQUIVALENTS, END OF
YEAR

CASH AND CASH EQUIVALENTS COMPRISE
THE FOLLOWING:

EXTERNAL ASSETS:
Balances and deposits with foreign bankers and
Crown Agents
Other foreign credit instruments
Accrued interest and cash intransit
Balance with the International Monetary Fund

LOCAL ASSETS:
Cash and bank balances
Government of Belize Treasury Pl I

56,658.902 (25,432.219)

197,436,320 222,868,539

254,095.222 197,436,320

95,399,943 160,592.042
'-, ,1 11, 31,940.000
30,600,564 859,022
4,003.295 3,440,560

200,263,802 196,831,624

36,548 109,677
53,794,872 495,019

254,095,222 197,436.320

The accompanying notes form an integral part of these financial statements.

Page 7
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS

In Belize dollars.

1. ORGANIZATION

The Central Bank of Belize, (the "Bank"), was .I;hbli. .:l by the Central Bank of Belize
Act 1982 (the Act).

The principal activity of the Bank is to foster monetary stability especially in regard to
the exchange rate, and to promote banking, credit and exchange conditions conducive to
the growth of the economy of Belize.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Following is a summary of the more significant accounting policies adopted by the Bank
in preparing its financial statements which accord with International Accounting
Standards adopted by the International \'c. :'ui1.i, Standards Board and with the Central
Bank of Belize Act.

a. Property. plant and equipment, depreciation and amortization -

Fixed assets are carried at cost, and are depreciated on a straight line basis over their
estimated useful lives. Land is not depreciated.

Depreciation is charged at the following rates:

Building and improvements 1%, 5%
Office furniture 10%, 20%
Equipment 10%, 20%
Vehicles 20%

b. Sale of special coins -

Special coins, which are minted or packaged as collector items, are legal tender.
However. no IrII rI is recorded in respect of these coins since they are not expected to
he placed in circulation as currency. Minting cost is charged against income in the year
incurred. Income is recognized when sales are made.

c. Foreign currency translation and exchange gains and losses -

i. Assets and liabilities

Foreign currency balances at the balance sheet date are translated at the rates of
exchange ruling at that date.

Page 8
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS

In Belize dollars.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

c. Foreign currency translation and exchange gains and losses -

ii. Income and expenses

Income and expenses in foreign currencies are translated at the rate of exchange
ruling on the transaction date.

iii. Revaluation

Section 49 of the Act stipulates that gains or losses from any revaluation of the
Bank's net assets or liabilities in gold, special drawings rights (SDR), foreign
exchange or foreign securities as a result of any change in the par value of the
Belize dollar or any change in the par value of the currency unit of any other
country shall be excluded from the computation of the annual profits and losses of
the Bank. All such gains or losses shall be credited in a special account called
Revaluation Account. However, no profits shall first be carried to the General
Reserve Fund or paid to the Government under Section 9 (see Note 21) whenever
the Revaluation Account shows a net loss. Such profits shall first be credited to
the Revaluation Account in an amount sufficient to cover the loss.

d. Valuation of securities -

Securities are stated at the lower of cost or market value. Unrealized losses arising from
changes in the market value of securities are charged against income while unrealized
gains are deferred. Realized gains and losses are included in income.

e. Accrued interest and cash intransit -

Accrued interest and cash intransit in respect of foreign assets are shown as part of
external assets.

f. Pension -

The pension scheme, a defined '.nclil plan, is funded by contributions from the Bank
and employees. It is financially separate from the Bank and is managed by a Board of
Trustees.

Page 9
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS

In Belize dollars.

g. Taxation -

In accordance with Article 51 of the Act, the Bank is exempt from the provisions of any
law relating to income tax or customs duties and from the payment of stamp duty.

3. INTEREST ON CENTRAL BANK BUILDING CONSTRUCTION BONDS

Interest is payable semi-annually on the Bank's Construction Bonds, and is charged
against the annual earnings of the Bank. (See Note 19).

4. CENTRAL BANK OF BELIZE ACT SECTION 5 COMPLIANCE

Section 5 of the Act stipulates that:

a. The Bank shall at all times hold assets of an amount in value sufficient to cover
fully the value of the total amount of its notes and coins for the time being in
circulation; and

b. The Bank shall maintain at all times a reserve of external assets of not less than
40 percent of the aggregate amount of notes and coins in circulation and of the
Bank's liabilities to customers in respect of its sight and time deposits.

c. At 31 December 2002 and 2001 total approved external assets approximated 92
percent and 76 percent of such liabilities :. p:..: c:1

5. IN IL 1 \11 IONAL MONETARY FUND RESERVE TRANCHE

Belize became a member of the International Monetary Fund in 1982 with a subscription
of SDR 7,200,000 of which SDR 1,320,600 was paid in foreign currency (The Reserve
Tranche) and the remainder in Belize dollars made tip of currency and non-interest
bearing promissory notes.

In 1982, this Reserve Tranche was purchased by the Bank from the Government of
Belize.

At 31 December 2002, Belize's subscriptions to the International Monetary Fund
amounted to SDR 18,800,000 and the Bank's Reserve Tranche amounted to SDR
4,238.690. The Reserve Tranche which earns interest is included in approved external
assets in the financial statements at the exchange rate of BZS2.7096 to SDR 1.0 at 31
December 2002 (2001 BZS2.51124 to SDR 1.0).

Page 10
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS

in Belize dollars.

6. ACCRUED INTEREST AND CASH INTRANSIT

Accrued interest and cash intransit consist of:

Accrued interest
Cash intransit

7. BELIZE GOVERNMENT SECURITIES

Belize Government securities consist of:

Treasury Bills
Debentures
Treasury Notes
Belize Defense Bonds

2002 2001

53.794,873 495,019
2,170,000
S 18,000
10,000,000 10,000,000

63,794,873 12,683,019

Section 35(2) of the Act stipulates that the Bank shall not at any time hold Belize
Government securities in an aggregate amount exceeding five times the aggregate
amount at that time of the paid up capital and general reserves of the Bank. At 31
December 2002 and 2001 the Bank's aggregate holding of Belize Government securities
approximated 2.84 times and .57 times, respectively, the amount of paid up capital and
general reserves of the Bank.

8. BELIZE GOVERNMENT CURRENT ACCOUNT

In accordance with Section 34 of the Act, the Bank may make direct advances to the
Government provided that at any one time the total outstanding amount of direct
advances shall not exceed twenty percent of the current revenues of the Government
collected during the preceding financial year or the sum of fifty million dollars,
whichever is greater. At 31 December 2002 and 2001, advances to Government
represent approximately zero percent and 90 percent of the authorized limit respectively.

263,414
30,337,150

30,600,564

544,632
314,390

859,022

CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS

in Belize dollars.

9. LOANS TO THE PUBLIC SECTOR

4% p.a. loan with quarterly payment of interest
commencing 24 March 2000 and a bullet payment of
principal at maturity on 24 March 2007. The loan was
refinanced in 2002.
11 ", p.a. loan with semi-annual payment of interest,
and payment of first installment of principal 18
months after 16 August 2000 and every 6 months
thereafter until maturity on 1 November 2005.
Loan to Development Finance Corporation to finance
infrastructure projects required due to damage caused
by Hurricane Keith:
11.9%' p.a. loan with semi-annual payment of interest
commencing I May 2001 and a bullet payment of
principal at maturity on 1 November 2012. The loan
was refinanced in 2002.

Page 11

2001

50,000,000

15,000,000 20,000.000

14,000,000

15,000,000 84,000.000

These loans are guaranteed by the Government of Belize.

10. OTHER ASSETS

Other assets consist of:

Inventory notes and coins

Prepayments and accrued interest

Accounts receivable

3,896,148 5,301.665

2002

Other

1,245,158

1,451,780

1,116,236

1,631,559

2.232.293

1,322.681

115.132

82,974

CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS

In Belize dollars.

11. PROPERTY AND EQUIPMENT

Property and equipment consist of:

Property
Furniture
Equipment
Vehicles

Less: accumulated depreciation

34,769,335 34,259.157
3,929,727 3,124,693

30.839,608 31.134.464

12. DEPOSITS BY LICENSED FINANCIAL INSTITUTIONS

Effective November 2002, the cash reserve requirement on demand. savings and time
deposits was revised from 3% to 6% of average deposit liabilities.

Under the revised provisions of Section 13 of the Banks and Financial Institutions Act
1995, licensed financial institutions are required to keep on deposit with the Bank an
amount equivalent to at least 6% of their average deposit liabilities. These deposits are
interest free.

13. DEPOSITS BY INTERNATIONAL AGENCIES

The Bank acts as agent for and accepts deposits from international financial institutions.
At 31 December, deposits consist of:
2002 2001

Commission of the European Communities
International Monetary Fund
Caribbean Development Bank
Inter-Am erican Development Bank
International Bank for Reconstruction and Development
European Union

75,148 148,707
129,877 120,369-
67,041 1,056.035
294,199 247,756
716.450 716,450
3,181,416 26.415

4.464,131 2.315,732

Page 12

2002

2001

29,170.058
1,022,669
4,210.684
365.924

29,170,058
865.518
3.970,013
253.568

Page 13
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS

In Belize dollars.

14. OTHER LIABILITIES
2002 2001
Interest payable (including construction bonds) 545,760 1,293,226

Severance and gratuities 586.955 555,568

Abandoned property 929,651 832,975

Retention payable 24,730 182.820

Other 1,044.518 1,124,516

3,131,614 3,989,105

15. COMMERCIAL BANK DISCOUNT FUND

Commercial Bank Discount Fund is a facility which was established by an agreement
signed in March 1983 by the Government of Belize and the United States of America,
providing for a discount fund to be operated through the Bank. The United States
Government acting through United States Agency for International Development
(USAID) earmarked US $5 million in loan funds up to 30 June 1987, to finance this
facility. The facility enabled commercial banks in Belize to discount with the Bank up to
100% of loans made to sub-borrowers for projects approved by the Bank and USAID. In
1993, USAID and the Bank agreed that BZ $2 million and BZ S1.5 million from the
reflows to the Discount Fund could be used as a line of credit to National Development
Foundation of Belize (the Foundation) and Development Finance Corporation (DFC),
respectively.

The USAID loan has the following terms:

Interest rate of 2% for the first ten years and 3% thereafter. The loan is repayable within
25 years with a grace period of 9-1/2 years and 31 equal semi-annual principal payments
for 15-1/2 years.

At 31 December _'"2r outstanding loans discounted by commercial banks through the
facility amounted to 5.2 million (2001 $.4 million) net of repayments, against a total
drawdown of $5.7 million (2001 $5.7 million) from USAID. On that date the amount
drawn down by the Foundation was S1.4 million 21 1 I" $1.4 million) net of repayments
and the amount drawn down by DFC was S1.2 million (2001 S1.5) net of repayments.

Page 14
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS

In Belize dollars.

16. GOVERNMENT SINKING IL N I)

Government Sinking Fund consists of USS20.000,000 invested by the Bank on behalf of
the government in a sinking fund for a bond issue maturing in 2005.

17. BELIZE CREDIT FACILITY

Under a World Bank Agricultural Credit and Export Development Project Loan
Agreement signed between the Government of Belize and the International Bank for
Reconstruction and Development on 19 July 1988, the Bank acting as agent for the
Government of Belize assists the Government in operating the Belize Credit Facility
through which loans are made available to the Development Finance Corporation for
specific development projects.

The Bank's responsibility to assist the borrower is set
between the Government and the Bank on 13 March 1989.

18. LOANS PAYABLE TO FOREIGN INSTITUTIONS

Loans payable to foreign institutions consist of:

Due to a foreign institution repayable in 8 installments
commencing 4 November 2002 and every 6 months
thereafter. Interest accrues at 2.82% per annum above
LIBOR for the first 2 years and thereafter at 2% per
annum above LIBOR. The loan was negotiated for
US$5,000,000 for project financing and is secured by a
first-priority charge lien or security interest on a deposit
of USS4,000,000 placed by the borrower with the foreign
institution.

Due to a foreign institution repayable in 8 installments
commencing 4 November 2002 and every 6 months
thereafter. Interest accrues at 2.82% per annum above
LIBOR for the first 2 years and thereafter at 2% per
annum above LIBOR. The loan was negotiated for
project financing and is secured by a first-priority charge,
lien or security interest on a deposit of USS4,000,000
placed by the borrower with the foreign institution.

out in an agreement signed

2002

6,250,000 8,750.000

6,250,000 8,750,000

Page 15

CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS

In Belize dollars.

18. LOANS PAYABLE TO FOREIGN INI1 I I I N 11
(CONT'D)

Due to a foreign institution repayable in a bullet payment
7 years after 3 March 2001. Interest accrues on a
quarterly basis at the interest rate earned on Certificates of
Deposits which aggregate US$25,000,000 plus 3% per
annum (9.72% at 31 December 2001). The loan was
negotiated for USS25,000,000 for on-lending to the
Development Finance Corporation to finance specific
projects and is secured by (cr`:fit;,... of Deposits totaling
US$ 25,000,000 plus all interest accruing thereon held
with the foreign institution. The loan was refinanced in
2002.

Due to a foreign institution repayable in a bullet payment
12 years after 31 October 2001. Interest accrues at 11.9%
and is due and payable each May I, and November 1
during the term of the loan. The loan was negotiated for
USS7,000,000 to invest in infrastructure and capital
improvement projects within Belize and is secured by a
promissory note signed by the Bank. The loan was
refinanced in 2002.

2002

2001

- 50.000.000

14,000,000

12,500,000 81,500,000

These loans are guaranteed by the Government of Belize.

19. (OIN\ I L( ACTION BONDS

$24,000,000 construction bonds secured by a guarantee
from the Belize Government. Interest at 11.75% per
annum is payable semi-annually. Principal repayable
by 8 semi annual installments of US$1,500,000
beginning 15 January 2001.

6,000,000 1 :11 ,i,

Page 16
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS

In Belize dollars.

20. REVALUATION ACCOUNT

Under Section 49 of the Act, no profits shall be credited to the General Reserve Fund or
paid to the Consolidated Revenue Fund whenever the Revaluation Account shows a net
loss. Such profits shall first be credited to the Revaluation Account in an amount
sufficient to cover the loss.

2002 2001

Balance at beginning of year

Net gain (loss) on revaluation of Reserve Tranche in
the International Monetary Fund 836,603 (398,900)
Net gain (loss) on revaluations during the year 351,714 (176,982)
Transfer (to)/from profits 575,882

Balance at end of year (Note 2c. iii) 1,188,317

21. GENERAL RESERVE FUND

Section 9(1) of the Act provides for the establishment of a General Reserve Fund into
which is paid 20 percent of the net profit of the Bank in each financial year until the Fund
is equal to the amount of the Bank's paid up capital. Thereafter, 10 percent of net profit
is paid into the Fund.

2002 2001

Balance at beginning of year 12,184,831 11,718,400

Transfer from profits at 10% 308,172 466,431

Balance at end of year

22. PENSION SCHEME

12,493.003 12,184,831

The pension scheme, a defined benefit plan, receives contributions from the Bank and its
eligible employees. During the year under review the Bank contributed S135,000 (2001 -
$121,548) to the scheme. The scheme is financially separate from the Bank and is
managed by a Board -I Trustees. The cost of plan benefits is determined using an accrued
benefit valuation method.