CENTRAL BANUKOF BELIZE

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CENTRAL BANK
OF
BELIZE

Twenty-fourth Annual Report
&
Statement of Accounts

For the Year Ending 31 December 2005

Abbreviations and Conventions
used in this Report

Abbreviations:

ACP
BAHA
BEL
BFIA

BGA
BIS
BSI
BSSB
BTB
BTL
BWSL
CARICOM

CABEI

African, Caribbean and Pacific
Belize Agricultural Health Authority
Belize Electricity Limited
Banks and Financial Institutions
Acts, 1995
Banana Growers Assodation
Bank for International Settlements
Belize Sugar Industries Limited
Belize Sodal Security Board
Belize Tourism Board
Belize Telecommunications Limited
Belize Water Services Limited
Caribbean Community and Common
Market
Central American Bank for Economic

Integration
CARTAC Caribbean Regional Technical
Assistance Centre
CMFS Capital Market Finandal Services
CCMS Caribbean Centre for Monetary Studies
CDB Caribbean Development Bank
CET Common External Tariff
CFATF Caribbean Finandal Action Task Force
CFZ Commerdal Free Zone
CGA Citrus Growers Association
CIF Cost Insurance and Freight
CPI Consumer Price Index
CSO Central Statistical Office
DFC Development Finance Corporation
ECCB Eastern Caribbean Central Bank
ECLAC Economic Commission for Latin
America and the Caribbean
EDF European Development Fund
EIB European Investment Bank
EPZ Export Processing Zone

EU/EEC European Union

FOB
FY
GDP
GOB
IBA
IBC
ICC
IBRD

IDB
IFS
IMF
NICH

NFC
OECD

OECS

PGIA
ps
RECONDEV

RBTT
RMB
ROC
SIF
TIBoM
UK
US/USA
SAID

WTO
WASA

Free on Board
Fiscal Year
Gross Domestic Product
Government of Belize
International Banking Act
International Business Company
Innovative Communication Company
International Bank for Reconstruction
and Development
Inter-American Development Bank
International Finandal Statistics
International Monetary Fund
National Institute of Culture and
History
Not-From-Concentrate
Organisation for Economic
Cooperation and Development
Organisation of Eastern Caribbean
States
Phillip Goldson International Airport
pound solid
Reconstruction and Development
Corporation
Royal Bank Trinidad and Tobago
Royal Merchant Bank
Republic of China, Taiwan
Social Investment Fund
International Bank of Miami
United Kingdom
United States of America
United States Agency for
International Development
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 2005 in this report are provisional, and the figures for 2004 have been revised.
- Since May of 1976 the Belize dollar has been fixed to the US dollar at the rate of US$1.00 = BZ$2.00.
- Totals in tables do not always equal the sum of their components due to rounding.

CENTRAL BANK OF BELIZE

200 ANNUAL REPORT

200 ANNUAL REPORT

CENTRAL BANK OF BELIZE

April 28, 2006

Hon. Said Musa
Prime Minister and Minister of Finance
New Administration Building
Belmopan
BELIZE

Dear Prime Minister :

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, 2005, together with
a copy of the Bank's Statement of Accounts, as certified by the External Auditors.

Yours sincerely,

Sydney J. Campbell
Governor

DIRECTORS AND PRINCIPALS

At December 31, 2005

BOARD OF DIRECTORS

SYDNEY CAMPBELL
Vice Chairman

MARION PALACIO

DAVID FONSECA

JAIME BRICENO

ROBERT SWIFT

Dr. CARLA BARNETT
Financial Secretary

PRINCIPAL OFFICERS

SYDNEY CAMPBELL
Governor

MARION PALACIO
Deputy Governor

CAROL HYDE
Manager, Human Resources & Administration

HOLLIS PARHAM
Manager, Finance

MARILYN GARDINER
Manager, Banking & Currency

NERI MATUS
Manager, Financial Sector Supervision

CHRISTINE VELLOS
Manager, Research

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
E conom ic O verview ....................................................... ................ .................. 1
International and Regional Developments ........................................................... 3
Domestic Production, Prices and Employment........................................................ 11
Monetary and Financial Developments ........ .................. ............................ 25
Central Government Operations and Public Debt ................................. ........ 31
Foreign Trade and Payments ............................................................................ 38
E conom ic P rosp ects ........................ .. ........................................... ................... 53

Operations ................................................................................................... 56
Foreign Exchange Operations ........... ........ .............................................. .. 56
Relations with Commercial Banks........................................... ...................... 57
Transactions with Central Government ................................................................. 58
Supervision ofBanks & Financial Institutions ................................................. 59
Information Systems Unit ......................................................... ................... 61

Administration .................................................................................. 62
B board ofD directors ........................................... ............................................... 62
O overseas M meetings ............................................. ............................................ 62
F in a n ce .......................................................................................... ............ ............ 6 2
In tern a l A u d it ..................................................................... .................................. 6 3
H um an R sources ............................................. .............................................. 63

Appendices .................................................................................................. 65
Monetary Policy Developments .................................................. ........................ 65
Statistical Appendix .............................................................. ...66

Financial Statements........................................ ........................................74
V

CENTRAL BANK OF BELIZE ANNUAL REPORT

LIST OF TABLES

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

International and Regional Developments ..................................... ......... 3
Table II.1: Selected Indicators for Some OECD and Newly Industrialized Countries .......................................... 4
Table 11.2: Selected Indicators for Some Caribbean Countries .......................... .......................................... 5
Table 11.3: Selected Indicators for Mexico and Central America ............................ ................................ 8

Domestic Production, Prices and Employment................................. ....... 11
Table III.1: Annual Percent Change in Selected Indicators ........................................... ........................... 11
Table III.2: Sugarcane D deliveries ..................................................................................... ............ ................. ....... 12
Table III.3: C itrus Fruit D deliveries ....................... ............................................................ ........... .................. ...... 13
Table III.4: Sugar and M olasses Production ...................................................... ............................................. 18
Table III.5: Production of Citrus Juices and Pulp ...................................................... ............................... 18
Table III.6: Bonafide Tourism Arrivals & Expenditure ............................................................ ......................... 21
Table III.7: Quarterly Percentage Change in CPI Components by Major Commodity Group ............................... 22
Table III.8: Employed Labour Force by Industrial Group ....................................... .............................................23

M monetary and Financial Developments ...................................... ........ .. 25
Table IV 1: Factors Responsible for Money Supply Movements ............. ............................................ 25
Table IV2: Money Supply ..................................................................................................... 26
Table IV3: Net Foreign Assets of the Banking System ........................................................................ 27
Tab le IV 4 : N et D om estic C credit ................................................................................................... ..................27
Table IV 5 : Commercial Banks' Holdings of Approved Liquid Assets ..................................................... 29

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: Public Sector External D ebt by Source ................................................... ........................................ 35

Foreign Trade and Payments ............................................. .................... 38
Table VI. 1: Balance of Payments Summary and Financing Flows ........................................................ 38
Table VI.2: Balance of Payments MerchandiseTrade ............................................... ............................ 39
T ab le V I.3 : D om estic E xp orts ................................................................................................................................ 40
Table V I.4: Exports of Sugar and M olasses ...................................................... ............................................. 40
Table VI.5: Export Sales of Citrus Juices and Pulp......................................................... ................... 43
Table V I.6: E exports of B ananas ... .................. ........................................................................................................ 44
Table VI.7: Exports of Marine Products ................................................................................................46
Table V I.8: O therM ajorExports ... ................................................................................ ............ .................. ....... 47
Table V I.9: D direction of V visible Trade ................................................................. ........................................... 49
Table VI.10: Balance of Payments Services, Income and Current Transfers.............................................50
Table VI. 11: Balance of Payments Capital and Financial Accounts...................................... 51
Table V I.12: O official International R deserves ................................................................. .............................................. 52

Operations.................................................................................................... 56
Table VII. 1: Central Bank Dealings in Foreign Exchange 2005 ........................................ ......................... 56

2005ANNUAL REPORT
CENTRAL BANK OF BELIZE

Table V II.2: External A assets R atio 2005 ..................................................................... ...................................... 57
Table VII.3: Commercial Bank Balances with the Central Bank ........................................ .......................... 57
Table V II.4: Currency in Circulation2005 .................................................. ................................................ 58
Table VII.5: Central Bank Credit to Central Governm ent ..................... ........................ ..........................................58
Table VII.6: Government of Belize Treasury Bill Issues ............................................... .............................. 59
Table V II.7: L ist of Financial Institutions ................................................................................. ....................... 60
Table V II.8: L ist of C credit U onions ...................................................................... ........................................ ...60

A pp en dices........................................................................................................................................................... 65
Table 1: Gross Domestic Product (GDP) by Industrial Origin at Current Prices ................................................... 66
Table 2: Percentage Share of GDP by Industrial Sector at Current Prices............................ .................. 66
Table 3: Real Gross Domestic Product by Industrial Origin (2000=100) ................................................... 67
Table 4: Annual Percent Change In GDP by Sector at Constant 2000 Prices ................................................ 67
Table 5: GDP by Expenditure in Current Prices ......................... ............................... 68
Table 6: GDPby Expenditure in Constant 2000 Prices ........................................................... ........................68
Table 7: Sectoral Composition of Commercial Banks' Loans and Advances ............................................. 69
Table 8: Commercial Banks' Weighted Average Interest Rates .................................................... ..................69
Table 9: Balance of Payments Summary .......................................................................................................70
Table 10: Gross Imports (CIF) by SITC Categories.......................................................... ..................71
Table 11: Central Governm ent's D om estic D ebt ......................................................................... ................. 71
Table 12: Government of Belize Revenue and Expenditure .................... .........................................72
Table 13: Public Sector External Debt by Creditors .......... .........................................73

LIST OF CHARTS

Chart II.1: Real GDP Growthfor Selected Caribbean Countries ............................................... ....................... 6
Chart 11.2: Real GDP GrowthforMexico and CentralAmerica...................................................... .................. 9
C hart III.1: B anana A create ......................................................................................... ................................... 13
Chart IV 1: Ratio of M 2 to GDP ........................................................................... .................. 26
Chart IV2: Annual Change in Net Foreign Assets of Central Bank & Commercial Banks ...................................26
Chart IV 3: Sectoral Distribution of Outstanding Commercial Banks' Loans........................... ..................... 28
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........................................ ............................ 34
Chart V 3: Sources of Public SectorExternal Debt ..................................................... ................................. 36
Chart VI. 1: Foreign Reserve Coverage of Merchandise Imports ............................................................. 39
Chart V I.2: G ross O official International R deserves ..................................................................... ....................... 52

LIST OF BOXES

B ox 1: F arm ed Shrim p ............................................................................................................................................ 16
B ox 2: Tourism D evelopm ents and Prospects ........................................................................... ....................... 20
Box 3: Belize's Oil Discovery ................. ........................... ...........................................................................24
Box 4: Central Government Tax Measures in 2005 ............................................................ ..................33
Box 5: Public Sector & Publicly Guaranteed D ebt ...................................................... ..................................... 37
B ox 6: EU SugarR reform ................. ......................................................................................... .................. 41
Box 7: EU Banana Im port Regim e ...................... .................................................................. 45
Box 8: Meetings Attended by the Governor and Deputy Governors during 2005 .............................................62

OVERVIEW OF THE BANK

t

MISSION STATEMENT

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 condi-
tions 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.
/ Provide 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.
/ Provide guidelines to the banking community on matters such as money supply,
interest rates, credit and exchange rates.
SSet high standards of efficiency and organisation so as to encourage higher levels of
attainment in the Bank.

OBJECTIVES
/ Promote monetary stability.
/ Regulate the issue and availability of money and its international exchange.
/ Regulate and monitor the financial environment.

200 ANNUAL REPORT

CENTRAL BANK OF 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 review-
ing 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 and processing of staff
compensation and benefits.

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

2005ANNUAL REPORT

CENTRAL BANK OF BELIZE

* 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 international bank licenses.
* Supervising and regulating banks, financial
institutions and credit unions through on-
site examination and off-site 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.

* Processing of applications for large credit
exposures under section 21(2) of the Banks
and Financial Institutions Act and 21 b (2)
of the International Banking Act.
* Promoting and conducting anti money-
laundering surveillance of financial insti-
tutions licensed under the BFIA, IBA and
the Credit Unions Act.

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

Other Operations

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

* Maintaining the Bank's plant and
equipment.

Finance

200 ANNUAL REPORT

Table L1: Major Economic Indicators

0I0I 2LI0 200 200 200 200

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 (%)
Prim ary Activities
SecondaryActivities
Services
MONEY AND PRICES ($mn)
Annual Inflation
Currencyand Demand deposits (M1)
Quasi-Money(Savings and Time deposits)
MoneySupply(M2)
Ratio of M2 to GDP (%)
CREDIT ($mn)
Commercial Bank Loans and Advances
Public Sector
Private Sector
INTEREST RATE (%)
Weighted Average Lending Rate
Weighted Average Deposit Rate
Weighted Average Interest Rate Spread
CENTRAL GOVERNMENT FINANCES ($mn)
Current Revenue
Current Expenditure
Current Account Surplus (+)/Deficit(-)
Capital Expenditure
Overall Surplus(+)/Deficit(-)
Ratio of Budget Deficit to GDP at m kt. Prices (%)
Domestic Financing (Net)
External Financing (Net)
BALANCE OF PAYMENTS (US $mn)
Merchandise Exports (f.o.b.)1
Merchandise Imports (f.o.b.)2
Trade Balance
Remittances (Inflows)

249.8 255.3 262.7 271.1 281.1 289.9
83.7 85.9 84.7 89.2 95.9 98.6
11.1 9.1 10.0 12.9 11.6 11.0

1,663.5 1,742.7 1,864.3 1,975.2 2,110.4 2,209.9
6,659.3 6,826.1 7,096.7 7,285.9 7,507.6 7,623.0
13.0 4.9 5.1 9.3 4.6 3.3

15.2 14.5 13.9 17.5 18.2 17.9
18.1 17.3 16.9 14.9 15.3 14.5
66.7 68.3 69.3 67.6 66.5 67.6

0.6 1.1 2.3 2.6 3.1 3.7
310.2 364.8 358.1 361.1 406.7 423.1
655.7 676.0 705.3 740.0 841.6 906.8
965.9 1,040.8 1,063.4 1,101.1 1,248.3 1,329.9
58.1 59.7 57.0 55.7 59.1 60.2

695.4 788.5 904.6 1,056.6 1,176.0 1,254.7
11.1 12.9 16.0 30.0 46.3 63.0
684.3 775.6 888.6 1,026.6 1,129.7 1,191.7

15.8 15.4 14.5
5.0 4.3 4.5
10.8 11.1 10.0

349.8 372.1 425.8 422.2 462.0 511.4
308.4 333.7 333.4 393.0 468.0 556.2
41.4 38.4 92.3 29.1 -6.0 -44.8
247.5 267.4 260.3 276.4 180.9 117.6
-139.9 -142.4 -68.8 -216.0 -125.3 -141.9
-8.4 -8.2 -3.7 -8.9 -5.9 -6.4
-74.0 72.7 -220.9 -62.4 -39.4 -24.1
213.5 69.8 278.3 380.7 174.9 122.1

281.8 269.1 309.7 315.5 306.2 318.4
478.4 477.7 496.9 522.4 480.7 556.2
-196.6 -208.7 -187.2 -206.9 -174.6 -237.9
27.3 26.4 24.3 29.3 30.9 40.9

Tourism (inflows) 110.7 110.5 121.5 149.7 168.1 213.7
Services (Net) 28.2 44.0 43.6 69.7 86.8 141.5
Current Account Balance -161.6 -182.3 -165.6 -176.4 -149.9 -151.6
Capital and Financial Flows 202.9 173.5 151.6 174.5 110.2 157.4
Gross Change in Official International Reserves 3 -51.7 2.7 5.4 30.1 31.4 -18.0
Gross Official International Reserves 122.8 120.1 114.7 84.6 53.3 71.3
ImportCover of Reserves (in months) 3.2 3.2 3.2 2.1 1.4 1.6
PUBLIC SECTOR DEBT
Disbursed Outstanding External Debt(US $mn)4 433.7 486.6 574.5 749.7 850.7 932.6
Ratio of Outstanding Debt to GDP at Mkt. Prices (%) 52.1 55.8 61.6 75.9 80.6 84.4
External Debt Service Payments (US $mn) 43.1 68.0 75.2 72.0 88.5 220.7
External Debt Service Ratio (%)5 9.8 15.3 15.2 13.6 16.3 35.6
Disbursed Outstanding Domestic Debt ($ m n) 176.0 210.8 174.2 257.8 278.6 279.5
Domestic Debt Service Payments ($ m n) 22.6 17.7 19.2 13.7 18.8 23.1
Sources Ministry of Finance, Central Statistical Office, & the Central Bank of Belize
Includes CFZ gross sales
2 Includes CFZ imports
SA negative sign denotes an increase in reserves and vice versa
4 Excludes guaranteed debts
5 = amounts related to refinancing w ere excluded

CENTRAL BANK OF BELIZE

Belize Currency Notes

U'

(I ..

ECONOMIC OVERVIEW

GDP grew by 3.1% in 2005 as the policy
environment tightened somewhat in an effort to
reduce pressure on the international reserves.
Growth was led by services with tourism playing
a key role in the expansion of distributive trade,
transport & communications as well as the
continuing growth in hotel and restaurant activity.
Activity in fisheries also heightened as a result of
developments in shrimp and tilapia farming. New
employment opportunities were largely
concentrated in community, social, communications
and tourism services and these helped to cut the
unemployment rate from 11.6% to 11.0% in the
face of a 2.1% increase in the labour force.
Meanwhile, the consumer price index rose by 3.7%
in response to hikes in prices for petroleum and
other imports as well as increases in water rates and
government taxes designed to improve fiscal
performance.

The efforts to improve the balance of payments
position met with limited success as a significant
expansion in the trade deficit eclipsed higher tourism
earnings and remittance inflows. The external current
account deficit consequently rose by 1.2% to
$303.2mn although as a proportion of GDP it
declined from 14.5% to 13.7%. The deficit was
financed by foreign investment inflows and
government borrowings that included two Bear
Stearns bonds. Supported by these inflows, gross
international reserves rose by $36.0mn to
$142.6mn (1.6 months of imports).

While the net foreign assets of the banking system
increased, growth in broad money slowed to 6.5%
(down from 13.3% in 2004), as the Central Bank
acted to reduce liquidity and credit expansion. In
May, liquid asset and cash reserve requirements were
raisedby a further 1.0%, long-term loans to Central
Government were removed from the list of
approved liquid assets and the gradual sterilization
of BSSB deposits was initiated. These measures
contributed to a 32.3% contraction in excess
statutory liquidity and a slowing in the growth of
net domestic credit to 4.2% as compared to the
19.8% expansion in 2004. With greater reliance on
foreign financing, net domestic credit to Central
Government contracted by 16.9% and the
growth of private sector credit fell from 11.1%
to 6.4%. Much of the incremental credit was in
the form of personal and real estate loans with
lesser amounts being extended for construction
and manufacturing. Loans for primary
production declined with only banana and
mining activity recording net increases.

With conditions tightening, the weighted
average lending and deposit rates of commercial
banks rose slightly, yielding a net increase of 10
basis points in the banks' weighted average
interest rate spread, which stood at 8.9% at year-
end.

A review of the government's fiscal performance
during the 2005 calendar year, showed that its
overall deficit widened to $141.9mn (6.4% of

2005ANNUAL REPORT

CENTRAL BANK OF BELIZE

GDP) largely due to a 40.1% growth in interest
and other debt related payments to $170.3mn (7.7%
of GDP). Capital outlays were cut by 35.0% to
restrain the growth in the deficit. The primary
balance improved as a result, swinging from a
small deficit in 2004 to a surplus of $28.3mn
(1.3% of GDP), an indicator of the effort being
made to eventually reverse the upward trend in
the debt/GDP ratio. The overall deficit was
largely financed by external borrowing and
privatization proceeds. Central Government's
domestic debt consequently edged up only
marginally to $279.5mn (12.6% of GDP) as a
$5.1mn increase in local borrowing was nearly
matched by $4.3mn in amortization payments.
In contrast, the external debt rose by 9.0% to
$1.9bn (84.2% of GDP), with disbursements of
$427.9mn and downward valuation adjustments
of $4.8mn outweighing principal repayments of
$307.0mn.

In 2006, growth in the economy is likely to range
between 2.0% and 3.0% as fiscal and monetary
policies are tightened in a tactical way to slow
consumption and improve the external current

account position. Inflation is expected to rise to
approximately 4.5% with the implementation of
the General Sales Tax, high fuel prices at the pump
and hikes in electricity rates. The export sector should
perform well with the advent of crude oil exports
and higher earnings from citrus products, sugar and
papaya driving up the value of domestic exports
by at least 12.0%. On the other hand, there are
some concerns for the banana industry, which will
be subject to the new and less favourable EU
import regime. Its performance in 2006 will be a
good indicator of the future viability of that industry.
After a bumper year, citrus will return to normal
output levels and marine and basic grain production
should also not see much change. In the secondary
sector, construction should be stable and
manufacturing growth will hinge on the
performance of items for domestic consumption
such as soft drinks and beer, which did not appear
to respond well to tax increases in 2005. Activity in
services is not likely to exceed the 2005 level given
a projected decline in cruise ship arrivals, fiscal
tightening and other efforts to slow domestic
consumption.

TIONAL & REGIONAL DEVELC

Although tested by several major disasters during
the year, the global economy expanded by an
estimated 4.3% with vigorous growth in the United
States, China and Emerging Asian countries
providing the major impetus for the rest of the
world. While slightly below the previous year,
growth was more broad-based as Japan remained
on the road to recovery and continental Europe
continued on an upward trend facilitated by low
long term interest rates and buoyant export markets.
Strong global demand led to a general rise in
business investment and job creation.
Notwithstanding the oil shock, overall prices in the
larger developed countries remained stable as the
increased cost of i -. did not spill over into higher
wage demand and long term inflation expectations.

Developments in Select OECD and Newly
Industrialized Countries

Despite oil price spikes and the devastation left by
three hurricanes in 2005, the United States
economy expanded by 3.6% with growth being
underpinned by robust increases in productivity and
income, construction, and supportive financial
market conditions. Even with little excess capacity
and higher . i _- costs, core inflation remained
stable at around 3.4%, while unemployment
decreased to 4.9%. While the economy has shown
strength and resilience, it has also been generating
larger external current account deficits in recent years
due to the expansion of the fiscal deficit and tax

measures designed to stimulate domestic demand.
In 2005, the external current account deficit was
equivalent to approximately 6.0% of GDP. With
its eye on the widening deficit and a possible build-
up of latent inflationary pressure, the Federal
Reserve has been gradually tightening monetary
policy through small interest rate increases as a
precautionary measure.

In Britain, GDP growth decelerated from 3.2%
in 2004 to 1.7% in 2005 as the domestic housing
boom came to an end and the operating surpluses
of some insurance corporations declined following
the Hurricane Katrina disaster. Exports, a moderate
increase in business investment, government
consumption and stronger activity in the services
sector were the chief drivers of growth. The
consumer price index rose by 2.1% with upward
pressure being manifested as retailers passed on price
increases for food and non-alcoholic beverages. The
economic slowdown translated into a slight increase
in the unemployment rate, which rose from 4.7%
to 5.0%.

Canada's economy grew by 2.9%, driven by fast
growth in its IK i - sector (which accounted for
6' I" of exports), construction and business services.
The unemployment rate edged downward from
7.0% to 6.5% with growth in blue collar jobs in
areas such as mining, oilfields and forestry. Soaring
oil prices stimulated another round of investment
into oil fields, oil and gas pipelines, railways and

2005ANNUAL REPORT

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

United States
Canada
Taiwan
United Kingdom

3.6
2.9
4.4
1.7
2.5

Sources: Economist and International Financial Statistics

port facilities. S,. i- !, _r -costs also contributed
to a small rise in headline inflation, which rose from
2.1% to 2.3%.

In the face of continued tense relations with
mainland China, growing competition from
developing countries, rising energy prices and
interest rates, and excess inventory, growth in
Taiwan, the world's twentieth largest economy,
slowed to 4.4% while its inflation rate climbed to
2.2%. While the rate of expansion in industrial
production slowed from 9.9% to 9.5%,
unemployment remained stable at 4.4%. During
the year, Taiwan continued to be a creditor economy,
investing heavily in Asia and holding the world's
third largest stock of foreign exchange reserves
(1 l'-. l .1 i as of October 2005.

Japan's economy expanded by 2.5% in 2005 driven
by exports, business investment and private sector
consumption. Strong corporate profits paved the
way for an end to the hitherto declining trend in
employment and wages. The unemployment rate
fell 10 basis points to 4 4".. and industrial production
grew by 3.8% as demand for Japanese products
remained strong overseas. With the general price
level declining by -0.2% during the year, the Bank

ofJapan pledged to keep interest rates at zero while
pumping cash into the economy to reverse the
downward trend in core consumer prices.

Development in Selected Regional
Economies

The Caribbean

Notwithstanding natural disasters in the form of
floods and hurricanes, the Caribbean as a region is
estimated to have grown by 3.9% in 2005,
marginally above the 3.8% achieved in 2004.
Growth was supported by the continued strength
of external demand, low interest rates that prevailed
for much of the year and, to a much lesser extent,
an increase in I -,- i~l, domestic demand.

Buttressed by a combination of high international
prices for oil and gas, an expansion in the liquefied
natural gas sub-sector and construction, growth in
Trinidad and Tobago's GDP accelerated to 7.0%
in 2005 with unemployment decreasing from 8.6%
to 8.0%. The windfall in oil revenues underpinned
a fiscal surplus of US$300mn for FY2004/2005
and a projected surplus for FY2005/2006 as well.
The improved position enabled a reduction in the

CENTRAL BANK OF BELIZE

INTERNATIONAL & REGIONAL DEVELOPMENTS

stock of debt from 48.0% to 41.0% of GDP. With
inflation rising from 5.6% in 2004 to 7.2% in 2005,

measures were taken to tighten monetary policy
during the year. In the external sector, the surplus

on the current account more than offset net capital
and financial outflows, causing net international

reserves to rise from US$2.9bn to US$4.8bn.

The Bahamian economy expanded by an estimated

3.0% in 2005, boosted by growth in construction

activity, robust domestic demand and ongoing
investments in tourism projects. As at the end of

October, tourist arrivals had declined by 2.1% to
4.2mn in response to an active hurricane season in

2005 and hurricane damage in 2004. Inflation rose

to 2.2% from 0.9% in 2004, reflecting higher costs
for medical and health care, education and food/

beverage items. Over the first five months of the
fiscal year, higher tax revenues caused a 20.9% fall
in the overall fiscal deficit to $50.0mn. Strong

domestic demand led to contractions in the liquidity

of the banking system and when combined with
high fuel prices, resulted in a 12.3% decline in

external reserves to $582.9mn.

Growth in the Barbadian economy slowed from

4.8% to 4.1% driven by construction and the
wholesale and retail trade sector. The average
unemployment rate, for the first nine months, fell

by 0.8 percentage points to 9.1%. Up to the end of

November, activity in the tourism sector had

declined by 4.2% with stay-over visitors down by
1.1% and cruise ship passengers decliningby 22.7%.

Except for a small increase in sugar output,

agricultural production also declined during 2005.

At the end of September, annualized inflation was

estimated at 5.1% compared to 0.8% for the same
period of 2004 with upward pressures coming
from higher food and energy prices. The fiscal

deficit for calendar year 2005 rose to 2.9% of GDP
with financing coming largely from injections of

US$125.0mn that was raised on the international
bond market.

Jamaica's economy growth accelerated from 0.9%

in 2004 to 1.5% in 2005, notwithstanding two
hurricanes and higher international oil prices.

Mining and construction were the main

contributors to this growth. Tourism grew by

Table 11.2: Selected Indicators for Some Caribbean Countries

GDP Grwt Inflaion Rate Unmlomn Net Itraiona

Barbados
The Bahamas
Guyana
Jamaica
OECS
Trinidad & Tobago

5.1
2.2
6.0
16.0
3.5
7.2

Sources: ECLAC, IMF, Central Bank of Barbados, Central Bank of Bahamas,
Bank of Jamaica, ECCB, and Central Bank of Trinidad & Tobago
n.a. = not available

9.1
n.a.
n.a.
12.0
n.a.
8.4

595.3
1,190.5
136.6
1,858.5
n.a.
2,933.0

Bank of Guyana,

489.1
1,238.0
160.5
2,087.0
n.a.
4,765.0

2005ANNUAL REPORT

CENTRAL BANK OF BELIZE

2.0% with new investments in the sector
compensating for declines in the number of stay-
over and cruise ship arrivals. Meanwhile, even
though the external shocks led to -1.i.i. hb
revenue collections the Jamaican government
planned to end the year with a deficit of close to
1.0% of GDP, a target essential for the reduction
in the debt stock which stands at 136.0% of GDP
and which accounts for more than 60.0% of
government's expenditure. The rate of inflation
remained at the two-digit level (16.' i'"., fueled by
higher energy costs, while unemployment stood at
12.0% in April 2005.

In Guyana, GDP registered a 2.9% decline in
contrast to the 1.6% increase in the previous year.
The agricultural sector '- 1.t 1.1 il1 sugar and rice)
suffered from floods and subsequent food shortages
alongwith higher oil prices and sharp increases in
money supply and credit pushed up the rate of
inflation from 5.5% to 6.0%. The fiscal deficit rose
to 13.0% of GDP in 2005 as the slowdown in
economic activities reduced tax revenues while
capital expenditure expanded for disaster recovery

Chart II.1: Real GDP Growth for

Barbados The
Bahamas

efforts and construction for the Cricket World Cup.
Some fiscal relief was provided by the G-8 debt
write-off, which represented a decrease in debt
obligations payments of 0.5% of GDP.
Consequently, the overall balance of payment
registered a surplus ofUS$3.1mn as the increase in
the external current account deficit was more than
offset by net capital inflows and official aid flows
related to debt relief.

OECS

Growth in the OECS was estimated at 4.0%, for
the second consecutive year driven by an upsurge
in construction as preparations are made for the
2007 Cricket World Cup and increased activity in
wholesale/retail trade, transportation/
communication and the banking sector. In contrast,
the performance of the tourism sector was weaker
as stay-over and cruise ship arrivals registered slight
declines. Output in the agriculture sector declined
significantly in 2005 due to the very weak
performance of the traditional export crops such
as banana, sugar, nutmeg and cocoa. The rate of
inflation has been provisionally estimated at 3.5%

Selected Caribbean Countries

0 2004

[ 2005

Guyana Jamaica OECS Trinidad &
Tobago

INTERNATIONAL & REGIONAL DEVELOPMENTS

due to a significant hike in the international price
of oil and commodities such as cement, steel,
lumber and other building materials. Substantial
foreign exchange reserves continued to be held
in order to maintain the stability of the EC
dollar, while assets of the banking system grew
and liquidity levels remained high.

Mexico

GDP growth in Mexico slowed to 3.0%
(compared to 4.2% in 2004) in the face of increasing
competition from Asia '" iti .-i.l i1- China) for the
US market. Between September 2004 and
September 2005, Mexico's share of world exports
to the US fell from 10.7% to 10.2% and the
manufacturing sector took the brunt of this, growing
by only 0.9% during the first nine months of the
year as contractions in textiles, 1 *- -i- -, machinery
and metals overshadowed small gains in chemicals
and automobiles. While the value of merchandise
exports increased by 13.7%, this was largely due to
a 34.8% increase in petroleum sales. Non-petroleum
exports rose by 10.6%, a slower rate of expansion
than the previous year. Bouyed by particularly strong
petroleum prices, the international reserves rose by
US$4.0bn to US$65.5bn. The latter, along with
increased remittances and foreign direct investment
spurred a 3% real appreciation of the Mexican Peso
that in turn contributed to a lowering in the inflation
rate from 5.2% in 2004 to 2.9% in 2005. The
unemployment rate also declined from 5.4% to
4.9% during the year.

Central America

Economic activity in Central America expanded by
4.0% during 2005 with the Panamanian economy
registering the fastest growth of around 6.0%, while
El Salvador lagged with GDP rising by 2.5%. As
net oil importers, all of the Central American
countries' experienced a worsening in their terms
of trade given the record high prices for crude oil
in the international market. Current account deficits
also widened as a result. Inward remittances to
most countries rose significantly (caused by a rise
of Latin American employment in the USA) and
this helped to drive domestic consumption. High
oil prices contributed to inflationary pressures across
board ranging from 3.9% in Panama to 14.1% in
Costa Rica.

The Costa Rican economy expanded by 4.2% with
growth in all major sectors of the economy.
Manufacturing was up by 5.6%, reflecting increased
output of microprocessors and textiles for the
export market. Agriculture grew by 4.1% and the
services sector also performed well. Although
exports grew by a healthy 11 8" ,, fuelled by a rally
in coffee prices, the sale of non-traditional
agricultural products and a rebound in sales of
microprocessor chips, the external current account
deficit rose to 5.2% of GDP as the trade balance
worsened and increases in profit repatriation offset
the surplus on the services account. An increase in
financial inflows (mostly private sector) financed the
external deficit and pushed international reserves
up by U -' '.Omn. The fiscal deficit remained

Table 11.3: Selected Indicators for Mexico and Central America

**. - I- *
GDP Grwt Ili Rat g i Net It n i
Country ~ ~~~ ~ ~ ~ ~ Rat ()NRto() Rsre S

Mlexico 4. z -3.u z z.
Costa Rica 4.2 4.2 13.1 14.1
Nicaragua 5.1 4.0 8.9 10.5
Panama 7.6 6.0 1.5 4.0
El Salvador 1.5 2.5 5.4 4.3
Honduras 5.0 4.2 8.2 8.8
Guatemala 2.7 3.2 9.2 8.6
Sources: ECLAC, IMF, Banco Central be Honduras, Banco
Banco Central de Costa Rica, CABEL, Banco de Mexico
n.a. not available

at 2.8% of GDP with government revenues

rising and expenditure being held in check.

Inflation reached 14.1%, reflecting the rise in

petroleum prices, an increase in water and

electricity rates and higher prices for certain

agricultural goods. Unemployment also rose

minimally from 6.7% to 6.9%.

El Salvador's GDP rose by 2.5% with an 11.0%

increase in family remittances (to more than

US$2.0bn) spurring private consumption but with

unemployment increasing as a result of a contraction

in jobs available in the "maquila" sector of the

economy. Agriculture grew by 4.3% with output

of basic grains, coffee and sugar rising Even with

the closure of some 'maquila' businesses,

manufacturing rose by 1.8% and construction was

up by 0.8% as a result of public and private
investment in port facilities. At 4.6%, the annual

rate of inflation was largely due to the rise in food

prices after Hurricane Stan and higher world

petroleum prices. The trade deficit widened as the

cost of imports rose and this contributed to an

n.a.
n.a.
6.1
n.a.
n.a.
3.4
1.0

n.a.
n.a.
5.6
3.6
n.a.
2.9
1.4

2.9
0.5
n.a.
1.8
n.a.
4.1

Central de Ncaragua,

external current account deficit that was

equivalent to 3.9% of GDP. The latter was

funded by foreign direct investment, external

borrowings and the drawdown of US$67.0mn

of from international reserves. At the end of

September, the overall fiscal deficit decreased to

0.6% of GDP and the public sector's external

debt stood at US$4.9bn, approximately 40.0%

of GDP.

Notwithstanding hurricane destruction in

September, Guatemala's GDP grew by 3.2% in

2005 with all sectors, except for mining and

construction, performing well. Tourism was

negatively affected by the hurricane, which

accounted for a drop in tourist arrivals of 100,000

and a US$50.0mn contraction in receipts.

Agriculture grew by 3.0%, spurred by greater

production of basic grains, fruits and vegetables,

as coffee production remained almost constant, and

banana yields fell. A rally in the export of

manufactured goods underpinned a 2.9%

expansion of this sector. Fuelled by remittances,

CENTRAL BANK OF BELIZE

2005ANNUAL REPORT

INTERNATIONAL & REGIONAL DEVELOPMENTS

private sector consumption expanded by 4.1%.
Fiscal policy was also loosened somewhat with the
government's overall deficit rising from 1.0% to
1.4% of GDP. At 8.6%, the annual rate of
inflation was well above the target of 4% to 6%
set by the Bank of Guatemala and preliminary
figures indicate that unemployment for the year
was approximately 3.1%. With imports growing
faster than exports, the external current account
deficit widened to 4.1% of GDP, the shortfall
being covered by a surplus on the capital and
financial accounts that also helped to push gross
international reserves up by U *-'I.Omn.

Although the performance of the agricultural
sector was negatively affected by unstable
weather conditions, the Honduran economy
grew by 4.2% with the "maquila" component
of the manufacturing sector expanding and
domestic consumption being bolstered by an
increase in remittances from abroad. The fiscal
deficit fell from 3.4% of GDP to 2.9%, as the
government met the targets set under an IMF

Chart 11.2: Real GDP Growth

programme and benefited from debt relief.
However, the external current account deficit
worsened from 5.2% to 5.7% of GDP as imports
continued to expand at a faster rate than exports.
Inflows on the capital and financial account financed
this deficit and expanded gross international reserves
by US$28.0mn to US$180.0mn. The rate of
inflation was approximately 8.8% and largely due
to the hike in petroleum prices with the categories
experiencing the largest increases being transport,
housing, water and other fuels.

Economic activity in Nicaragua expanded by 4.0%
fueled by export agriculture, manufacturing, free
zones and construction. The service sector was also
vibrant, in particular, financial services, commerce,
transport and telecommunications. The economic
expansion was accompanied by a worsening of the
external current account deficit to 18.1% of GDP
that was financed by a surplus on the capital/
financial accounts and US$39.0mn withdrawn from
the international reserves. In the run-up to
presidential elections in 2006, the government

for Mexico and Central America

* 2004
0 2005

IVxico Panama Costa Rca B Salvador Ncaragua -bnduras Guaterrala

2005ANNUAL REPORT

CENTRAL BANK OF BELIZE

suspended its IMF program but was nonetheless
successful in negotiating debt relief in September
of some US$3.8bn. With higher revenues and cost
savings from lower interest payments, the fiscal
deficit as a percent of GDP declined from 6.1%
to 5.6%. The rate of inflation rose to 10.5%,
pushed up by an increase in the price of fuel and
transportation, adjustments in the rate for certain
public services and higher prices for some
agricultural goods.

Panama's economy expanded by an estimated
6.0%, benefitting from growth in the US, Asia and
Latin America as well as higher levels of domestic
consumption and investment. Fiscal reforms helped
to lower the overall deficit from 5.0% to 3.6% of
GDP. The latter, alongwith reforms of the social

security system, reduced the country's risk rating
to the lowest level ever and facilitated the
restructuring of its debt profile. The external
current account deficit increased to 9.7% of
GDP as imports, affected by higher oil prices
and an increase in capital goods, rose faster than
exports. The large surplus on the financial
account generated partly by significant direct
investment inflows financed the external deficit
and pushed up international reserves by
US$319mn. High oil prices, which pushed up
the cost of transportation by more than 10%, as
well as significant increases in housing, water,
electricity, food and beverages, caused the rate
of inflation to increase to 4.0%. Meanwhile, the
urban unemployment rate fell from 14.1% in
2004 to 12.0% in 2005.

:PRODUCTION, PRICES & EMI

Production

With fiscal and monetary policies tightening, growth

in GDP decelerated to 3.3% (compared to 4.6% in

2004). The services sector moved to the forefront

of economic activity during the year with a 6.3%

expansion while the primary sector increased by

2.1% and activity in the secondary sector contracted

by 0.9%. Notwithstanding the economic

slowdown, the unemployment rate (measured

annually in the month ofApril) declined from 11.6%

to 11.0% largely due to the creation of new jobs in

the services sector.

The overall performance of the primary sector was

mixed with agriculture contracting by 0.7% as

output of most major export commodities fell

except for citrus and papaya. On the other hand,

Table III.1: Annual Percent

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

an 6.9% expansion in fishing was spurred mostly

by higher farmed shrimp output and the nascent

growth of the tilapia industry.

Construction shrank by 3.4% as large projects such

as the Chalillo hydroelectric facility came to a gradual

close and the government curtailed capital outlays.

Notwithstanding record-breaking output of citrus

juices andby-products, manufacturing had virtually

flat growth at 0.1%, reflecting declines in the

production of sugar and major items such as soft

drinks and beer that are produced mostly for the

domestic market. The utilities contracted by 0.6%

with imports of Mexican electricity rising to meet

consumer demand during the extended dry season

that negatively impacted the performance of the

hydro-electric plant.

Change in Selected Indicators

I, 20 6064 2005

5.9
9.3

37.6
15.5
110.3
-5.2

-3.7
-17.9
-0.5

8.2
14.5
1.4
6.3
8.6
31.5

2.6
2.3

200 ANNUAL REPORT

CENTRAL BANK OF BELIZE

In the area of services, wholesale and retail activity
grew by 5.6% as imports surged partly due to the
growth in tourism. The latter also contributed to a
4.1% increase in hotel and restaurant activities while
the advent of a new telecommunication service
provider contributed to a 7.8% increase in transport
and communication services. Government services
grew by 1.3%, even with programmed efforts to
reduce the fiscal deficit and achieve a primary fiscal
surplus.

The Consumer Price Index (CPI) rose by 3.7%
influenced largely by the rising cost of imports,
higher prices for .. _i- and water as well as an
increase in excise duties and business and
environmental taxes.

Agriculture

Sugarcane

Drought conditions during the critical growing
period of the 2004/2005 crop reduced overall
yields, leading to a 19.2% contraction in sugarcane
deliveries to 929,393 long tons, the lowest level
in three years. Deliveries by farmers were down
by 18.8% to 878,468 long tons. In addition to
declines experienced by ordinary farmers, yields
from the cane-growing project and the processing
company's research division fell noticeably (from
24.1 to 17 long tons per acre) notwithstanding

the higher standards of management practices and
inputs characterizing these production units. While
its primary impact was to reduce yields, a partially
compensatory result of the extensive dry was the
concentration of sugars in the sugarcane (pol of
12.9% versus 11.0% in 2003/2004) and
improvement in cane purity (from 85.09% to
85.83%).

In another positive development, the estimated
average final price per long ton of sugarcane rose
by $8.13 to '4.20 mostly due to exchange rate
gains from the Euro denominated average unit price
negotiated in the futures market and an increase in
the percentage share of sales to the preferential
markets.

Citrus

Citrus production surged by 32.7% during the
2004/2005 crop year as a record breakingbumper
crop was harvested. Approximately 86.8% of the
crop was processed, 2.6% went into fresh fruit
exports and 1.7% was rejected at the factories, an
improvement over the 2.5% rejection rate in the
previous year. The remaining 8.9% consisted of
fruit lost or not harvested, the casualties of
bottlenecks arising from the anomaly of having one
massive harvest instead of the usual extended 2
to 3 harvest periods per season.

Table III.2: Sugarcane Deliveries

1 I20023 2I03i/0I

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

1,073,339 1,149,475 929,393

DOMESTIC PRODUCTION PRICES & EMPLOYMENT

Table III.3: Citrus Fruit Deliveries
200/0 2030 2004/05~

Deliveries ('000 boxes) 5,124
Oranges 4,046
Grapefruits 1,078
Source: Citrus Grow ers Association

Notwithstanding the proportionately lower
percentage of the crop that was processed (86.8%
versus 95.0% in 2003/2004), factory deliveries
surged by 21.3% to 7.8mn boxes. Orange
deliveries increased by 27.6% to 6.3mn boxes,
while deliveries of grapefruit climbed by 3.3%
to 1.5mn boxes. This performance was attributed
to favourable weather and agronomic conditions,
increased fertilizer and agro-chemical usage and, in
the case ofgrapefruit, the continued implementation
of a Mexican fruit fly control program, which
reduced fruit drop. Other motivational factors may
have been the pound solid payment system as well
as a renewed sense of involvement and ownership
by growers.

After several years in the doldrums, international
prices for citrus products rallied, driving up

domestic fruit prices as adverse weather in major
citrus producing countries such as Spain, Brazil,
Florida and Cuba decreased global production. The
estimated final price for orange consequently went

up by 7.5% to $0.95 per pound solid (pps), while
that of grapefruit settled at $2.44 pps, equivalent to
$9.82 per box, substantially above the $3.84 paid
in 2003/2004.

Banana

Unfavourable weather at the start of the year
and the decision by growers to cut back on field
inputs in anticipation of a further price cut led
to reduced banana production of 4.0mn boxes,
some 0.3mn boxes below the previous year's
output.

Chart III.1: Banana Acreage

January 2005

Plantilla

December 2005

Plantilla
171 Plantilla To be Planted
ac42 acres

Producing
5,708
arroc

6,426
4,947
1,479

7,793
6,265
1,528

SProducing
6,080 acre

200 ANNUAL REPORT

CENTRAL BANK OF BELIZE

Banana acreage under cultivation has remained
relatively constant over the past two years, though
small annual variations in the total acreage do occur
and even wider variations between harvestable and
youngtrees (plantilla) exist. InJanuary, 5,707.6 acres
had harvestable trees and 428.2 acres were under
plantilla. By December, harvestable acreage had
risen to 6,080.3 acres with 171.2 acres under young
trees and 42 acres prepared for planting.

Papaya

Papaya production continued on an upward trend
that was opportune since output of two
competitors for the US market was down.
Brazilian production was disrupted by heavy
rains and by favourable coffee prices that
influenced several Brazilian growers to shift to
planting coffee instead. Mexican papaya
production was also affected by unstable weather
patterns. Belize's share of papaya exports to the
US market consequently increased from 18.9%
to 20.8%.

While total acreage under cultivation increased
by 43 acres to 1,403 acres during the year, the
harvestable area expanded by 110 acres to 941 acres.
Of the latter amount, 800 acres consisted of large
papayas (Tainung) and 141 acres were under the
solo variety. Papaya production was concentrated
in the Corozal District where both large and small
papayas are grown. In the Cayo District, some 33
acres of Solo papayas were cultivated.

Other Agricultural Production

Production of basic grains, vegetables and fruits
was mixed. Grains generally performed well. A
12.6% expansion in acreage and improved yields
from mechanized corn boosted overall
production of this grain by 33.6% to 104.1mn
pounds. On the other hand, sorghum declined
by 17.0% principally because of a contraction
in harvested acreage particularly in the Corozal
District where farmers shifted acreage to red kidney
beans and papaya. Significant improvements in
yields from mechanized and irrigated rice fields
boosted overall production by 70.1% to 39.2mn
pounds. Soybean production increased by 7.0% due
to an improvement in yields as harvested acreage
was halved to only 300 acres. Bean production
rose by 12.5% to 16.8mn pounds as a decline in
blackeye peas was offset by increases in red kidney,
black and other miscellaneous varieties.

Due to unfavourably dry weather, production of
most vegetables was down, with the notable
exception of hot pepper, irish potato, onion and
broccoli. High demand for hot pepper in the
US spurred production of this crop. Increased
output of irish potato reflected an expansion in
harvested acreage, while onion and broccoli
benefited from more use of irrigation. Root crop
production mostly increased with the exception
of cassava and sweet potato.

Livestock production was mixed. Cattle dressed
weights declined by 39.0% to 3.6mn pounds, as
high prices encouraged the sale of live cattle to

DOMESTIC PRODUCTION PRICES & EMPLOYMENT

Guatemala. Poultry increased by 6.0% to 30.5mn
pounds while pig dressed weights grew by 37.0%
to 2.3mn pounds as a rise in demand spurred
production. Milk output rose by 5.0% to 8.3mn
pounds while eggproduction fell by 16.0%. Honey
yields declined by 17.0% to 0.06mn pounds.

Marine Products

Further increases in farmed shrimp outweighed
declines in most other marine species and
contributed significantly to the 3.4% increase in
fishery production to 26.7mn pounds.

While the output of whole, farmed shrimp increased
by 4.3% to 25.4mn pounds, the wild capture of
sea shrimp fell significantly by 56.9% to 0.07mn
pounds due to a reduction in the number of shrimp
trawlers working in the fishing grounds. The latter
was influenced by the abundance of farmed shrimp
as well as high fuel prices that made it uneconomical
for the local cooperatives to participate in joint
venture shrimp operations with Honduran trawlers.

Output of conch (most of which was market
cleaned) increased by 2.0% to 0.6mn pounds. On
the other hand, lobster output fell by 12.4% to 0.5mn
pounds. Whole fish handled by the cooperatives
fell by 19.6% to 0.02mn pounds as the cooperatives
restricted purchases from their members. The latter
restriction may change if a partnership venture into
Cobia fish farming and deep-sea fishing being
currently assessed by one of the major fishing
cooperatives prove financially viable.

Forestry, Mining and Construction

Forestry expanded by 11.1%, reflecting the
continustion of efforts to harvest pine trees
damaged by the pine bark beetle.

Construction shrank by 3.4% as large projects such
as the Chalillo hydroelectric facility came to a gradual
close and the government reduced capital spending.
The contraction was however ameliorated by other
projects that were completed or initiated during the
year, such as the upgrade of the Spanish Lookout
road, the construction of the US embassy and the
expansion of the international airport runway.

While construction projects and oil exploration
efforts partly accounted for the 2.5% expansion in
the mining sub-sector, developments of interest
included the granting of several exclusive
prospecting licences for metal exploration, primarily
silver and gold, in the Ceibo Chico area of the
Chiquibul forest.

Manufacturing

Sugar and Molasses

Factory operations commenced on November 29h
and closed on May 31st after only 184 days of
operation. With deliveries down 19.2%, sugar
production declined by 13.8% to 100,435 long tons,
a less than proportionate reduction that was largely
due to the higher sugar content of the crop. A
positive development was the implementation of
a 24-hour delivery system that reduced the long

2005ANNUAL REPORT
CENTRAL BANK OF BELIZE

Box 1: Farmed Shrimp

Over the last decade, farm-raised white shrimp has played a major role in the diversification of Belize's

export base. Production grew rapidly, expanding from approximately 1.lmn pounds in 1996 to a high of

18.4mn pounds in 2005. Except for a 4.7% decline in 2002 when the industry was affected by the Taura

virus, shrimp production grew yearly, boasting an average annual growth rate of 30.0%. Receipts from

shrimp (farmed and wild catch) rose from 3.1% of gross domestic export earnings in 1996 and reached an

all time high of 24.3% in 2003 when earnings totaled $92.8mn. However, notwithstanding a steady

increase in export volume, depressed prices in recent years have caused a progressive decline in export

value down to l rnii in 2005.

Shrimp Exports and Price
Mn Ibs & Mn BZ$ BZ$/Ib
100 10 0
90 90
80 ~- 80
70 70
60 i 60
50 -50
40 40
30 -30
20 20
10 1 0
00
1997 1998 1999 2000 2001 2002 2003 2004 2005
l Total volume i Total value -A-Average price

The United States Department of Agriculture reported that the average price for shrimp imported

into the US, where the majority of Belizean shrimp was traditionally sold, fell for 5 consecutive years

from US 4.94 per pound in 2000 to US'" 12 per pound in 2005. Notwithstanding the levying of

antidumping duties that affected major suppliers from six countries, average prices for frozen shrimp still

declined in US markets during 2005.

Because of the low prices in the US, domestic farmers have been forced to look to other markets where

prices are more favorable. In 2005, the share of the total volume of shrimp exported to the US contracted

by more than half, falling from 96.0% in 2004 to 45.8% in 2005. In contrast, shrimp exports to Mexico and

Europe rose substantially from 3.6% and 0.4% in 2004 to 36.6% and 17. .., respectively in 2005. While

shrimp sales to the US consisted of mainly tails, sales to Mexico and Europe were comprised of head-on

shrimps (of higher bio mass) that fetched a lower average unit price when compared to the tails.

x 1: DOMESTIC PRODUCTION RICEdPOYMEN

Box 1: Farmed Shrimp (cont'd)

Shrimp Export Markets

2003 2004 2005

As a result, the decline in the export earnings observed in 2005 was not only attributable to lower

average prices but also due to the shift in the export mix from mainly tails to whole shrimps. In fact,

whole shrimp exports to Mexico in 2005, which were sold at farm gate prices, averaged only US$1.00

per pound compared to US'2 2' per pound received on the US market. In spite of the lower prices,

however, some farms reported that they netted a bigger profit margin with the whole shrimp since

the reduction in prices was outweighed by the savings in processing and transportation.

With shrimp prices not expected to rise significantly, the viability and profitability of local shrimp

farms rest on their ability to lower their cost of production, access more favourable markets and offer

more value added products.

Sources: Central Statistical Office, Central Bank of Belize Sixteenth Annual Report and Accounts, USDA Livestock,

Dairy & Poultry Outlook/LDP-AQS-23/March 9, 2006

Mn Lbs
16
14
12
10
8
6
4

NUS
*Mexico
mOther

Table III.4: Sugar and Molasses Production

1I 2 I00I/ 2 I0II30

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

104,433
42,944

93.11
85.08
10.28

116,515
41,117

92.27
85.09
9.87

queues and consequent deterioration of the cut
sugarcane during the protracted waiting period prior
to factory reception and processing. Hence, although
a lower mud content only partly compensated for
factory inefficiencies that led to a lower sugar
extraction rate (from 94.6% to 93.90), the higher
quality of the sugarcane caused the cane/sugar ratio
to improve by 6.3%, moving from 9.87 to 9.25
long tons of sugarcane needed to produce one ton
of sugar. The lower processing volume of
sugarcane was the main cause of a 9.8% fall in
molasses production to 37,704 long tons.

Citrus Juices and Pulp

A 21.3% increase in fruit deliveries pushed citrus
juice production up by 26.3% to 44.2mn pound
solids (ps) for the 2004/2005 crop year. Also

contributing was an improvement in the average
yield of pound solids per box of fruit with orange
increasing from 5.73 ps to 6.15 ps and that of
grapefruit moving from 3.87 ps to 4.02 ps.

The more attractive price for concentrates
compared to the not-from concentrate product
caused the bulk of deliveries to be used for
production of orange and grapefruit concentrate.
With orange experiencing the largest volume
increase, orange concentrate production surged
by 35.1% to 37.7mn ps, while grapefruit
concentrate, in line with deliveries, rose by a
more modest 7.6% to 5.8mn ps. Freeze
concentrate made up only 3.4% of concentrate
juices as market demand remained relatively weak.
Output of not-from-concentrate (NFC)
dropped to almost one-third that of the previous

Table III.5: Production of Citrus Juices and Pulp

1I2I00 2/I00I/0 2004/II051

Production ('000 ps)
Orange Concentrate
Grapefruit Concentrate
Not-from-concentrate (NFC)
Production ('000 pounds)
Pulp
Source: Citrus Products of Belize Ltd.

CENTRAL BANK OF BELIZE

200 ANNUAL REPORT

100,435
37,074

94.57
85.83
9.25

28,381
23,067
3,728
1,586

35,202
27,902
5,432
1,868

44,221
37,689
5,846
686

2,490

DOMESTIC PRODUCTION PRICES & EMPLOYMENT

year (0.7mn ps) with the industry seeking to
maintain a token presence in the market,
notwithstanding its relatively lower
profitability.

Production of pulp, mostly from orange,
almost quadrupled to 2.5mn ps, the result of a
drive to increase the output and sale of by-
products as a way of maximizing the industry's
value added.

Other Manufacturing Production

The performance of the rest of the
manufacturing sector was lacklustre with
production of most items, except rum,
decreasing. Notwithstanding a tripling in the
excise duty on alcohol, rum output rose by
45.7% to 34.3mn gallons. In contrast, soft drink
and beer production declined by 10.0% and
12.3% to 4.9mn and 1.9mn gallons, respectively.
Cigarette production was also down by 6.6% to
78.2mn units. With respect to the latter three
items, the increase in excise duties may have
lowered domestic consumption and/or caused
an escalation in the contraband trade in these
products, despite the crackdown by custom
authorities. In other developments, flour
production declined by 3.0% to 26.9mn pounds
and battery output plummeted by 98.7% with
the closing down of a local producer. Fertilizer
production remained almost constant at 26.9mn
tons.

Tourism

International tourism fared surprisingly well
during the year despite terrorist attacks in Britain
and elsewhere, natural disasters such as the
Indian Ocean tsunami and an extraordinarily
active hurricane season. Preliminary results from
the World Tourism Organization indicate that
the number of international tourist arrivals
recorded worldwide grew by 5.5% to
approximately 808.0mn. Within the region,
tourist arrivals in the Caribbean and Central
America grew by 5.5% and 13.8%, respectively.

Domestically, after strong growth in recent years,
the tourism industry slipped into moderate gear with
stay-over tourist arrivals, the lifeblood of the
industry, rising by 3.0% to 227,036, while cruise ship
visitors declined by 6.0% to 720,298
disembarkations partly due to the negative impact
of the highly active hurricane season.

The growing recognition of Belize as a prime, tourist
destination helped to boost air seat capacity to the
country. Not only did the number of flights
from the US, the main market, increase during
the year, but the departure points within the
US also diversified, thereby improving
accessibility to a wider American market. The
number of overnight visitors entering the
country through the Phillip Goldson
International Airport (PGIA) consequently increased
by 7.2%, even as arrivals through the land and sea
borders declined by 9.0% and 10.7%, respectively.

2005ANNUAL REPORT
CENTRAL BANK OF BELIZE

Box 2: Tourism Developments and Prospects

The performance of the tourism sector was mixed in 2005 as stay-over arrivals increased by 2.5%
while cruise arrivals fell by 4.2%.

The Belize Tourism Board (BTB) continued its marketing efforts at shows in the USA and in Europe.
Through its relationship with the Sistema de Integraci6n Centro Americana (SICA), the BTB has also
been seeking to gain greater exposure in the European market by developing ties with European tour
operators that deal with the Central American region. The eventual objective is to increase European
arrivals to the country via Central America. Another positive development was a cooperative online
marketing effort for over 160 small hotels (which offer rooms for LU I per night or less) called the
Toucan Trail. Fully supported by the BTB, this program aims to promote socially-responsible,
environmentally-sound, sustainable tourism that benefit local communities and visitors as well.

With respect to infrastructure, the re-surfacing of the Caye Caulker airstrip was completed in 2005 and
the project to expand the runway at the Phillip Goldson International Airport was started. Major hotel
or resort development included the construction of 11 condominiums in the Placencia area and the
inauguration of the Golden Princess casino at the Santa Elena northern border. In other developments,
legislation relating to the operation of tour operators/tour guides was passed.

The development programme for 2006 is expected to include:

a) Paving of the Placencia road

b) A comprehensive advertising campaign targeting Canada, Europe and the US.

c) Modification of cruise legislation to include matters relating to the CARICOM Single Market and
Economy

d) Opening of the Las Vegas Casino at the Santa Elena northern border

e) Refurbishment and upgrade of the Belize City Princess Hotel and Casino

f) The development of a Tourism Master Plan for Belize

g) Commencement of the construction of the Carnival port

Source: Belize Tourism Board

DOMESTIC PRODUCTION PRICES & EMPLOYMENT

Table III.6: Bonafide Tourism Arrivals & Expenditure

Stayover Arrivals
Air 153,637 164,073 175,965
Land 47,100 48,165 43,815
Sea 8,442 8,121 7,256
Total stayovers 209,179 220,359 227,036
Cruise Ship Arrivals 511,924 766,292 720,298
Expenditure by stay-overs ($mn) 245.7 259.5 354.9
Expenditure by cruise visitors ($mn) 43.4 65.0 61.1
Sources: Immigration Department, Belize Tourism Board, Central Bank of Belize

With its economy performing strongly
notwithstanding the rise in world oil prices and
hurricanes that affected several southern states,
arrivals from the US rose by 6.4%, and it
consequently remained the major market,
accounting for 64 .'".. of all tourists and for virtually
all the growth in overnight visitors. At 13.9% of all
visitors, the EU retained its position as the second
largest market. Arrivals from this region went up
by a more modest 1.5% as the euro-zone economy
grew marginally during the year.

After moving from less than 50,000 arrivals in 2001
to 766,292 in 2004, fast growth by any standard,
the cruise sub-sector suffered a small reversal with
disembarking visitors decliningby 6.0% to 720,292.
The decline directly reflected a reduction in the
number of port calls and visiting ships, as an
unusually active hurricane season forced the major
cruise lines to cancel port calls and shorten cruise
itineraries. Hopes that Belize would benefit from
the temporary redirection ofport calls from Cancun
(a competitor port) in the aftermath of its hurricane
devastation did not materialize.

Prices

A combination of external and domestic factors
pushed the cost of living to a six-year high.
Exercising a domino effect on prices elsewhere in
the economy, .. i costs went up significantly as
crude oil prices spiked in response to the rapid
growth in world oil demand, disruptions in major
oil producers such as Iraq, Nigeria and Venezuela,
and damage to oil rigs from severe storms in the
USA Gulf coast. High international freight rates
alongwith a 3.3% increase in the cost of imported
goods (as proxied by the US export price index up
to October 2005) contributed to the increase in the
cost of imports. On the domestic front, cost push
factors included tax increases implemented in the
first part of the year and a rise in utility costs.
The overall effect was a 3.7% rise in the Consumer
Price Index (CPI),with average prices in all categories
of goods and services rising, except "Clothing &
Footwear" whose price level fell by 0.1%.

"Transport & Communication" services had the
biggest increase of 5.7% mostly due to an increase
in the price of fuel at the pump and higher airfares.
Higher prices of some basic foodstuffs and

200 ANNUAL REPORT

CENTRAL BANK OF BELIZE

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

I I n fl a t i on6- 6.

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

increases in the excise taxes on local cigarettes,
soft drinks, beer and rum contributed to the
4.7% increase in "Food, Beverages & Tobacco".
"Rent, Water, Fuel and Power" rose by 4.2%
with an increase in the rates for water/sewer
services and electricity and higher butane/
cooking oil costs.

Increases in "Medical Care", "Personal Care",
"Recreation, Education & Culture" and
"Household Goods & Maintenance" were more
modest at 1.8%, 0.9%, 0.8% and 0.7%, respectively.

Employment

The unemployment rate declined from 11.6%
to 11.0% with the labour force increasing by
2.1% to 110,786 while the employed labour force
rose by 2.8% to 98,589. The largest job growth
was in the tertiary sector, which contrasted with
neglible job creation in the primary and
secondary sectors.

In the primary sector, modest employment gains
in sugar and domestic agriculture were partly
offset by lower employment in the citrus and
banana export industries. Unlike previous years,
there was only one major citrus crop and the
timing of the labour survey in April coincided
with the winding down of this harvest. In the
case of banana, the job loss directly reflected the
contraction in crop yields. Notwithstanding the
negligible job gains, agriculture maintained its
position as the largest source of employment,
accommodating some 18.9% of the employed
labour force.

Within the secondary sector, job growth in
utilities and construction was nearly fully offset
by a decline in manufacturing jobs. Job losses
in the latter were concentrated in beverages and
food product manufacturing and was likely
attributed to the fall in the domestic production
of key items such as soft drinks and beer.

346.6
92.0
167.0
85.3
20.1
170.1
80.4
37.9
1,000.0

DOMESTIC PRODUCTION. PRICES & DEPLOYMENT

With a 16.3% increase in workers, tourism was
the main catalyst for job creation in the tertiary
sector, holding its position as the fourth largest
employer. Employment within the third largest
job market, "Community, Social and Personal
Services", expanded by 11.5% to 15,084.
Employment in government services also rose
by 1.5% while jobs in all other service categories
declined. While -\\ wholesale, retail trade and
repair" experienced a 1.7% job loss, it still
remained the second largest job market with
16.2% of the employed population. Other

industries with varying amounts of job losses
included financial intermediation, real estate, renting,
business activities, transportation and
communication.

Between April 2004 to April 2005, the labour force

participation rate declined from 60.3% to 59.4%,
as the working age population grew faster than the
labour force and the job seeking rate declined.

Table III.8: Employed Labour Force by Industrial Group

Agriculture 17,120 18,157 18,671
Forestry, logging, sawmilling 864 1,010 961
Fishing and fish processing 2,120 2,554 2,330
Mining and Quarrying 360 401 211
Manufacturing 6,724 7,607 7,210
Electricity, gas & water 778 768 934
Construction 7,489 6,595 6,884
Wholesale, retail, repair 14,716 16,227 15,944
Tourism (Hotels & Restaurants) 9,400 11,062 12,865
Transport and Communication 3,298 3,683 3,553
Financial intermediation 1,518 1,939 1,594
Real Estate, renting 1,741 2,123 2,084
General Government Services 10,309 9,885 10,033
Community, Social & Personal Services 10,822 13,531 15,084
Work Abroad* 1,676 157 85
Activities not classified elsewhere 287 212 146
Total, All Sectors 89,222 95,911 98,589
Source: Central Statistical Office
* Covers w ork abroad and in 2004, w workers in commercial free zone as w ell.

2005ANNUAL REPORT
CENTRAL BANK OF BELIZE

Box 3: Belize's Oil Discovery
For more than three decades, on and offshore exploratory drilling for oil has been conducted by various oil
companies in the search for commercial deposits of 'black gold'. Although these efforts were unsuccessful, the
presence of commercial oil deposits in the neighboring countries of Mexico and Guatemala continued to
indicate that the prospects for finding oil in Belize were positive.

Recent improvements in seismic technology allow for clearer mapping of the substrata and underground structures that
may be potential oil traps and this has been a boon for explorers. Benefiting from the improved underground mapping
technology, Belize ': Iri. 11 !n... v Limited (BNE) tapped into an oil deposit in the Spanish Lookout area in June of
2005 that yielded a promising flow of very high quality crude oil also known in the industry as 'sweet crude'. Another
well was dug approximately one mile away from the first site. By year-end, each well was yielding an average of 900
barrels per day, which can be compared to a crude estimate of domestic consumption of approximately 5000 barrels a
day, excluding demands for electrical power generation.

The Geology and Mining Department has since granted approval for the company to dig a total of 5 wells to speed up
the production testing of the find. The third well is to be dug in January and production testing commence in February
The plan is to complete the remaining two wells by the end of March, 2006 and production testing by the end of the
year. In the interim while production testingis ongoing, the high quality of the oil has enabled the company to market
the oil produced to domestic and foreign buyers. The first export shipment of over 30,000 barrels is scheduled to take
place nearing the end of J !n.1 i .'III. It is anticipated that the company may be able to regularize shipments during
the production testing phase to one per month.

With a new oil discovery, the standard practice is to initiate production testingwhere factors such as the oil's flow rate and
pressure are measured and recorded for a period of at least 90 consecutive days. This is important since the oil flow
usually stabilises at a lower rate than the initial find and thereafter declines as reserves are depleted. After the production
testing phase, various wells are dug in an attempt to delineate the perimeter of the oil field. During this phase, a three-
dimensional model of the structure is mapped so that an estimate of the size of the oil reservoir can be made. Once the
latter is completed, the last phase in the commercialization of the oil find involves development and production. Even
in countries where the infrastructure to support the industry is already in place, the process from oil discovery to
commercialization of the find is lengthy and risky with a thirty-month period for the entire process considered to be a
fairly reasonable time horizon.

The financial viability of the oil find will depend on factors such as the level of sustainable oil flow, the total amount of
oil reserves and recoverable quantities, the costs required to extract the oil, especially as flow rates decline over time and
the cost of building the necessary infrastructure to support a new industry

Under the present revenue sharing arrangements, royalties calculated on the gross value of oil production should be
paid at the rates of 7.125% to the Government and 0.375% to the landowner. A production sharing agreement, once
the find is commercialized, also allows for the company's operating cost (expressed in equivalent barrels of oil) to be
subtracted from gross production. Of this net production, the government receives 1.5%, and the company keeps the
remaining 98.5%.

Some patience, prudence and much hard work are needed while the oil find is properly evaluated. Should the optimistic
scenario unfold, the Government will then be challenged to ensure that the interests of the country and private
investors are well balanced.

TARY & FINANCIAL DEVELOP

Money Supply

Fiscal tightening was supported by a restrictive
monetary policy aimed at reducing the rate of
expansion in credit and concomittant demand for
imports during the year. In May, the Central Bank
ordered a further 1.0% increase in commercial bank
cash and liquid asset reserve requirements as well as
the removal of long-term loans to the government
from the list of approved liquid assets. The
agreement of the Belize Social Security Board
(BSSB) was also obtained to begin sterilizing its
monthly cash inflows by shifting a portion of these
deposits to an account held with the Central Bank.
Growth in broad money consequently slowed from
13.3% in 2004 to 6.5% in 2005 with the impact of
credit deceleration being somewhat tempered by
foreign inflows to the government from successful
international bond placements and other foreign

loan disbursements that contributed to a 56.6%
expansion in net foreign assets in the banking
system.

Growth in narrow money i'[ 1) slowed from
12.6% to 4.0% with public currency holdings
and demand deposits rising by 1.9% and 4.8%,
respectively. The upward movement in demand
deposits reflected additional holdings by the
BSSB and a $9.2mn increase in foreign currency
deposits held by residents. Quasi-money
increased by 7.8% with deposits held by
individuals driving up savings deposits by 5.4%
while time deposits rose by 8.6%. The bulk of the
increase occurred during the first and second quarters
and largely reflected increased holdings by individuals
and business enterprises engaged in providing
services and producing for the export market.

Table IV.1: Factors Responsible for Money Supply Movements
$mn
Psition as at C
Duing
Dec 200 Dec 2004 Dec 200 200

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

133.3
163.4
-30.1

1,133.3
92.3
22.9
1,018.1

85.1
103.7
-18.6

1,353.5
175.4
46.9
1,131.2

2.5

133.3
139.9
-6.6

1,410.4
145.8
61.3
1,203.3

0.0

158.0 187.8 213.8

1,101.1 1,248.3 1,329.9

48.0
36.1
11.9

56.7
-29.6
14.3
72.0

-2.5

25.5

81.7

2005ANNUAL REPORT

CENTRAL BANK OF BELIZE

Chart IV.1: Ratio of M2 to GDP

994 995 1996 997 198 199 2000 2001 2002 2003 2004 2005

M2/GDP

Net Foreign Assets

Even with a substantial increase in external debt

payments, the net foreign assets of the banking
system rose by $48.0mn as loan inflows to the
government and proceeds from the sale of its Belize
Telecommunications Ltd. (BTL) shares coincided
with higher private sector receipts from tourism
and domestic exports such as citrus.

Chart IV.2: Annual Change in Net
Foreign Assets of the Banking System

300

250

200

S150
E 100

50

0

-50 n7 nO nn nvo CV) C ) nA n

-- Commercial Banks -g-Central Bank

The Central Bank's foreign asset holdings
expanded by $36.0mn reflecting inflows of
$590.6mn and outflows that totalled '3,4.6mn.
Various loan disbursements (including proceeds
from two Bear Stearns bond issues) accounted
for 60.8% of total inflows. Proceeds from the
sale of BTL shares contributed an additional
14.2% and 11.3% came from sugar export
earnings. The balance was made up of purchases

Table IV.2: Money Supply

$mn
Position t C gs
During
Dec 200 Dec 2004 Dec 200 200

Money Supply (M2)

Money Supply (M1)
Currency with the Public
Demand Deposits

Quasi-Money
Savings Deposits
Time Deposits

1,101.1 1,248.3 1,329.9

*Includes Non-Residents Foreign Currency Time Deposits of $ 36.1mn

361.1
103.3
257.8

740.0
205.5
534.5

406.7
115.3
291.4

841.6
198.3
643.3

81.7

16.4
2.2
14.2

65.3
10.2
55.1

423.1
117.5
305.6

906.8
208.5
698.3

MONETARY & FINANCIAL DEVELOPMENTS

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

$mn
Psito as at Changes
Duing
Dec 200 Dec 2004 Dec 200 200

Net Foreign Assets

Central Bank
Foreign Assets
Foreign Liabilities(Demand)

133.3

163.4
169.2
5.8

85.1

103.7
106.5
2.8

133.3

139.9
142.6
2.7

48.0

36.1
36.0
-0.1

Commercial Banks -30.1 -18.6 -6.6 11.9
Foreign Assets 118.7 129.3 147.6 18.3
Foreign Liab. (Short-Term) 148.8 147.9 154.2 6.4
*Does not include Non-resident Foreign Currency Time Deposits of $36.1 rn held with Commercial Banks.

from the commercial banks, foreign grants to

the government, revaluation gains and interest
earnings. Outflows continued to be dominated

by sales to the public sector, which rose by 73.6%

to some $506.2mn to facilitate refinancing of the
external debt and other external payments. On

the other hand, sales to the commercial banks

fell by 65.1% and the amount designated for BEL

debt servicing and fuel purchases also declined

significantly (from $28.3mn to $8.7mn) as the

commercial banks increasingly earmarked funds
for this purpose.

Notwithstanding a substantial rise in net trade

related outflows, the commercial banks' net foreign

asset position improved for the second consecutive

year. Foreign asset holdings rose by $18.3mn

due to higher inflows from citrus and tourism,

Table IV.4: Net Domestic Credit

$mn
os as at Cha
Duing
I- II I- I~ I- II I

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

220.6
165.5
55.1

129.8

90.8
21.1
1,018.1
1,130.0

246.9
165.3
81.6

71.5

175.4
46.9
1,131.2
1,353.5

249.2
181.8
67.4

103.4

145.8
61.3
1,203.3
1,410.4

2.3
16.5
-14.2

31.9

-29.6
14.3
72.0
56.7

2005ANNUAL REPORT

Chart IV.3: Annual Change in Commercial Bank Loan Distribution

0 (
C)~s" S '~ '
0ice 0 (
oC)

and entities within the Corozal Free Zone, as
well as increases in borrowings from foreign
banks and IBC demand deposits. Short-term
foreign liabilities rose by $6.4mn (4.3%)
reflecting the aforementioned rise in foreign
borrowings and IBC deposit holdings.

Net Domestic Credit

A tighter monetary policy and increased loan
disbursements from abroad paved the way for a
deceleration in the growth of net domestic credit
from 19.7% in the previous year to 4.2%. While
credit to the private sector increased by 6.4% as
compared to 11.1% in 2004, net credit to Central
Government contracted by $29.6mn as some of
the proceeds from the Bear Stearns bond issue
in March were deposited in accounts held with
the Central Bank and the commercial banks. A
$14.4mn increase in credit to the statutory bodies
was largely a reflection of loan reclassifications
following the Government's reacquisition of
BWSL from Cascal. Meanwhile, a tightening in
liquidity in the second half of the year pushed

the commercial banks to reduce their holdings
of Treasury Bills and Notes by a total of
$10.0mn in secondary market transactions.

Over 90.0% of the increase in private sector loans
occurred during the second and third quarters and
the bulk consisted of personal loans, which rose
by 31.4% ($61.9mn) during the twelve month
period. The shift in loan distribution also reflected
a decision by the banks to reclassify loans amounting
to some $24.0mn from construction and tourism
to the real-estate sub-sector. Meanwhile, financing
for productive activity in the primary sector
contracted by $3.4mn with net repayments by
marine and agriculture producers outweighing
increases for entities involved in mining &
exploration.

Liquidity

After a first quarter upward surge that was partly
linked to the rise in exports earnings, bank
liquidity tightened as the commercial banks took
advantage of the inflows and boosted loans to

CENTRAL BANK OF BELIZE

&a
(C,
~ C'

MONETARY & FINANCIAL DEVELOPMENTS

Chart IV.4 : Quarterly Change in Excess
Liquidity

SExcess Liquid assets

the private sector in the second and third
quarters. An increase in the liquid asset and cash
reserve ratios (effective May 1, 2005) from 20.0%
to 21.0% and 7.0% to 8.0%, respectively, the
removal of long-term loans from the list of
approved liquid assets, and sterilization of Social
Security Board monthly inflows also
contributed to the general contraction. Hence,
following its strong growth in 2004, excess

Chart IV.5 : Quarterly Change in Excess
Cash Reserves

statutory liquidity contracted by 32.3% ($27.9mn)
to $58.4mn at yearend with holdings of approved
liquid assets risingby $5.8mn relative to a $33.7mn
increase in required holdings. Primary liquidity
experienced a significant increase during the year
largely due to the substantial balances being held by
one of the commercial banks. At year-end, excess
cash reserves stood at $8.7mn reflecting increases
in commercial banks daily average holdings of cash

Table IV. 5 : Commercial Banks' Holdings of Approved Liquid Assets

$mn
P sito as at Change
Duing
Dec 200 Dec 2004 Dec 200 200

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
Excess/(Deficiency) Liquid Assets
Daily Average holdings of Cash Reserves
Required Cash Reserves
Excess/(Deficiency) Cash Reserves

303.3
29.8
79.6
74.0
19.8
100.1
252.2
51.1
79.9
63.1
16.8

324.2
33.7
81.7
102.9
25.9
80.0
237.9
86.3
84.7
83.3
1.4

330.0
35.6
111.8
120.0
22.8
39.8
271.6
58.4
112.2
103.5
8.7

5.8
1.9
30.1
17.1
-3.1
-40.2
33.7
-27.9
27.4
20.2
7.2

2005ANNUAL REPORT

CENTRAL BANK OF BELIZE

reserves of $27.4mn while required cash reserves
rose by $20.2mn.

ensured continued upward pressure on deposits
that led to a 20 basis points increase in the
weighted average deposit rate at year-end.

Interest Rates

The three-year downward trend in the weighted
average interest rate spread of the commercial banks
came to an end during the year with the spread
rising by 10 basis points to 8.9% in conditions of
tightening liquidity. Rates on all loan categories
rose, pushing up the weighted average lending
rate by 30 basis points. Higher cash reserve
requirements combined with lending increases also

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

11.5
11 1

10.5
10
9.5
9
8.5
8
7.5
7

93 94 95 96 97 98 99 00 01 02 03 04 05

)VERNMENT OPERATIONS & P

Central Government Operations

The overall fiscal deficit widened to $141.9mn (6.4%

of GDP) in the 2005 calendar year largely due to a

40.1% growth in interest and other debt related

payments. While expenditure rose by 3.8%, revenues

were up by only 1.6% notwithstanding a strong

upward boost to current revenue from the increase

in taxes since the latter was largely offset by a 66.8%

contraction in capital revenue, grants and other

receipts. The primary balance did improve however,

swinging from a small deficit in 2004 to a surplus

of $28.3mn (1.3% of GDP). While smaller than

hoped for, the latter was an indicator of improved

fiscal performance and represented the necessary

preliminary step along the road to an eventual

reduction in the debt ratio. Financing for the fiscal

deficit came from external sources with two

successful Bear Steams bond issues and privatization

proceeds.

Current revenue continued to grow strongly, posting

a 10.6% increase to $511.4mn (23.1% of GDP)

with tax and non-tax revenues rising by 9.2% and

25.1%, respectively. Increases in the business tax rate

structure delivered the largest growth of $20.6mn

in revenues from "Income and Profits". This was

followed by a $12.9mn increase in taxes on goods

& services, which was largely attributed to higher

collections of sales tax during the year. The

Table V.1: Government of Belize Revenue and Expenditure

$m n
I Change- 3
JanDe JanDe JanDe dmmrn

Current Revenue
Tax Revenue
Non-Tax Revenue
Current Expenditure
CURRENT BALANCE
Capital Revenue
Capital Expenditure (Capital II local sources)
OPERATING SURPLUS
Total Grants
Total Revenue and Grants
Total Capital Expenditure
ofwhich Hurricane Reconstruction
Total Expenditure
of which Interest Payment on Public Debt
PRIMARY BALANCE
OVERALL BALANCE
FINANCING
Domestic Financing
Financing Abroad
Other

Ratio of Overall Balance to GDP (%)
Ratio of Primary Balance to GDP (%)
Sources Central Bank of Belize, Ministry of Finance

-11.0 -6.0 -6.4 -0.4
-7.1 -0.2 1.3 1.5

422.2
370.2
52.0
393.0
29.1
24.8
89.6
-35.7
6.4
453.4
276.4
2.5
669.4
77.4
-138.6
-216.0
317.6
-62.4
380.7
-0.7

462.0
419.3
42.7
468.0
-6.0
26.5
59.7
-39.2
35.2
523.6
180.9
0.0
648.9
121.5
-3.8
-125.3
135.3
-39.4
174.9
-0.3

511.4
458.0
53.4
556.2
-44.7
6.4
50.0
-88.4
14.1
531.9
117.6
0.0
673.8
170.3
28.3
-141.9
97.5
-24.1
122.1
-0.4

49.4
38.7
10.7
88.2
-38.8
-20.1
-9.6
-49.2
-21.1
8.3
-63.3
0.0
24.9
48.8
32.1
-16.7
-37.7
15.2
-52.8
-0.2

Chart V.1: Central Government's Development Expenditure

BZ$ mn
250.0

200.0

150.0

100.0

50.0

2002 2003 2004 2005
Capital II O Capital III

expansion in non-tax revenue was due to receipts
from BSSB's repayment of loans under the
mortgage securitization programme, transfers from
other government departments, licenses, and
property income. Capital revenue, mostly derived
from the sale of crown lands, was $6.4mn,
compared to $26.5mn in 2004, while grant and debt
service receipts more than halved to $18.5mn.

At $556.2mn, current expenditure was 18.8%
higher year on yearwith all major categories showing
increases. The sharpest growth was in interest and
other public debt related payments, which rose by
40.1% to $170.3mn (7.7% of GDP). Outlays for
goods and services were up 19.6% partly due to
the effort to improve reporting accuracy by
reclassifying some items hitherto reported as capital
expenditure. Salaries and pensions rose by 6.4%,
pushed up by the partial payment of previously
negotiated salary increases to civil servants. The net
effect of the various increases was an almost ninefold
rise in the current deficit to $44.7mn.

With capital expenditures being sharply curtailed in
an effort to reduce the fiscal deficit to a more
manageable level, overall capital/net lending outlays
plunged by 35.0% to $117.6mn (5.3% of GDP)
with Capital III expenditures showing the sharpest
decline. Some 31.8% was assigned to infrastructural
projects such as land development, streets and drains,
construction of bridges, the road between Mussel
Creek and Willows Bank and the rehabilitation of
highways and feeder roads. Another 22.3% of
capital expenditure was on educational projects that
included the University of Belize, tertiary level
scholarships and technical/vocational training.
Other allocations were made to a medley of
projects such as the National Institute of Cultural
Heritage, printing services, the Basic Needs Trust
Fund, the US debt for nature swap, area
constituency projects, BAHA, hurricane
preparedness, the Commonwealth Debt Initiative
and prison custodial services.

The fiscal deficit was funded from external sources
and privatization proceeds that enabled a build up

CENTRAL BANK OF BELIZE

200 ANNUAL REPORT

CENTRAL GOVERNMENT OPERATIONS & PUBLIC DEBT

Box 4: Central Government Tax Measures in 2005

From

Income & Business Tax (Amendment)
Act 6, dated 27/01/05, effective 01/02/05
Trade & other business taxes 0
(Except for radio, television, and newspaper)

Business tax on professional

Business tax on banks (BFIA)
PIC group of companies

Business tax on realtors agents (commissions)

Business tax on casino earnings

Act 14, dated 01/04/05, effective 01/03/05
Service stations fuel receipts

Environmental Tax (Amendment)
Act 9, dated 27/01/05, effective 01/02/05
Vehicle over 4 cylinders

Environmental tax

Act 17, dated 01/04/05, effective 01/03/05
Environmental tax

Custom & Excise Duties (Amendment)
Act 5, dated 27/01/05, effective 01/02/05. 1/7/05
Rum (any strength or proof)

Tobacco (cigarettes)

Aerated Water (not exceeding 12 oz)
Aerated Water (exceeding 12oz)

Act 19, dated 24/06/05, effective 01/07/05
Excise Tax
Rum (any strength or proof)

Tobacco (cigarettes)

Aerated Water (exceeding 33.8floz)

Brewery (Amendment) (No 2)
Act 8, dated 27/01/05, effective 01/02/05
Excise Tax
Beer

Act 16, dated 01/04/05, effective 01/03/05
Beer

Act 18, dated 24/06/05, effective 01/07/05
Beer

.7%, 1.25%, and 1.5%

4%

10%
4%

4%

4%

1.75%

2%

1%

3%

$30/gal

$4/ctn

$0.0325
$0.0408

$60/gal

$12/ctn

$0.0816

$1.80/gal

$3.60/gal

$6/gal

1.75%

6%

15%
8%

15%

15%

0.75%

$60/gal

$12/ctn

$0.0650
$0.0816

$90/gal

$18/ctn

$0.1632

$3.60

$6/gal

$4/gal

200 ANNUAL REPORT

CENTRAL BANK OF BELIZE

Table V.2: Central Government's Domestic Debt

$mn
Instrument 20 2

Loans & Advances
Treasury Bills
Treasury Notes
Defence Bonds
Total
Sources: Ministry of Finance, Central

of Central Government deposits in the domestic

banking system. External financing amounted to

$122.lmn, with loan disbursements of$427.9mn

outweighing amortization payments of $295.8mn.

Central Government's Domestic Debt

Central Government's domestic debt increased

marginally by 0.3% to $279.5mn (12.7% of GDP),

as amortization payments of $4.3mn almost offset

a net $4.3mn rise in overdraft credit plus $0.8mn

in commercial bank loan disbursements.

The largest principal payments were to the Belize

Bank ($2.5mn) and to the GOB/US debt for nature

swap account ($1.2mn). Smaller payments went to

the DFC, BSSB, Guardian Life and Atlantic Bank.

In secondary trading, the commercial banks sold

$1.0mn in Treasury Bills as well as $9.0mn worth

of Treasury notes to the Central Bank and other

institutions.

Of the $18.8mn in interest payments, some $8.9mn

was paid to the Central Bank as the cost ofproviding

overdraft financing to the Government. A total of

$6.3mn was made on securities such as Treasury

Bills, Treasury Notes and Defence Bonds. An

interest payment of $0.6mn went to the DFC while

the Belize Bank received $2.5mn on its loans for

housing and infrastructure development. An

additional $0.3mn was paid to the GOB/US debt

for nature swap.

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

200.0
180.0
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0

Central Bank Commercial Banks Social Security
i2003 i2004 02005

Other

117.4
100.0
24.0
15.0
256.4
Bank of Belize

139.6
100.0
24.0
15.0
278.6

140.5
100.0
24.0
15.0
279.5

CENTRAL GOVERNMENT OPERATIONS & PUBLIC DEBT

Table V.3: Public Sector

External Debt by Source

6 .. -- S ..@^^^^^^^^^^^^^^*^^^^^^^^^^^^^^^*
Oustndn Iners Outsta.n*d0ing- 6
^^^^^^^^ Debt & Other Valuation Debt^^^^^^^^^^^^^
^^^^31/12/2004 D^Mi is^iBbusement Amort Ki^^i^^^~fizain Cags Adjustments i31/12/200

Bilateral
Multilateral
Bonds
Commercial Banks
Suppliers Credit
Total

259.7
379.2
932.6
123.6
6.2
1,701.3

62.0
26.7
285.7
53.4
0.0
427.9

21.9
21.4
239.8
20.8
3.1
307.0

12.5
15.2
93.9
12.3
0.6
134.4

External Public Sector Debt

The public sector's external debt rose by 9.6% to
$1,865.1mn (84.4% of GDP) with all new
disbursements going to Central Government. These
amounted to $427.9mn, a substantial part ofwhich
was raised on the international bond market. With
the repurchase of the water utility company in
October, the debt of the non-financial public sector
expanded by $36.4mn. Principal payments totalled
$307.0mn and included a programmed bullet
payment as well as the payoff of investors that
chose an early put option. The preceding caused
external debt service payments to rise to $441.4mn
and the debt service ratio to increase from 16.3%
in 2004 to 35.6%.

At $285.7mn, bonds (including two by Bear Stearns
for $273.4mn) accounted for 66.8% of total
disbursements. The funds raised on the international
markets were earmarked for balance of payment
support and refinancing of debt obligations.
Bilateral creditors, namely ROC/Taiwan, disbursed
$62.0mn for budgetary support and to facilitate the
partial payment for the buy back of Belize Water
and Sewerage Limited (B\\ L). Included in the
$53.4mn received from commercial creditors were

promissory notes of $19.8mn for the repurchase
of BWSL shares and $12.3mn for infrastructure
work done by Johnston International.
Disbursements from multilateral creditors totalled
$26.7mn with the largest inflow coming from CDB
($18.3mn) to finance projects such as technical and
vocational education, health sector reform, southern
highway rehabilitation, disaster management, and
the Orange Walk By-pass. The IDB also provided
$6.2mn for hurricane rehabilitation, land
management, and tourism development projects.

Central Government's amortisation payments
totalled $295.8mn with 78.1% of these payments
going to note/bond holders. The latter included
$157.9mn paid to CMFS noteholders who exercised
an early put option on notes that were issued under
a debt reprofilingpackage in 2004. Another $58.2mn
went to Salomon Smith Barney upon maturation
of bonds that were issued in 2005. Other principal

payments consisted of $20.8mn to bilateral
creditors, $16.7mn to multilateral agents, $16.5mn
to commercial banks and $2.0mn to commercial
suppliers. The financial public sector made total
payments of$8.4mn, some $4.3mn ofwhich, went
to multilateral agents, followed by commercial

299.0
415.4
978.5
167.1
5.1
1,865.1

200 ANNUAL REPORT

Chart V.3: Sources of Public Sector External Debt

2004 2005

DBilateral MMultilateral *Bonds *Commercial Banks *Suppliers Credit

creditors with $3.7mn and the balance of $0.4mn
to bilateral agents. Amortization payments by
the non-financial public sector summed to
$2.8mn, which was shared among a commercial
bank, the Government of Kuwait and CDB.

Interest and other payments amounted to
$134.4mn with Central Government accounting
for 97.4% ($130.9mn) of the total. The latter's
payments to bond holders (Bear Stearns, Royal
Merchant Bank, CMFS and Citicorp Merchant
Bank) summed to $93.8mn. Bilateral and
multilateral creditors received $12.1mn and
$12.7mn, respectively. Interest payments by the
financial public sector consisted mainly of$0.2mn

to creditor suppliers, and $2. mn to multilateral
agents. Interest paid by the non-financial public
sector totalled $1.lmn divided among the
government of Kuwait, a commercial bank and
CDB.

The debt stock was lowered by $4.8mn reflecting
the net effect of valuation adjustments derived
from the depreciation of the euro and sterling against
the US dollar, and the appreciation of the dinar.
Euro and sterling-denominated loans were adjusted
downward by $3.9mn and $1.2mn, respectively, and
Kuwait dinar-denominated loans was adjusted
upwards by $0.3mn.

CENTRAL BANK OF BELIZE

1000-
900-
800-
700-
600-
500-
400-
300-
200-
100-
0-

2003

A-

NEL__

CENTRAL GOVERNMENT OPERATIONS & PUBLIC DEBT

Box 5: Public Sector and Publicly Guaranteed Debt

At the end of 2005, public and publicly guaranteed debt amounted to '2 ,I .0mn (104.8% of GDP) with
domestic debt liabilities accounting for 12.6% of the total. The external debt, excluding contingent liabilities
of $170.4mn, stood at '2 0143.1mn (92. .. of GDP). Contingent liabilities were equivalent to 7.7% of GDP
and consisted of '.'. 2'ri in mortgage securitization liabilities of the Development Finance Corporation
(DFC) and $104.2mn in guaranteed debt for privatized and private enterprises. With most of the guarantees
obtained prior to their privatization, privatized enterprises accounted for almost half of the guaranteed debt
with the largest guarantees given to the Belize Electricity Limited (BEL) on loans to implement a national
electricity grid and to entities associated with acquisition and improvement of the Belize port.

While it appears that the stock of publicly guaranteed external debt declined by 36.9% in 2004 and by a
further 29.4% in 2005, much of these reductions was tied to an increase in Government's direct debt
obligations. In 2004, Government prepaid the RIMB Securitization with proceeds from a RBTT US$76.0mn
bond that contributed to the 12.9% increase in the public sector debt to $1.7bn. In 2005, the re-nationalization
of Belize Water Services Ltd changed its loan status from a contingent liability to a direct Government debt.
The latter increased by some $86.1mn that included the previously guaranteed debt and the company's
purchase cost. The publicly guaranteed debt has also decreased, to a far lesser extent, with amortization
payments from the enterprises themselves, such as the US$8.0mn repayment on the Belize port loans in

2005.

(in millions of BZ dollars)
Public Sector & Publicly Guaranteed
Debt Outstanding (end of period) 2145.9 2221.1 2315.0
Public Sector Debt 1763.5 1979.9 2144.6
Central Government 1672.5 1902.9 2043.1
External 1416.1 1624.3 1763.6
Domestic 256.4 278.6 279.5
Non-Financial Public Sector 14.3 12.1 46.3
Financial I Public Sector 76.7 64.9 55.2
Publicly Guaranteed Debt 382.4 241.2 170.4
Debt for Privatized Enterprises 110.8 139.4 77.9
Belize Water Service 43.6 39.1 0.0
Belize Electricity Ltd 45.6 39.1 34.9
Belize Port 21.6 61.2 43.0
Private Enterprises 0.0 28.4 26.3
Securitization proceeds 271.6 73.4 66.2

(in percent of GDP)
Public Sector & Publicly Guaranteed
Debt Outstanding (end of period) 108.6 105.2 104.8
Public Sector Debt 89.3 93.8 97.0
Central IGovernment 84.7 90.2 92.5
External 71.7 77.0 79.8
Domestic 13.0 13.2 12.6
Non-Financial Public Sector 0.7 0.6 2.1
Financial public Sector 3.9 3.1 2.5
Publicly Guaranteed Debt 19.4 11.4 7.7
Debt for Privatized Enterprises 5.6 6.6 3.5
Belize Water Service 2.2 1.9 0.0
Belize Electricity Ltd 2.3 1.9 1.6
Belize Port 1.1 2.9 1.9
Private Enterprises 0.0 1.3 1.2
Securitization proceeds 13.8 3.5 3.0
Sources: Central Bank of Belize, Ministry of Finance

)REIGN TRADE AND PAYMENT

Higher tourism earnings, lower outflows for
profits and seasonal workers and increased
inflows of remittances to individuals and various
organizations only partly compensated for a
36.3% expansion in the trade deficit during the
year. The external current account deficit
consequently grew by 1.2% to $303.2mn though
its ratio to GDP declined from 14.2% to 13.7%.
The gap was financed by net financial inflows of
$314.7mn that were derived mostly from foreign
investments primarily in tourism, electricity,
communications and oil exploration and
government borrowings that included two Bear
Stearns bonds. The latter accounted for a
$36.0mn increase in gross official reserves to
$142.6mn, the equivalent of 1.6 months of
imports.

Merchandise Trade

With imports significantly outpacing exports, the
merchandise trade deficit widened to $475.7mn
(21.5% of GDP). Gross imports rose by 15.7%
to $1.lbn as imports for domestic consumption
and the CFZ increased by 15.4% and 17.4%,
respectively. Slightly more than half of the increase
in imports for the domestic market was due to the
higher acquisition cost of petroleum products and
inputs for export processing zones. CFZ imports
expanded with an increase in cross border trade
and a seeming build-up of inventory. At
$636.7mn, total exports was 4.0% higher than the
previous year as domestic exports, CFZ sales and
other re-exports all registered modest increases.

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

CURRENT ACCOUNT -352.8 -299.7 -303.2
Merchandise Trade -413.7 -349.1 -475.7
Services* 139.4 173.5 282.9
Income -170.3 -227.0 -222.4
Current Transfers 91.7 102.9 112.1
CAPITAL ACCOUNT 3.0 8.5 2.2
FINANCIAL ACCOUNT 346.0 211.9 312.5
NET ERRORS & COMMISSIONS -56.4 16.7 24.5
OVERALL BALANCE -60.1 -62.7 36.0
FINANCING 60.1 62.7 -36.0
Memo Items
Import cover in months 2.1 1.4 1.6
Current AccountlGDP Ratio (%) 17.9 14.2 13.7
*Tourism earnings in 2005 w as measured using actual inflow s into the banking systerr
in comparison to the previous years that are based on the revised 2000 VEMS survey

FOREIGN TRADE & PAYMENTS

Table VI.2: Balance of Payments MerchandiseTrade
$mn
2003 204t t [ c?

Goods Exports, f.o.b.
of which: Domestic Exports
CFZ sales
Other Re-exports
Goods Imports, f.o.b.
of which: Free Circulating Area
CFZ*

631.0
359.7
236.8
34.6
1,044.7
877.7
167.0

612.3
372.9
218.9
20.5
961.4
818.9
142.5

636.7
384.1
227.4
25.2
1,112.4
945.1
167.3

4.0%
3.0%
3.9%
22.9%
15.7%
15.4%
17.4%

Merchandise Trade Balance -413.7 -349.1 -475.7 36.3%
*This CFZ item excludes fuel and goods imported from the domestic territory.

Domestic Exports

Despite price and volume declines in key export

commodities, the strong performance of citrus

products helped to push the value of domestic

exports up by 0.9% to $411.9mn.

Except for citrus and papaya, revenues decreased

for the major domestic exports in 2005. Sugar

receipts contracted as a decline in export volume

outweighed a small appreciation in the EU price

and earnings from banana declined marginally

as lower export volume was mitigated by a small

price improvement. With a sharp decline in

average prices outweighing a modest increase in

export volume, shrimp revenues plummeted,

pulling down earnings from marine products.

A volume contraction reduced garment revenues

while a restriction on the export of mahogany

led to a contraction in earnings from sawn wood.

On the upside, the value of citrus shipments

skyrocketed with a surge in output fortuitously

coinciding with strong price rallies for citrus

products, particularly grapefruit. Gains in

export revenues were also experienced by papaya

as sale volumes increased and a price increase

pushed up molasses earnings. Volume and price

improvements also boosted revenues from citrus

oils, beans, fresh orange, pepper sauce and other

miscellaneous non-traditional exports.

Chart VI.1: Foreign Reserve Coverage of Merchandise Imports
50

40

E 30

0
20--

0

0 0) -0 - 0) -0 L-
c? w? w? w w w w

Table VI.3: Domestic Exports
$mn

Traditional Exports 367.6 388.1 378.8
Sugar 71.2 79.7 69.9
Citrus Juices* 79.9 83.3 107.8
Citrus Concentrate 78.0 79.3 107.0
Not-from-Concentrate 1.9 4.0 0.8
Molasses* 2.5 1.8 2.8
Bananas 52.6 53.0 51.1
Marine 110.2 107.4 83.9
Garments 30.9 37.1 33.9
Sawn Wood 3.5 3.0 2.6
Papayas 16.8 22.8 26.8
Non-traditional Exports 13.8 20.2 33.0
Total Exports 381.4 408.3 411.9
Source: Central Statistical Office
* Value of export shipments and not sales. The number used in the
balance of payments table is adjusted to reflect actual sales.

markets.

Lower output and a reduction in the volume of

Protocol sugar led to a 17.7% fall in sugar export

volume while earnings fell by 12.3% to $69.9mn.

An improvement in the EU price mitigated the

negative impact on revenue as prices remained

stable in other markets. For the second

consecutive year, no sugar was sold to the world

market as all 'non-preferential' sugar was readily

sold in CARICOM, which has become the

second largest market, and other regional niche

Table VI.4: Exports

Sugar (long tons)* 98,568 71.2

E.U. (Quota long tons) 46,356 45.1
USA(Quota long tons) 10,888 9.8
CARICOM (long tons) 13,645 7.3
Other (long tons) 27,679 9.1

Molasses ** 37,753 2.8
Sources: Belize Sugar Industries, CSO
* Reflects value of export shipments.
** Reflects actual sales as reported by the processor.

The tonnage of EU Protocol sugar was lower

because of the pre-delivery of 5,886 long tons in

2004. On the other hand, sales of EU Special

Preferential Sugar (SPS) increased by 2,214 long

tons with the deferment of the 2004 SPS

allocation to 2005. Total exports to the EU

consequently declined by 16.8% to 39,928 long

tons, while receipts fell by 10.3% to .42 4mn.

The revenue decline was ameliorated by the

improved Euro to US dollar exchange rate

of Sugar and Molasses

107,102

47,965
10,917
46,367
1,854

32,706

79.7

47.3
8.4
22.7
1.3

2.6

88,131

39,928
11,015
35,319
1,869

33,336

CENTRAL BANK OF BELIZE

2005ANNUAL REPORT

Sugar and Molasses

$mn

2003 20I042005

FOREIGN TRADE & PAYMENTS

Box 6: EU Sugar Reform

On November 24, 2005 the European Agricultural Council agreed on measures to reform the EU sugar
regime. The major elements of the reform package of interest to African, Caribbean and Pacific (ACP)
countries include:

A 36.0% price cut over four years on the intervention (minimum guarantee) price for raw sugar
beginning on July 1, 2006 as illustrated below:

Keterence rice, Kaw `ugar t/NII I Z / 4V0. 4V6.6 4J4.1 JJ3
Cumulative reduction, % 0% -5.0% -5.0% -17.1% -36.0%

Abolition of the intervention system after a four-year phase-out period and the replacement of the
intervention price by a reference price.

SThe merging of'A' and 'B' quota into a single production quota.

SCompensation for EU sugar beet farmers at an average of 64.2% based on the final price cut of 36.0%.
EU countries that will slash their quota by at least 50.0% may receive an additional coupled payment
of 30.0% of the income loss for a maximum of five years.

SVoluntary restructuring scheme lasting 4 years for EU sugar factories, consisting of a payment to
encourage factory closure and the renunciation of quota.

SIntroduction of a private storage system as a safety net in case the market price falls below the
reference price.

SExtension of the sugar quota system, until 2014/15 with no review clause.

SAn assistance scheme for ACP countries who traditionally export to the EU is limited to
approximately 40 million for 2006. Further long term assistance for the period 2007 to 2013 may be
made available.

In 2005, the EU market represented 45.2% of the sugar export volume and accounted for 61.9% of the
sugar export revenue for Belize. Belize's sugar quota allocation to the EU under the Protocol
arrangement stands at 42,000 metric tons. The effects of the 36.0% price cut, as quantified in the table
below, indicate that the industry will suffer a cumulative loss of US$16.0mn over the next four years
and an annual loss ofUS$9.9mn from 2009.

Protocol Quota (MT) 39,500 42,000 42,000 42,000
Curent Price (Euro) 523.7 523.7 523.7 523.7
Price Cut (cumulative %) 5 5 17.1 36
Revised Price (Euro/MT) 496.8 496.8 434.1 335.2
Price Cut (Euro) 26.9 26.9 89.6 188.5
Euro/US$ exchange rate 1.25 1.25 1.25 1.25

gross revenue US$'000 26,082 22,790 17,598
Annual Impact on gross revenue US$'000 -1,412 -4,704 -9,896
Accumulated impact US$'000 -1,412 -6,116 -16,013
Accumulated impact BZ$'000 -2,825 -12,233 -32,025
No revenue loss assuming protocol quota is delivered before July 1, 2006.

cont'd......

CENTRAL BANK OF BELIZE

Box 5: EU Sugar Reform (cont'd)

obtained on the futures market that boosted the
average unit price by 9.1% to US$0.24 per
pound.

The US quota was filled at 11,015 long tons
valued at $8.4mn representing a 0.9% increase
in both volume and value as the average price
remained stable at US$0.17 per pound.

The reduction in output caused sales to
CARICOM, the residual sugar market, to
shrink by 23.8% to 35,319 long tons. Receipts
from such sales (mostly of bulk and bagged
brown sugar to Trinidad & Tobago andJamaica)
stood at $17.7mn as a modest 2.8% price
improvement limited the revenue decline to
22.0%.

Exports to niche, value added markets totalled
1,869 long tons valued at $1.3mn and consisted
of bi ---,..l sugar to Curacao and Canada.

Exports of molasses increased by 1.9% to 33,336
long tons, while earnings more than doubled to
$5.5mn as the tightening of global supplies caused
the average price to rise from $80.87 to $165.56
per long ton.

Citrus Juices and Pulp

After an especially challenging 2003/2004 crop
year when prices, especially for orange,
weakened considerably, the citrus industry
performed superlatively as a bumper crop with
record high yields fortuitously coincided with
a strong price rally for citrus juices in
international markets. The industry therefore
benefited from a revenue windfall, as citrus juice
exports surged by 27.2% to 35.8mn ps, and
earnings increased by 64.5% to $77.5mn. With
price factors favouring concentrates, the latter
accounted for the majority of sale volume

2005ANNUAL REPORT

Further losses will stem from the discontinuation of Belize's Special Preferential Sugar (SPS) quota allocation
in 2006 due to the Everything But Arms Initiative (EBA). Cumulative revenues over the past five years under
the SPS amounted to approximately US$10.9mn. To survive, the industry is developing an adaptation plan,
which will include clearly defined and costed projects geared towards improving industry productivity and
competitiveness. This plan will provide the basis for requesting EU financial assistance for Belize's adjustment
programme. This Strategic Action Plan calls for field improvements such as an increase in sugarcane supply
and quality, factory improvements to raise product quality and increase capacity to produce bagged sugar. It
also calls for minimum exposure to the volatile world market by redirecting sales to the CARICOM market,
reduction of overall unit cost of production and decreases in shipping and handling costs/time. Plans are also
afoot to diversify revenue sources through the establishment of a 25 Megawatts Cogeneration facility at the
existing sugar factory and to investigate options for alcohol/ethanol production. To mitigate the negative
effect of the 36.0% price cut, Belize has already registered a request with the EU to increase its market
allocation from the current level of 42,000 tons to 100,000 tons. In summary, the critical issue is whether key reforms
and projects can come to fruition in a timely manner during the four year phasing period of the 36.0% price cut.

Sources: European Commission, Press Release IP/05/1473, Nov. 24,2005. and BSI

FOREIGN TRADE & PAYMENTS

(99."' .., NFC sales being kept to a minimum.

Prices for orange juices were pressured upward

during the year in response to Florida's twin,
hurricane induced, misfortunes a reduced crop

and the spread of canker disease. Capitalizing

on the opportunity, sales of orange concentrate

rose by 29.1% to 29.2mn ps, while earnings

surged by 65.2% to '4.5mn. The US remained
the largest market with sale volume up by 29.3%.

With prices improving (from $1.27 per ps to

$1.74 per ps), this market yielded the greatest
dollar increase of $17.8mn, equivalent to a 77.8%

growth in revenues. Higher demand and
continued strategic focus on CARICOM pushed

up exports of orange concentrate to this market

by 17.9%, while revenue increased by 19.2% with
a $0.03 increase in the average price to $2.17 per

ps. Sales of freeze orange concentrate also

strengthened. No orange concentrate was sold

to Europe as lower shipping costs and higher

prices in the US made the latter the preferred
market.

With Florida losing more than half of its grapefruit

crop and Cuba suffering major crop losses to
hurricane damage, international prices for grapefruit

products hit historically high levels. Sales of

grapefruit concentrate rose by 22.1% to 6.3mnps,
while receipts out-performed the volume increase,

expanding by 71.9% to $22.1mn. Favourable prices

and lower freight costs revived sales to the US after
a hiatus of several years, and in a reversal from

previous years, the US surpassed the EU to emerge

as the leading market for grapefruit concentrate.

With the highest average price of $3.65 per ps, the

US accounted for 44.6% of total grapefruit

concentrate exports. In contrast, the volume of

sales to Europe fell by 54.9% with value declining

by a lesser 38.7% due to an increase in the average

Table VI.5: Export Sales of Citrus Juices and Pulp*

6603 6604 6605

Concentrate ('000 ps)
Orange
Grapefruit
Concentrate value ($mn)
Orange
Grapefruit

26,267
21,605
4,662
55.1
43.5
11.6

27,806
22,643
5,163
45.8
33
12.8

35,520
29,222
6,298
76.6
54.5
22.1

Not-from-concentrate Exports ('000 ps) 644 284 227
Orange 329 67 189
Grapefruit 315 217 38
Not-from-concentrate Value ($m n) 3.1 1.3 0.9
Orange 1.4 0.3 0.7
Grapefruit 1.7 1 0.2

Pulp Export ('000 pounds) 481 332 2,548
Pulp Value ($mn) 0.3 0.2 1.6
Source: Citrus Products of Belize Ltd
* Reflects actual sales as reported by the processor and not the value of export shipments
as reported by the CSO. Export shipments go to inventory for sale at a later point in time.

2005ANNUAL REPORT

CENTRAL BANK OF BELIZE

price (from $2.26 to $3.07 per ps). Demand also
revived in CARICOM to the point where
Caribbean grapefruit sales more than doubled.
Sales of grapefruit freeze concentrate rallied,
increasing by 34.9% in volume and 60.4% in
value.

The bullish market for concentrates kept NFC
export sales to a minimum of 0.2mn ps (83.1%
of which was orange) that was principally aimed
at maintaining a toehold in the market.

In line with the strategy to maximize the
industry's value added through expanded sales
of by-products, pulp exports increased by more
than sevenfold in volume to 2.5mn pounds and
by more than eightfold in revenue to $1.6mn.

Banana

Unfavourable weather at the start of the year
and a decision by growers to cut back on field
inputs (taken before the conclusion of the drawn-
out marketing negotiations) caused a 6.1% decline
in banana export volume to 74,618 metric tons.
The decline in revenue was lower(3.8% to
$51.0mn) due to an improvement in the final,
negotiated average box price and a smaller
percentage of second-class fruit in the export mix.

Growers received a final box price of $12.40, up
3.9% from the $11.93 earned in 2004. Apart
from the price improvement, the industry's net
returns was also boosted by other factors such
as the considerable reduction in quality penalties,
from 12.8g per box in 2004 to only 3.4g per box
this year, and the removal of import license costs
for the second consecutive year.

Marine Products

After exceeding $100.0mn in the previous two years,
revenues from marine exports fell to $83.8mn largely
due to a slump in earnings from farmed shrimp.
While exports of the latter grewby 8.5% to 18.4mn
pounds, accounting for virtually all of the 8.0%
increase in total marine exports, the expansion was
partly due to the higher proportion of 'head-on'
shrimp which weighs more but is lower priced
than the tail in the export mix. Hence,
notwithstanding the higher volume, shrimp earnings
plummeted 28.9% to $60.5mn. Among the factors
that contributed to the steep drop in revenues was
intense competition from Asia and other global
suppliers that have kept shrimp prices depressed.
The application of countervailing duties on US
imports of frozen warm water shrimp on a
number of major shrimp suppliers to the US
did not significantly reduce supplies, so the expected

Table VI.6: Exports of Bananas
6603 6604 66lI

73,016
52.6

79,428
53.0

Volume (metric tons)
Value ($mn)
Sources: CSO and BGA

76,101
51.0

FOREIGN TRADE & PAYMENTS

Box 7: EU Banana Import Regime

After facing legal challenges to its banana import regime, the European Union has opted to institute a
single import tariff on bananas imported from countries enjoying Most Favoured Nation (MFN) status.
Originally, the EU planned to levy a tariff of *230 per tonne on non-ACP banana but some Latin
American producers successfully challenged this under the WTO arbitration rules on the grounds that
they would not be able to maintain their share of the EU market if the plan was adopted.

In January, 2006, the EU import regime shifts to a hybrid of the tariff only and quota regimes. The
effective tariff rate as of January 1, 2006, falls to *176 per tonne on bananas from MFN countries a
level that is still being disputed as injurious to Latin American producers. The ACP group, of which
Belize is a member, will continue to benefit from a duty-free quota that will be slightly higher at
775,000 tonnes per annum but lower than known ACP production capacity.

For January and February of 2006, 160,000 tonnes of duty free banana has been allocated to ACP
countries. Another 615,000 tonnes of tariff free quota for ACP countries remains for the period March
to December, 2006. Under the new rules, some 76.1% or 468,150 tonnes of the tariff free quota will be
made available on a "first come, first served" basis in five trenches of 93,630 tonnes each. A tranche
consists of a two-month delivery period. The remaining 146,850 tonnes of the quota will be held by
operators who actually imported bananas from ACP countries during 2005. The licenses for these
operators will be proportional to the quantities they imported from ACP countries in 2005. If deliveries
during a tranche exceed the allowed ACP duty-free quota (as is wont to occur since ACP exports are
greater than the quota), then the surplus ACP import volume will be subject to the tariff of *176 per
tonne, which is equivalent to an average box cost of US$3.65. Volumes especially at risk of being
subjected to the tariff would be imports during the latter part of the two-month delivery period.

High volume ACP producers such as West Africa and the Dominican Republic (DR) stand to gain the
most from this new arrangement. Any tariffs payable by these large producers, when averaged across
total exports, will work out to a lower average box cost than that for much smaller producers like
Belize and the Windward Islands who will have a smaller amount of export boxes over which to split
the tariff cost. In addition, West Africa and the DR have lower labour costs and better economies of
scale, meaning that, even without the tariff, they already have a distinct cost advantage over a smaller
producer like Belize.

For Belize, a shift to delivering only in the early part of the tranche (before the duty-free amounts are
exhausted) is impractical. The harvest cycle does not allow this, and the marketer has consistent
commitments during the year. The management of shipments and costs during 2006 will consequently
be quite challenging to the industry. The Caribbean Banana Exporters Association aptly summarises
the deficiency of the new regime in the following words, "The origin and main justification of the
preferential regimes for bananas was the need to safeguard the trade of the most vulnerable producers in
economies that were socially and economically dependent on it. It would be perverse to provide a
duty-free quota intended for this purpose, but then allocate it by a method tailor made to favour the
strongest at the expense of the most vulnerable".

Sources: http://europa.eu.int/comm/agriculture/newsroom/en/226.htm,
http://www.cbea.org/main.asp

2005ANNUAL REPORT

CENTRAL BANK OF BELIZE

price boost did not occur, although prices did
eventually stabilize. While sales of the 'head-on'
shrimp to buyers in the EU and Mexico increased,

Mexican buyers were offering farm gate prices,
which are lower than the normal export price since
international delivery and handling costs are

excluded. While lower, these prices were sufficient
to enable producers to maximise their net returns.
Consequently, while the average price per pound
of shrimp fell from $5.01 in 2004 to 25 in 2005,
the industry's net profitability did not necessarily
diminish as well.

Limited by natural, cyclical reproductive

patterns, the wild capture of lobster was down,
so lobster exports declined by 5.2% in volume,
while a 1.0% price improvement to $28.43 held
the revenue decline to 4.2%.

Conch performed well, as a 12.1% decrease in
sale volume to 0.5mn pounds was more than

offset by a 40.1% price improvement that drove
up earnings by 23.2% to $7.2mn. The
Convention on International Trade in Endangered
Species (CITES) banned the importation of conch

from Jamaica, Colombia, Honduras and a few
other countries, significantly reducing supplies
to the US and causing prices for conch to increase
significantly from $9.75 in 2004 to $13.66 in

2005. CITES, while benefiting Belize by boosting
export prices, also required the local fishing
industry to ensure that only legal sized conch
was harvested, a factor that may have influenced
to some extent the decline in export volume.

The export of whole/fillet fish once again

expanded substantially with volume increasing

by 77.3% to 0.4mn pounds and earnings by
36.8% to $1.7mn. The increase was linked to the
continued development of the domestic tilapia

industry and the corresponding expansion in the
export volume of fresh tilapia fish fillets, all of
which was sold to the US. While US demand

for fresh fillet experienced double digit growth

during the year, countries such as Ecuador, Costa

Rica and Honduras, the major suppliers of this
product to the United States, also increased
production thereby contributing to a decline in
the average price from $4.92 to $4.15 per pound.

Table VI.7: Exports of Marine Products

^^^^^^^^^^^^^^KS[ 2003 2004 2005J|f^^^e~K^^^u~lnK^^^l~~
Volu m e Value Volu m e Value Volu m e Value^^^

Lobster Tail 521
Lobster Head 15
Shrimp 16,052
Conch 450
Whole/Fillet Fish 24
Other 1
Total 17,063
Source: Central Statistical Office

13,511
87
92,762
3,741
30
26
110,157

505
33
16,999
596
251
3
18,387

14,980
162
85,153
5,810
1,228
38
107,371

490
20
18,445
524
445
4
19,928

14,373
126
60,535
7,156
1,681
55
83,926

FOREIGN TRADE & PAYMENTS

Exports of other marine products, namely stone
crab, were minimal.

Other Major Exports

A greater proportion of high valued garments
was exported compared to the previous year.
Consequently, while garment exports declined
by 12.8%, revenues declined by only 8.6% to
$33.9mn given the 4.8% improvement in the
average unit price.

With mahogany remaining on the endangered
species list and logging being restricted to forests
that have been certified as managed in a
sustainable manner, exports of sawn wood fell
by 29.0% to 0.7mn board feet, while earnings
fell by 13.3% to $2.6mn even with a 22.1%
increase in the average unit price.

The volume of Belize's papaya exports expanded
by 13.5% to 63.1mn pounds and earnings were

up 7.5% to $26.8mn with the industry benefiting
from a reduction in Mexican papayas exports to
the United States, a decline in Hawaiian-grown

papayas and an aggressive marketing and sales

effort. In 2004, Mexico had accounted for some
75.0% of total US papaya imports, followed by
Belize with 19.0% and Brazil with 4.0%.
Hurricane damage to Mexican papaya
plantations in 2005 opened the window for other
suppliers and although competition in the

papaya market is intense, the local industry has
been able to keep up a steady supply of high
quality papayas that allows it to maintain a
competitive advantage in the US.

Non-traditional Exports

The value of non-traditional exports expanded
by 63.2% to $33.0mn with citrus oils, beans,
fresh orange, pepper sauce and a medley of
miscellaneous non-traditional products increasing
robustly. The push to maximise production and
sales of citrus by-products more than doubled
the volume of citrus oils to 3.0mn pounds and
increased export value by $5.2mn to $8.9mn.
While orange oil dominated sale volume, the
higher valued grapefruit oil accounted for 68.6%
of revenues. The smoothing of trade
arrangements for beans within CARICOM
virtually doubled sales of red kidney beans and

Table VI.8: Other Major Exports
6603 66 66

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

3.2
30.9

1,053
3.5

36,522
16.8

3.9
37.1

1,052
3.0

55,607
22.8

3.4
33.9

747
2.6

63,106
26.8

2005ANNUAL REPORT

CENTRAL BANK OF BELIZE

black eye peas to 15.9mn pounds, while a modest
price improvement for red kidney beans drove
up revenues by 113.6% to $8.9mn. Sales of fresh
oranges, most of which are being sold to
Germany and the UK for the 'freshly-squeezed'
juice market, also increased 30.1% in volume to
19.6mn pounds while revenues rose by 62.5%
to $3.4mn.

Re-exports

Re-exports expanded by 5.5% to '' ..i',n
reflecting a 3.9% rise in CFZ sales as well as a
22.9% expansion in re-exports from the customs'
area. Although sales of fuel, the initial product
that spurred CFZ development, declined
further, the CFZ experienced increased activity
that may be partly attributed to its success in
attracting a wider spectrum of the Mexican
market through the diversification into high end
merchandise stores. The CFZ may also be
benefiting from spill off visitors from the
adjacent casinos. The growth in other re-exports
was mostly due to the hike in the cost of fuel
sold to international airlines.

Gross Imports

Gross imports (f.o.b.) rose by $151.0mn,
reflecting increases of$126.2mn and $24.8mn for
goods imported into the customs' territory and
the CFZ, respectively. All categories of goods,
except 'Animal and Vegetable Oils', went up.
The largest increase was in Vuels and Lubricants,
including electricity' which rose by $48.0mn due to

higher imports of Mexican electricity and steep
hikes in international fuel prices that outweighed
volume declines of more than 12.0% in diesel,
gasoline and butane imports. This was followed by
Machinery and TransportEquipment', which expanded
by $21.7mn mainly due to the importation of
vehicles, communication equipment and aircraft,
and 'Miscellaneous Manufactured Goods'with a $17.6mn
increase arising from larger purchases of consumer
goods, such as jewelry, plastic bags, bottles, and
printedpaper. In the latter category, jewelry imports
targeted at the cruise ship market accounted for
virtually 60.0% of the increase. Imports of 'Chemical
Products'and Food and Live Animal' also recorded
double digit increases of $11.3mn and $10.4mn,
respectively, as the former showed higher purchases
of medicines, fertilizers, and insecticides, while
durum wheat and animal feed drove up the latter.

Direction of Visible Trade

During the year, the US and UK continued to
be Belize's main trading partners, accounting for
74.2% of total export proceeds. While the share
of sales to the US market declined by three
percentage points to 52.1% due to a fall-off in
shrimp and garment exports, the UK's
percentage share rose from 19.7% to 22.1%
largely because of stronger citrus oil, fresh
orange and shrimp sales. With the UK's share
rising, the share of exports to other EU countries
fell to 6.7% as compared to 10.1% in the previous
year. Due to the surge in farmed shrimp sales,
Mexico's share rose from 1.4% to 4.3%.

FOREIGN TRADE & PAYMENTS

Table VI.9: Direction of Visible Trade
Percentage

E r Impor ts mmmm

United States of America
Mexico
United Kingdom
Other EU
Central America
CARICOM
Canada
Other
Total

55.5
1.5
24.5
5.4
1.1
8.4
0.2
3.4
100.0

Source: Central Statistical Office
* excludes CFZ sales

CARICOM's share remained relatively stable
at 11.5% as a reduction in sugar exports was

compensated for by an increase in citrus juice
and bean sales.

While the share of imports from the US increased
from 38.7% to 39.1%, the UK's share declined
from 2.3% to 1.6% and purchases from other
EU countries increased from 3.9% to 5.1%.
Mexico accounted for 9.4% of imports and other
Central American countries combined for

19.5%. The share of imports from CARICOM
fell slightly to 2.4% during the year.

Services

Even with a decline in cruise ship arrivals,
tourism activity was the cornerstone of a 63.1%
increase in net receipts from services as visitor

expenditures rose significantly in response to the
opening of several high end jewelry stores and

other attractions. With travel expenditure
abroad by residents registering a marginal
decline, net inflows from travel services increased

by 37.1% to '344.Omn. The surplus from services

was further boosted as net inflows to the

government more than doubled to $20.4mn
reflecting increased revenues from permit/visa

fees and a 50.0% rise in funds for foreign
embassies and military units. In another positive

development, net outflows for other goods and
services declined by $9.7mn as earnings from the
construction of the US Embassy and other
miscellaneous services drove up receipts by 43.6%.
The latter more than offset Government payments

that included a $16.1mn insurance payment on the
Bear Stearns bonds and legal fees associated with
the placement of the bonds, the buy back of BWSL
shares and the GOB/ICC dispute. Transportation
was the only category that had a negative net
impact on the services account as higher freight
costs corresponding to the expanded volume of
internationally traded goods drove up net

outlays by $6.4mn to $40.8mn.

Income

In a reversal from the previous year, net outflows

on the income account declined by 2.0% to

55.1
1.4
19.7
10.1
0.4
11.4
0.2
1.7
100.0

52.1
4.3
22.1
6.7
0.6
11.5
0.1
2.7
100.0

42.5
7.9
2.5
5.1
16.6
2.7
1.2
21.3
100.0

38.7
10.3
2.3
3.9
19.2
2.6
1.2
21.8
100.0

39.1
9.4
1.6
5.1
19.5
2.4
1.3
21.6
100.0

2005ANNUAL REPORT

CENTRAL BANK OF BELIZE

$222.4mn as higher interest payments on the

external debt was outweighed by the net impact

of a decline in payments to seasonal, agricultural

workers, increased earnings of resident workers

linked to the US embassy construction project,

a reduction in the level of profit repatriation

and reinvested earnings and a modest increase in

Central Bank interest earnings on its foreign

asset portfolio.

Current Transfers

Increases in family remittances and inflows to

credit unions, insurance companies, and non-

profit organizations overshadowed an $11.2mn

decline in official grants to the government, and

accounted for a 9.0% rise in current transfers to

$112.1mn. In a noteworthy development,

inflows of remittances increased even though

only one money transfer primary agent operated in

2005 instead of the two that conducted operations

during most of 2004.

Capital and Financial Accounts

A reduction in debt forgiveness accounted for a

$6.3mn decline in the capital account surplus to

$2.2mn. Unlike 2004 when debt assistance from

the UK and US governments totalled $7.4mn,

only $1.5mn was received under the USAID

Debt for Nature Swap Agreement and there was

no debt forgiveness from the British

Government during 2005.

Strong investor activity and government

borrowings for balance of payments support

paved the way for a 47.5% increase in the surplus

on the financial account that summed to

$312.5mn. Notwithstanding the government's

buy back of the water and sewerage company

from Cascal B.V. of the Netherlands, net foreign

investment inflows rose to $215.5mn, a 4.7%

increase over the previous year. Notable

transactions included government's sale of Belize

Telecommunication Limited (BTL) shares,

Table VI.10: Balance of Payments Services, Income and Current Transfers
$mn

.... ... . ... I-

Services
Transportation
Travel*
Other Goods and Services
Govt. Goods and Services, N.I.E
Income
Labour Income**
Investment Income
Current Transfers
Government
Private

424.J
44.3
299.4
48.4
32.2
9.1
5.0
4.2
122.1
5.5
116.6

284.9
79.4
91.7
95.6
18.3
179.4
10.9
168.5
30.4
0.2
30.2

139.4
-35.1
207.7
-47.2
13.9
-170.3
-5.9
-164.3
91.7
5.3
86.4

47U.6
54.8
336.1
56.0
23.8
8.7
4.9
3.8
128.2
27.4
100.8

297.1
89.2
85.2
106.4
16.3
235.7
12.4
223.3
25.4
0.2
25.1

173.5
-34.4
250.9
-50.4
7.5
-227.0
-7.5
-219.5
102.8
27.2
75.7

b602.7
59.4
427.3
80.4
35.6
13.6
7.5
6.0
141.9
16.2
125.7

319.8
100.2
83.3
121.1
15.2
236.0
11.7
224.3
29.8
0.2
29.5

282.9
-40.8
344.0
-40.7
20.4
-222.4
-4.2
-218.3
112.1
16.0
96.2

*Tourism earnings in 2005 w ere measured on the basis of actual inflow s recorded by the banking system.
Numbers for previous years are based on the revised 2000 VEMS survey.
**Payments to non-resident workers were revised from 1999 to 2004 based on a field survey of non-resident seasonal
and border workers conducted in 2004.

FOREIGN TRADE & PAYMENTS

tourism projects such as the construction/

expansion of casinos at the northern border and

various hotels, the Chalillo Dam construction

and oil exploration and development.

Unfavourable exchange rate movements resulted

in a net outlay of $10.6mn as the Yen/US$

currency swap derivative contract that was linked

to the Salomon Smith Barney Bond matured in

June.

The impact of external borrowings on the

financial surplus was reduced given the offsetting

impact of disbursements and debt repayments.

While external disbursements to Government

totaled $427.8mn (including $273.4mn from

two Bear Stearns bond issues), amortization

payments by the public sector amounted to

$308.3mn as, among other transactions, the

Salomon Smith Barney Bond ($58.2mn) and the

Capital Market Financial Services notes

($158.0mn) were retired. In other developments,

the commercial banks' net position improved

by $9.8mn with foreign assets and foreign

liabilities rising by $18.3mn and $8.5mn,

respectively. Meanwhile, net financial outflows from

the private sector contracted as loan disbursements

exceeded amortisation payments, in contrast to the

previous year when the reverse was true.

Table VI.11: Balance of Payments Capital and Financial Accounts

$mn
II mml mm

CAPITALADCOUNT
General Government
Other Sectors
RNANCIAJ.LAOUNT
Direct Investment Abroad
Di rect Investment i n Belize
Portfolio Investment Assets
Portfolio Investment Liabilities
Finandal Derivatives Assets
Finandal Derivatives Liabilities
Other I investment Assets
VbnetaryAuthorities
General Government
Banks
Other Sectors
Other Investment Liabilities
VbnetaryAjthorities
General Government
Banks
Other Sectors
CHANGES IN RFESBVES (Negative = Increase in reserves and vice versa)

3.0
1.5
1.6
346.0
-0.7
-21.8
-0.3
151.1
1.4
0.0
-26.6
0.0
-6.0
-6.0
-14.6
243.0
-5.2
104.6
56.9
86.6
60.1

8.5
7.4
1.1
211.9
-0.1
205.8
-0.5
151.3
1.1
0.0
-14.8
0.0
-6.0
-10.6
1.8
-131.0
-8.0
-101.9
0.7
-21.8
62.7

2.2
1.5
0.7
312.5
-2.0
215.5
-0.4
34.2
0.5
-11.1
-23.2
0.0
-6.0
-18.3
1.1
98.9
-2.6
89.9
16.9
-5.3
-36.0

2005ANNUA L REPORT
CENTRAL BANK OF BELIZE ANNUAL REPORT

Table VI.12: Official International Reserves
$mn

Gross Official International Reserves 169.2 106.5 142.6 36.0
Central Bank of Belize 152.4 79.6 115.8 36.2
Holdings of SDRs 4.6 4.8 5.0 0.3
IMF Reserve Tranche 12.5 13.1 12.1 -1.0
Other 135.3 61.7 98.6 36.9
Central Government 16.8 27.0 26.8 -0.2
Foreign Liabilities 5.8 2.8 2.7 -0.1
CARICOM 0.8 0.1 0.3 0.2
Other 5.0 2.7 2.4 -0.3
Net Official International Reserves 163.4 103.7 139.9 36.1

Official International Reserves

Bolstered by external borrowings, gross
international reserves increased by $36.0mn to
$142.6mn as the Central Bank's foreign assets
rose by $36.2mn, while Central Government's
holdings fell by $0.2mn. Meanwhile, the net
international reserve position rose by $36.1mn
to $139.9mn, a marginally larger increase
facilitated by a $0.1mn reduction in foreign
liabilities.

Chart VI.2: Gross Official International Reserves

300 BZ$mn

250

200

150 -

100

50 -

0
1984 1987 1990 1993 1996 1999 2002 2005

ECONOMIC PROSPECTS

In 2006, the economy is expected to grow
moderately (between 2.0% and 3.11".., as fiscal
and monetary measures aimed at slowing
domestic consumption and stabilizing the balance
of payments are maintained. The Central
Statistical Office estimates that inflation should be
about 4.5% with higher oil prices, increased
electricity rates and the new General Sales Tax
scheduled for implementation inJuly 2006 all tending
to push overall costs upward. The government's
continued commitment to keep a tight rein on
spending should limit the overall fiscal deficit to
approximately 2.9% ofGDP for fiscal 2006/2007
and tighter policies should slow the growth rate in
money supply, reduce domestic consumption and
indirectly contribute to the buildup of foreign
reserves necessary to meet external debt service
obligations. The export sector should continue to
hold its own with domestic exports being boosted
by approximately 12.0% as a result of the continued
bullish market for citrus juices and byproducts as
well as the premiering of crude oil on the export
scene.

Developments in the primary sector include an
increase in oil exploration activities that are expected
to expand to the southern part of the country. In
agriculture, increases in sugarcane and papaya are
forecasted alongside declines in citrus and banana,
while livestock and basic grains should remain
relatively stable. Sufficient rainfall during the
sugarcane growing season should boost deliveries

by 18.4% to 1.1mn long tons, yielding some
110,000 long tons of sugar and 40,000 long tons
of molasses. With higher output and a modest
increase in the US sugar quota allocated to Belize
this year, sugar exports should rise to 98,500 long
tons ($74.4mn), volume and value increases of
11.7% and 6.9%, respectively. The projected
earnings do not take into account the scheduled EU
price cuts as sales to this market should occur in the
first half of the year and not in the second half
when the first price cut becomes effective. Exports
of molasses should increase marginally to 35,000
long tons but with earnings declining to $3.4mn
due to a weakening in prices.

After a record bumper crop in 2004/2005, citrus
should revert back to its natural cycle with
deliveries declining by 20.4% to 6.2mn boxes and
production of citrus juices falling by 21.0% to
35.3mn pound solids (ps). Pulp cell yields should
double with the upgrading of pulp extraction
facilities but oil output should decline by 27.0%
due to the fall in processing volume. Although
output will decline, exports will be boosted by
sale of stocks from the existing inventory
resulting in a 6.6% rise in citrus juice export
volume to 36.5mn ps. Revenues are expected to
surge by 21.3% to $86.5mn due to a moderate
increase in grapefruit juice prices and a strong
rally in orange prices prompted by the second
consecutive year of hurricane destruction to Florida's
citrus groves. Another measure that will help to

2005ANNUAL REPORT

CENTRAL BANK OF BELIZE

boost revenues will be the start-up of juice sales to
Central America where prices tend to be more
favourable than the USA or EU. Sales of pulp
cells and oils, most ofwhich are already contracted,
should yield another $9.0mn.

Exports of banana are initially forecasted to
amount to 71,813 tonnes '".-.8mn), declines of
5.6% in volume and 6.5% in value as the
uncertainty surrounding the implementation of
the new EU import regime is causing growers
to reduce their exposure by trimming
production outlays. In addition to the impact
of the small volume decline, the revenue loss is
likely to be exacerbated by a 1.4% decline in the
average box price. The outlook for earnings may
also need to be revised downward to reflect the
impact of any import duties on Belizean banana
that could result from the new EU delivery
system by quota tranche or any change in the
marketing agreement. Under trading
arrangements that are more responsive to WTO
dictates, the performance of the industry during
2006 will be a good indicator of its future as a
banana producer.

In 2006, papaya export is poised for a 10.0%
increase to 69.4mn pounds ($29.4mn) as demand
in the US continues to grow and Mexican
production recovers from storm damage.

Little variation is expected in marine exports with
shrimp exports likely to remain relatively stable at
18.5mn pounds ($60.5mn) as the fall in production
volume arising from one major farm's switch to a

one crop system with emphasis on jumbo shrimps
being compensated for by higher production from
farms utilizing more intensive management systems.
Market and product diversification should help to
keep net returns up for shrimp farmers,
notwithstanding the likelihood that the average price
per pound will remain at the 2005 level. Now in
full production, exports of fresh tilapia should rise
from 0.4mn pounds to 0.6mn pounds valued at
$3.5mn. Meanwhile, the wild capture of conch,
due to the nature of its cyclical, reproductive
patterns, will be down, and exports should fall by
3.4% to 0.5mn pounds while revenues should
decline by 5.6% to $6.8mn as unit prices fall
marginally. On the other hand, lobster sales should
expand by 12.4% to 0.6mn pounds with earnings
up by 16.6% to $16.9mn as prices strengthen further
with strong demand from the dining out market.

The performance of the secondary sector should
continue to be mixed in 2006. While sugar
production will rise, citrus agro-processing will
contract and the performance of manufacturers
that produce goods for the domestic market
such as beer, soft drinks and tobacco may
continue to be affected by changes in the tax
regime which appear to have negatively affected
consumption in 2005. While no major change is
expected in the utilities, the level of activity in the
construction sector will be largely determined by
whether the contractionary effect of the fiscal and
monetary policy framework is outweighed by the

commencement in earnest ofwork on the carnival
port facility and the continuation of the airport
runway expansion and other projects.

Indications are that growth in the services sector
should not exceed that of the previous year. While
the number of stay-over tourist arrivals is predicted
to increase by 5.0% to 238,000, a projected 13.5%
decline in cruise ship arrivals to 623,000 due to the
re-deployment elsewhere of one of the ships that
had been making weekly port calls will dampen
this expansion. In addition, measures to slow
domestic consumption should limit the growth of
the merchandising sub-sector, while tight fiscal
controls should rein in government services.

OPERATIONS

Foreign Exchange Operations

Even with sales exceeding purchases in eight out

of the twelve months, the Central Bank recorded

net purchases of$40.3mn as a result of its trade in

US dollars, Canadian dollars, and Pound Sterling

during the year. Purchases peaked in March with

the receipt of proceeds of the Bear Stearns bonds

and again in September when a loan disbursement

was received from ROC/Taiwan On the other

hand, large sales occurred in April, June and

November as the Capital Market Financial Services

noteholders opted for early repayment and the

Salomon Smith Barney bonds were retired. Trade

in CARICOM currencies was mostly for settlement

of official transactions and resulted in net sales each

month that summed to $1.2mn for the year.

External Assets Ratio

Section 25(2) of the Central Bank of Belize Act

1982 requires the Bank to maintain external asset

reserves of not less than 40.0% of the i - i !el

amount of notes and coins in circulation and the

Bank's demand and time deposit liabilities. After

peaking at 67.2% in March following the receipt

of Bear Stearns bond inflows, the ratio began to

trend downward, bottoming out at 35.9% in

December largely due to a decision by bondholders

to exercise an early put option on notes issued by

the Government in the previous year. At year end,

the Bank's external assets were comprised of cash

and fixed deposits (83.9%), foreign securities (11.9%)

and holdings of Special Drawing Rights with the

International Monetary Fund (4.2" ..

Table VII.1: Central Bank Dealings in Foreign Exchange 2005

$mn

49.5
10.7
267.9
54.0
23.5
25.8
7.4
17.3
66.1
31.2
24.1
24.3
601.9

14.9
37.1
24.2
111.0
13.7
102.3
14.9
36.0
38.7
49.6
82.9
36.3
561.6

134.O
-26.4
243.7
-57.0
9.8
-76.5
-7.4
-18.7
27.3
-18.4
-58.8
-12.0

40.3

0.00
0.00
0.03
0.00
0.00
0.03
0.07
0.01
0.00
0.00
0.00
0.00
0.14

0.37
0.05
0.12
0.14
0.19
0.06
0.20
0.01
0.02
0.08
0.01
0.15
1.39

-U.3 /
-0.05
-0.10
-0.13
-0.19
-0.03
-0.13
0.00
-0.02
-0.08
-0.01
-0.15

-1.25

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

OPERATIONS

Table VII.2: External Asset Ratio 2005

M A, ,' E ..r.. "

114.8
89.8
329.4
277.3
281.6
207.7
201.9
177.4
205.1
188.4
129.7
118.4

261.6
241.6
490.3
416.0
439.3
371.3
372.3
367.3
377.5
379.1
355.3
330.0

43.88
37.17
67.18
66.66
64.10
55.94
54.23
48.30
54.33
49.70
36.50
35.88

Relations with Commercial Banks

Cash Balances

Following a 1.0% increase (from 6.0% to 7.' ..;n

the cash reserve requirement in December 2004,

commercial banks' holdings of cash reserves

averaged $84.7mn, some $1.2mn lower than the

statutory level. In May, the cash reserve requirement

was increased by an additional 1.0%. Average

cash holdings during the last eight months of the

year consequently rose to $112.0mn with the

banks moving into an excess cash position in

June and maintaining that position to the end
of the year.

At the end of December, currency in circulation

amounted to $143.0mn, a $1.lmn increase over the

previous year. At that point, the public was holding

$117.5mn while the combined vault cash holdings

of commercial banks amounted to $25.5mn. The

month of lowest currency circulation was

September, unlike the previous year when January

Table VII.3: Commercial Bank Balances with the Central Bank
$mn
MOT Avrg Depsi Reqire Cash Acua Cas Exes
Lible Reere Hodig (Deficit

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

1,210.6
1,218.3
1,234.0
1,248.2
1,291.8
1,298.2
1,284.1
1,291.3
1,290.6
1,286.4
1,283.9
1,293.4

84.74
85.28
86.38
87.38
103.34
103.85
102.73
103.30
103.25
102.91
102.71
103.47

85.53
87.41
80.81
85.15
98.31
108.00
113.77
117.68
121.69
114.05
110.57
112.18

0.79
2.13
-5.57
-2.23
-5.03
4.15
11.05
14.37
18.44
11.14
7.86
8.71

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

200 ANNUAL REPORT

Table VII.4: Currency in Circulation 2005
$mn

118.4
118.2
125.8
123.8
128.1
127.9
124.7
120.7
115.2
116.7
120.9
128.4

13.7
13.7
13.9
14.1
14.1
14.2
14.3
14.3
14.3
14.3
14.4
14.6

132.1
131.9
139.7
137.9
142.2
142.1
139.0
135.0
129.5
131.0
135.3
143.0

21.3
19.7
27.4
18.6
24.4
24.2
21.5
22.6
19.1
22.9
24.9
25.5

110.8
112.2
112.3
119.3
117.8
117.9
117.5
112.4
110.4
108.1
110.4
117.5

marked the lowest point. As in previous years,

December remained the peak month reflecting the

rise in transactions during the Christmas season.

Transactions with Central Government

Under the Central Bank Act, the Bank may extend

advances to Government up to a maximum of

2I". of current revenue collected during the

preceding financial year or a sum of $50.0mn,

whichever is greater. The ceiling for 2005 was

$89.7mn and advances were generally held within

that threshold averaging some $83.2mn in eleven

out of the twelve months. The exception was the

month of November when advances rose to

$115.7mn as a result of the unprogrammed lump

sum payment made to bondholders under the

CMFS arrangement.

Table VII.5: Central Bank Credit to Central Government

Jdiiud y ou./ v.u I U.U i J.o J. I /.u
February 66.2 0.0 10.0 79.51 3.25 18.59
March 72.2 0.0 10.0 79.87 3.51 18.67
April 53.2 0.0 10.0 82.27 2.70 18.03
May 62.7 0.0 10.0 83.06 3.10 18.21
June 45.3 0.0 10.0 88.99 2.36 19.51
July 56.8 0.0 10.0 86.68 2.85 19.00
August 64.8 4.0 10.0 89.15 3.36 19.54
September 54.8 4.0 10.0 74.26 2.93 16.28
October 63.8 4.0 10.0 86.26 3.32 18.91
November 69.8 4.0 10.0 115.71 3.57 25.36
December 73.8 9.0 10.0 89.64 3.96 19.65
A: Central Bank Holdings of Government Securities as a multiple of Central Bank's paid up Capital and Reserves
B: Advance to Government as a percentage of Government's estimated recurrent revenue fiscal year
Current Revenues for Fiscal 2003/2004 of $427.661 mn (January March)
Current Revenues for Fiscal 2004/2005 of $456.222mn (April December)

CENTRAL BANK OF BELIZE

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

OPERATIONS

Table VII.6: Government of Belize Treasury Bill Issues

12/29/04
01/26/05
02/10/05
03/08/05
03/30/05
04/27/05
05/12/05
06/07/05
06/29/05
07/27/05
08/11/05
09/07/05
09/28/05
10/26/05
11/10/05
12/07/05

03/30/05
04/27/05
05/12/05
06/07/05
06/29/05
07/27/05
08/11/05
09/07/05
09/28/05
10/26/05
11/10/05
12/07/05
12/28/05
01/25/06
02/09/06
03/08/06

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

3.22
3.22
3.22
3.22
3.22
3.22
3.22
3.22
3.22
3.22
3.22
3.22
3.22
3.22
3.22
3.22

3.25
3.25
3.25
3.25
3.25
3.25
3.25
3.25
3.25
3.25
3.25
3.25
3.25
3.25
3.25
3.25

Treasury Bills

As the Government's agent, the Central Bank

continued to conduct Treasury bill operations on

its behalf during the year. Treasury bills with a total

value of $100.0mn were traded in the secondary

market, the maximum presently allowable. On

average, the Central Bank held some $62.0mn with

the commercial banks accounting for most of the

remainder. The Bank's holdings reached a low of

$45.3mn in June following the 1.0% increase in

commercial bank statutory reserve requirements but

this rose in the following months as commercial

banks shifted their portfolios to facilitate a rise in

lending. At the end of the year, the Central Bank's

Treasury bill holdings stood at $73.8mn.

Treasury Notes

Under the 1993 amendment to the Treasury Bill

Act, the Government of Belize may issue up to

$25.0mn in Treasury Notes. These notes have a

one-year maturity period and carry a 9.0% rate

of interest. At the end of 2005, total Treasury

Notes outstanding amounted to $25.0mn, of

which, some $16.0mn was held by a domestic

bank with Central Bank holding the balance.

Supervision of Banks and Financial

Institutions

As a result of the passage of the Credit Unions

(Amendment) Act that became effective on

December 1, 2005, the Central Bank became

responsible for supervising and regulating credit

unions in Belize. Apart from further integrating the

supervision of the financial sector, the amendment

seeks to strengthen regulatory oversight based on

principles laid down by the World Council of

Credit Unions and also to improve efficiency

by encouraging compliance with international

standards. Currently, fourteen active credit

1/05
2/05
3/05
4/05
5/05
6/05
7/05
8/05
9/05
10/05
11/05
12/05
13/05
14/05
15/05
16/05

Table VII.7: List of Financial Institutions
Domet Ik mIn*te l Banks Financial Institut-i

Alliance Bank of Belize Ltd.
Atlantic Bank Ltd.
Belize Bank Ltd.
FirstCaribbean Int'l Bank (Barbados) Ltd.
Scotiabank (Belize) Ltd.

Atlantic International Bank Ltd.
Caye International Bank Ltd.
Handels Bank & Trust Company Ltd.
Investment and Commerce Bank Ltd.
Market Street Bank Ltd.
Provident Bank & Trust of Belize Ltd.
The Oxxy Bank Ltd

Belize Unit Trust Corp. Ltd.

unions are operating in Belize with total assets
ranging from approximately $0.23mn to
$220.0mn.

To effectively carry out its mandate of bank
supervision, four full scope on-site examinations
and two specialized examinations involving three
domestic banks and two international banks were
conducted during the year. These risk focused
examinations were performed to determine
whether the banks were operating in a sound and
safe manner and to ensure that all laws and
regulations including anti-money laundering laws
were being adhered to. A visit was also made to
the home country supervisor for two international
banks to ascertain that the standards being enforced
by the home country supervisors were acceptable.

During 2005, applications were received for licenses
to operate two financial institutions and one

international bank. While the application for
the international bank is still being processed,
the two applications to operate domestic financial
institutions were denied since they did not meet
the criteria set by the Central Bank. To date,
there are five domestic commercial banks, seven
international banks and one financial institution
licensed under the banking laws of Belize.

In order to keep up with internationally accepted
standards, the Central Bank is also in the process
of reviewing the Banks and Financial Institutions
Act (BFIA) and the International Banking Act (IBA).
Apart from ensuring that domestic legislation is in
compliance with the Basle core principles, the
legislative review aims to standardize certain
procedures for both the domestic and international
banking laws and establish Central Bank autonomy
in issuing and revoking banking licenses.

Table VII.8: List of Credit Unions

Holy Redeemer Credit Union Ltd. St. Martin's Credit Union Ltd. Evangel Credit Union Ltd.
St. John's Credit Union Ltd. Civil Service Credit Union Ltd. VVesley Credit Union Ltd.
St. Francis Xavier Credit Union Ltd. Mount Carmel Credit Union Ltd. Police Credit Union Ltd.
La Immaculada Credit Union Ltd. Toledo Teachers Credit Union Ltd. Citrus Growers & Workers Credit Union Ltd.
Blue Creek Credit Union Ltd. Belize Credit Union League Ltd.

CENTRAL BANK OF BELIZE

200 ANNUAL REPORT

OPERATIONS

Information Systems Unit

Overview

In 2005, the Information Systems Unit (ISU)
upgraded all critical systems of the Central Bank
to the latest versions available and improved the
level of system security.

Network Security

A detailed internal security assessment and
external penetration analysis conducted on the
Bank's network to evaluate the security
infrastructure revealed that the bank is adhering
to international best practices and standards.
Firewall rules were tested and revised to address
minor vulnerabilities. As part of its security
strategy, the bank is implementing the Intrusion
Detection System, SNORT.

Upgrade of Major Application Software
Packages

* Final upgrades of the SWIFTNET Link and
SWIFT Alliance Entry software were
completed by March 2005, concluding Phase
I of the SWIFTNET migration project, which
is to replace the existing x25 protocol and
security infrastructure to one based on the IP
protocol.

* On the HRPLUS Human Resources system, the
recruitment module was launched, while portions
of the vacation leave module began running in

parallel with the manual system. Additional
customized reports were added to the system
for Pension and Income Tax returns.

* The Commonwealth Secretariat's debt
management system, CS-DRMS version 1.1,
went into production in late 2004 and another
major maintenance upgrade was tested and
implemented in 2005. This latest version was
also deployed to the Ministry of Finance.

* The process of implementing the AREMOS
software package used for the development
and management of time series databases
continued in 2005 with further work to
develop the system scheduled for early 2006.

* The GE Picture Perfect Security Access system
was upgraded from version 1.7 to 2.0. The
system runs on REDHAT LINUX, which
was upgraded from version 7.2 to 7.3. Several
components of the system were replaced with
digital versions that have networking capabilities.

* The Honeywell Building Management system
that was running on a Windows 98 platform
was replaced by a new version that runs on
Window 2000 Professional.

ADMINISTRATION

The Board of Directors

The Board of Directors held 11 meetings in 2005

and considered 66 submissions.

Overseas Meetings

As executive officers to the Bank and advisors to

Government, the Governor & Deputy Governor

attended several meetings during the year, some of

which are shown in Box 9.

Finance

The Central Bank's financial statements for the

year ended December 31, 2005, with comparative

figures for the previous year, are annexed to this

report. During the year, the assets of the Bank

increased by 16.6% to $367.1mn. External and

domestic assets recorded increases of 49.8% to

$119.2mn and 5.4% to $248.0mn, respectively.

At year-end, the net operating surplus amounted

to $8.5mn, compared to $5.9mn in 2004. Gross

earnings totaled $19.8mn including interest

income of $18.3mn and commissions and other

income of $1.5mn. Current expenditure totaled

$11.3mn with staff costs, interest payments and

other operating costs accounting for 50.4 %,

Box 8: Meetings Attended by the Governor and Deputy Governors during 2005

Nam of Metn/ofrncSotlc

Meeting of the Bank for International Settlement Open Economies

Meeting of Superintendents of Banks of Central America

Mardi

May

Meeting with International Finandal Institutions

CARICOM Central Bank Govemors Meeting

Meeting on Caribbean Monetary Union

Meeting of CEMLA

VII Annual Assembly of the Assodation of Supervisors of Banks of the
Americas (ASBA)

Meeting of the Inter American Development Bank and CEMLA

2005 Annual Meeting of the IMF/World Bank Group

CARICOM Central Bank Governors Meeting

September

September

September

December

Antigua, Guatemala

Panama

Washington, D.C.

Belize City

Jamaica

Mexico City

Oaxaca, Mexico

Washington, D.C.

Washington, D.C.

Belize City

ADMINISTRATION

7.4%, and 42.2%, respectively.

As provided for under Section 9(1) of the Central
Bank Act, $0.9mn or 10.0% of the net operating
surplus will be paid into the Central Bank's General
Reserve Fund. The balance of $7.6mn will be
transferred to the Accountant General for the
Government of Belize's Consolidated Revenue
Fund.

Internal Audit

During the year, the Internal Audit Unit updated
its audit program and procedures manual and
formalized its strategic plan in anticipation of the
Bank's organizational review The Unit also prepared
a risk matrix to facilitate the future development
of departmental risk-based audit programmes.

In addition to its routine monitoring of general
Central Bank operations, special audits of the
following activities were conducted during the year:

* Year end reconciliation procedures for 2004
to assess accuracy, timeliness and effectiveness.

* Verification of furniture and equipment and
procedures for purchase and disposal of capital
items.

* Local and foreign travel policy and procedures.

* Acquisition and distribution process for books
and periodicals.

* Administration of cash accounts.

The Unit also reviewed the maintenance program

and equipment replacement plan of the Building
Services Unit and the adequacy of procedures and
controls for cash shipments. It facilitated the Audit
Committee's review of the Bank's audited financial
statements and management letter and also
submitted a summary report to the Committee that
formed the basis for further discussion and
clarification of certain issues with the Central Bank's
Board of Directors.

Human Resources

During the first quarter, the Bank contracted the
Hay Group Inc., an independent consulting firm,
to audit the proposed Performance Management
System that was developed by the Human Resources
Unit and the Committee of Managers to improve
the measurement and reward of employee
performance. The new system of meritocracy aims
to increase the level of staff feedback and the overall
objectivity of the performance appraisal process.
In November, the Central Bank also embarked on
an Organizational Review aimed at improving
operational processes and information flow as well
as strengthening the Bank's operations.

After a series of meetings, a new Collective
Agreement between the Central Bank and the
Christian Workers Union was signed upon the
conclusion of negotiations in August 2005. The
agreement was made retroactive to 1January, 2005.

At the Annual Employee Recognition
Ceremony, the Central Bank honoured
employees with ten, fifteen and twenty years of
service. The "Governor's Choice" award, which

200 ANNUAL REPORT

CENTRAL BANK OF BELIZE

consists of a scholarship to the University of
Belize, was presented to Miss Sherrette Fuller, a
Senior Clerical Officer in the Research
Department on the basis of her proven
dedication to the job, longevity of service and
exemplary performance.

In continuing its collaboration with the HIV/
AIDS Workers Education Project launched by
the Government of Belize in partnership with
the International Labour Organization (ILO)
and the United States Department of Labor
(USDOL), the Central Bank celebrated World
Aids Day under the Theme "Stop Aids Keep
the Promise" by distributing the symbolic red
ribbons, flyers and electronic information.

Staffing

At 31 December, 2005, the Central Bank's staff
totaled 142, of which 109 were established
positions. Thirty-one staff members were on
contract and 2 were employed on a temporary basis.
The staff turnover rate increased from 5.0% to 6.0%
with 8 separations occurring and 6 new positions
being created.

Staff Development & Training

As in 2004, focus remained on developing technical
and administrative skills Bank wide. International
courses and workshops were attended by some
staff at the managerial and professional levels. In
addition a series of in-house training seminars were
conducted to enhance management, supervisory,

accounting and information technology
proficiency. Staff members who took the
initiative for further self-development to
enhance job performance also received the
support and encouragement of the Bank.

Community Service

In support of the University of Belize's Internship
Programme, two students were employed to meet
core requirements for graduation. In addition, one
student from the Centre for Employment Training
interned with the Bank's Building Services Unit to
fulfill his vocational course requirements. Also, ten
senior secondary school students did work-study
for an average of two weeks and a nine-week
Summer Employment Programme provided
opportunity for eight students enrolled at a tertiary
level institution to receive wages and develop
practical skills.

Staff members and the Central Bank continued to
support other social projects duringthe year through
contributions to the SalvationArmy'sAnnualChristmas
Appeal, and the Be/ize CancerSociey.

Intra-Regional Games

In April 2005, sixteen members of staff went to
Trinidad & Tobago for the Sixth Intra-Regional
Games which are held biennially with a view to
building relationships and camaraderie among the
central banks of the region. The Bank's contingent
won the Goodwill Award for participation,
sportsmanship and congeniality and also placed
second and third in volleyball and basketball,
respectively.

APPENDICES

A. Monetary Policy Developments

1998 (1 November) Commercial banks' liquid asset and cash reserve ratios were lowered from 26% to
24% and from 7% to 5%, respectively. The Central Bank also authorized the inclusion of new loans
for residential construction (up to 5% of deposit liabilities) as part of commercial banks approved
liquid assets.

2000 (3 April) Commercial banks' cash reserve requirement on savings and time deposits was lowered
from 5.0% to 3.0%. New commercial bank loans for non-traditional, export-oriented enterprises
became classifiable as approved liquid assets.

2002 (2 January) Amendments to the Exchange Control Regulations that allowed the licensing and
operations of Casas de Cambios became effective.
(1 October) The Offshore Banking Act was amended to enable domestic companies with EPZ and
CFZ status to conduct banking transactions with offshore banks licensed in Belize. The Act was
also renamed "The International Banking Act".
(28 September) Commercial banks' cash reserve requirements were raised from 3.0% to 5.0% on
average savings and time deposit liabilities and from 5.0% to 7.0% on average demand deposit
liabilities.
(1November) The cash reserve requirements on demand, savings and time deposit liabilities were
harmonized at 6.0%.

2004 (29 January) The Export Processing Zone Act was amended to disallow the use of Belize currency
within an EPZ, require that all transactions be conducted in US dollars and specify that EPZ's are
subject to the Exchange Control Regulations.
(1 April) The Central Bank disallowed the inclusion of residential construction loans as part of
commercial banks' approved liquid assets, a move that coincided with the reduction of the liquid
asset ratio from 24% to 19%.
(1 November) The International Banking Act was amended to eliminate the co-mingling of resident
and non-resident deposits in domestic banks. The Central Bank decreed that commercial banks'
loans from affiliates must not exceed 10% of domestic deposit liabilities.
(1December) Commercial banks' cash and liquid asset ratios were increased from 6% to 7% and
from 19% to 20%, respectively.

2005 (1 May) Commercial banks' cash and liquid asset ratios were raised from 7% to 8% and from 20%
to 21% respectively.
(1 May) The Central Bank disallowed the inclusion of long-term loans to Central Government as
part of the commercial banks' approved liquid assets.
(11 July) Amendment to the Exchange Controls Regulations to repeal the licensing
of Casas de Cambios.
(1 July) Commencement of the new Commercial Free Zone Act to make new and better provisions
with respect to free zones.
(1 December) Commencement of the amendment of the Credit Unions Act to provide for the
supervision of credit unions by the Central Bank.

2005AN NUA L REPORT
CENTRAL BANK OF BELIZE ANNUAL REPORT

B. Statistical Appendix

Table 1: Gross Domestic Product (GDP) by Industrial Origin at Current Prices

$mn

Primary Industries 237.9 245.6 292.7 310.1 279.8
Agriculture & forestry 168.8 173.1 185.5 206.8 197.5
Fishing 59.7 63.5 98.0 93.5 72.1
Mining 9.4 9.0 9.2 9.8 10.3
Secondary Industries 299.5 306.8 288.7 312.0 326.7
Manufacturing 154.5 154.1 153.7 164.9 173.1
Electricity & Water 61.3 64.1 59.7 64.7 70.9
Construction 83.7 88.6 75.3 82.4 82.8
Tertiary Industries 1,024.1 1,122.6 1,212.7 1,293.9 1,404.2
Wholesale & retail trade 288.4 301.8 305.1 304.7 329.7
Hotels & restaurants 66.8 68.4 83.6 97.5 103.5
Transport & Communications 165.5 199.1 204.5 225.5 246.7
Finance intermediation 111.7 133.3 163.7 173.1 188.2
Real estate & business services 112.1 124.9 129.3 141.5 160.3
Community, social & other services 105.4 107.4 120.4 136.7 146.0
General government services 174.1 187.7 206.2 214.9 229.6
Less: Financial Services Indirectly Measured 55.7 74.4 91.3 94.6 101.7
All Industries at basic prices 1,505.8 1,600.6 1,702.8 1,821.5 1,909.0
Taxes less subsidies on products 236.9 263.7 272.4 289.0 300.9
GDP at market prices 1,742.7 1,864.3 1,975.2 2,110.4 2,209.9
Source: Central Statistical Office

Table 2: Percentage Share of GDP by Industrial Sector at Current Prices *
Percent

Primary Industries 13.7 13.2 14.8 14.7 12.7
Agriculture & forestry 9.7 9.3 9.4 9.8 8.9
Fishing 3.4 3.4 5.0 4.4 3.3
Mining 0.5 0.5 0.5 0.5 0.5
Secondary Industries 17.2 16.5 14.6 14.8 14.8
Manufacturing 8.9 8.3 7.8 7.8 7.8
Electricity & Water 3.5 3.4 3.0 3.1 3.2
Construction 4.8 4.8 3.8 3.9 3.7
Tertiary Industries 58.8 60.2 61.4 61.3 63.5
Wholesale & retail trade 16.6 16.2 15.4 14.4 14.9
Hotels & restaurants 3.8 3.7 4.2 4.6 4.7
Transport & Communications 9.5 10.7 10.4 10.7 11.2
Finance intermediation 6.4 7.2 8.3 8.2 8.5
Real estate & business services 6.4 6.7 6.5 6.7 7.3
Community, social & other services 6.0 5.8 6.1 6.5 6.6
General government services 10.0 10.1 10.4 10.2 10.4
Less: Financial Services Indirectly Measured 3.2 4.0 4.6 4.5 4.6
All Industries at basic prices 86.4 85.9 86.2 86.3 86.4
Taxes less subsidies on products 13.6 14.1 13.8 13.7 13.6
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

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

Primary Industries 252.2 252.9 348.0 380.7 388.5
Agriculture & forestry 178.0 183.9 212.4 237.6 236.0
Fishing 64.9 60.3 126.8 133.8 143.0
Mining 9.3 8.8 8.8 9.3 9.5
Secondary Industries 299.3 306.3 295.0 316.7 314.0
Manufacturing 156.7 159.0 158.2 177.7 178.0
Electricity & Water 58.6 60.2 65.3 64.3 63.9
Construction 83.9 87.0 71.5 74.7 72.2
Tertiary Industries 1,006.4 1,086.4 1,175.2 1,213.7 1,290.2
Wholesale & retail trade 290.2 301.8 306.0 305.9 323.0
Hotels & restaurants 66.4 68.0 77.9 84.0 87.4
Transport & Communications 158.5 176.4 191.5 201.1 216.7
Finance intermediation 103.8 131.1 172.5 181.8 205.3
Real estate & business services 110.9 121.7 123.0 129.9 142.3
Community, social & other services 102.2 106.2 111.5 115.8 117.8
General government services 174.4 181.2 192.7 195.3 197.7
Less: Financial Services Indirectly Measured 52.1 73.4 97.3 101.3 113.9
All Industries at basic prices 1,505.7 1,572.3 1,720.9 1,809.8 1,878.9
Taxes less subsidies on products 240.0 262.4 285.0 289.0 288.6
GDP at market prices 1,745.7 1,834.6 2,005.9 2,098.8 2,167.5
Source: Central Statistical Office

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

Primary Industries -0.3 0.3 37.6 9.4 2.1
Agriculture & forestry -2.0 3.3 15.5 11.9 -0.7
Fishing 4.3 -7.0 110.3 5.5 6.9
Mining 3.4 -5.7 0.5 4.9 2.5
Secondary Industries 0.1 2.4 -3.7 7.4 -0.9
Manufacturing -0.6 1.5 -0.5 12.3 0.1
Electricity & Water 0.4 2.7 8.4 -1.5 -0.6
Construction 1.3 3.7 -17.9 4.6 -3.4
Tertiary Industries 7.2 8.0 8.2 3.3 6.3
Wholesale & retail trade 7.3 4.0 1.4 0.0 5.6
Hotels & restaurants 13.5 2.5 14.5 7.8 4.1
Transport & Communications 11.8 11.3 8.6 5.0 7.8
Finance intermediation -0.2 26.4 31.5 5.4 12.9
Real estate & business services 13.0 9.7 1.1 5.6 9.6
Community, social & other services 1.5 3.9 5.0 3.9 1.7
General government services 5.8 3.9 6.3 1.3 1.3
Less: Financial Services Indirectly Measured 48.0 40.8 32.6 4.1 12.4
All Industries at basic prices 3.5 4.4 9.4 5.2 3.8
Taxes less subsidies on products 15.1 9.3 8.6 1.4 -0.2
GDP at market prices 4.9 5.1 9.3 4.6 3.3
Source: Central Statistical Office
* Figures in Table 3 may not reflect these percentages due to rounding

2005ANNUA L REPORT
CENTRAL BANK OF BELIZE ANNUAL REPORT

Table 5: GDP by Expenditure in Current Prices

GDP in $mn
GoVt. final consumption expenditure 228.3 266.8 289.6 295.4 318.7
Private final consumption expenditure 1,361.2 1,463.6 1,528.8 1,584.1 1,587.5
Gross capital formation 438.4 421.5 374.8 373.2 414.8
Changes in inventories including discrepancy -6.2 23.0 31.1 40.4 16.3
Gross Domestic Expenditure 2,021.8 2,175.0 2,224.3 2,293.2 2,337.3
Exports: goods & services 887.0 980.3 1,053.5 1,069.9 1,222.9
Imports: goods & services 1,204.9 1,233.4 1,306.0 1,238.0 1,388.7
Net Exports -317.9 -253.0 -252.6 -168.0 -165.8
Discrepancy 38.9 -57.7 3.4 -14.7 38.5
GDP market prices 1,742.7 1,864.3 1,975.2 2,110.4 2,209.9

Percent Distribution of GDP
GoVt. final consumption expenditure 13.1 14.3 14.7 14.0 14.4
Private final consumption expenditure 78.1 78.5 77.4 75.1 71.8
Gross capital formation 25.2 22.6 19.0 17.7 18.8
Exports: goods & services 50.9 52.6 53.3 50.7 55.3
Imports: goods & services 69.1 66.2 66.1 58.7 62.8
Net Exports -18.2 -13.6 -12.8 -8.0 -7.5
GDP market prices 100.0 100.0 100.0 100.0 100.0
Source: Central Statistical Office

Table 6: GDP by Expenditure in Constant 2000 Prices

GDP in $mn
GoVt. final consumption expenditure 227.9 257.8 271.5 269.0 276.7
Private final consumption expenditure 1,350.7 1,441.3 1,487.3 1,485.1 1,453.0
Gross capital formation 447.2 423.3 364.0 344.4 372.6
Changes in inventories including discrepancy -6.3 19.7 31.1 46.9 16.7
Gross Domestic Expenditure 2,019.5 2,142.1 2,153.9 2,145.4 2,119.0
Exports: goods & services 916.7 996.1 1,125.8 1,171.9 1,319.9
Imports: goods & services 1,216.2 1,248.1 1,274.5 1,179.4 1,252.0
Net Exports -299.6 -252.0 -148.7 -7.6 67.9
Discrepancy 25.7 -55.5 0.7 -39.0 -19.4
GDP market prices 1,745.7 1,834.6 2,005.9 2,098.8 2,167.5

Percent Distribution of GDP
GoVt. final consumption expenditure 13.1 14.1 13.5 12.8 12.8
Private final consumption expenditure 77.4 78.6 74.1 70.8 67.0
Gross capital formation 25.6 23.1 18.1 16.4 17.2
Exports: goods & services 52.5 54.3 56.1 55.8 60.9
Imports: goods & services 69.7 68.0 63.5 56.2 57.8
Net Exports -17.2 -13.7 -7.4 -0.4 3.1
GDP market prices 100.0 100.0 100.0 100.0 100.0
Source: Central Statistical Office

Table 7: Sectoral Composition of Commercial Banks' Loans and Advances
$mn

PRIMARY SECTOR 135.7 145.1 141.7 -3.4
Agriculture 87.7 96.2 95.9 -0.3
Sugar 8.8 9.9 9.5 -0.4
Citrus 22.1 19.0 16.0 -3.0
Bananas 45.2 52.9 58.0 5.1
Other 11.6 14.4 12.4 -2.0
Marine Products 26.5 25.1 19.6 -5.5
Forestry 3.7 1.8 1.7 -0.1
Mining & Exploration 17.8 22.0 24.5 2.5

SECONDARY SECTOR 277.7 339.2 344.5 5.3
Manufacturing 12.6 14.9 19.2 4.3
Building & Construction 232.5 258.7 263.7 5.0
Utilities 32.6 65.6 61.6 -4.0

TERTIARY SECTOR 419.9 494.6 509.5 14.9
Transport 38.4 38.7 33.3 -5.4
Tourism 73.1 84.5 71 .5 -13.0
Distribution 162.4 165.2 157.6 -7.6
Other* 146.0 206.2 247.1 40.9

Personal Loans 208.4 197.1 259.0 61.9
TOTAL 1,041.7 1,176.0 1,254.7 78.7
Includes government services, real estate, financial institutions,
professional services, and entertainment

Table 8: Commercial Banks' Weighted Average Interest Rates

Percentages

Weighted Lending Rates

Personal Loans 15.8 15.5 16.0 0.5

Commercial Loans 13.9 14.0 14.2 0.2

Residential Construction 12.4 12.6 13.1 0.5

Other 10.6 10.1 12.2 2.1

Weighted Average 14.2 14.0 14.3 0.3

Weighted Deposit Rates

Demand 0.4 0.5 0.7 0.2

Savings/Cheque 5.1 5.1 5.3 0.2

Savings 5.1 5.1 5.2 0.1

Time 7.2 7.6 7.8 0.2

Weighted Average 4.9 5.2 5.4 0.2

Weighted Average Spread 9.3 8.8 8.9 0.1

Table 9: Balance Of Payments Summary

$mn

CURRENT ACCOUNT -352.8 -299.7 -303.2
Goods: Exports f.o.b. 631.0 612.3 636.7
Goods: Imports f.o.b. 1,044.7 -961.4 1,112.4
Trade Balance -413.7 -349.1 -475.7
Services: Credit 424.3 470.6 602.7
Transportation 44.3 54.8 59.4
Travel* 299.4 336.1 427.3
Other Goods & Services 48.4 56.0 80.4
Gov't Goods & Services 32.2 23.8 35.6
Services: Debit -284.9 -297.1 -319.8
Transportation -79.4 -89.2 -100.2
Travel -91.7 -85.2 -83.3
Other Goods & Services -95.6 -106.4 -121.1
Gov't Goods & Services -18.3 -16.3 -15.2
Balance on Goods & Services -274.3 -175.6 -192.8
Income: Credit 9.1 8.7 13.6
Compensation of Employees 5.0 4.9 7.5
Investment Income 4.2 3.8 6.0
Income: Debit -179.4 -235.7 -236.0
Compensation of Employees -10.9 -12.4 -11.7
Investment Income -168.5 -223.3 -224.3
Balances on Goods, Services & Income -444.6 -402.6 -415.3
Current Transfers, n.i.e.: Credit 122.1 128.2 141.9
Current Transfers: Debit -30.4 -25.4 -29.8
CAPITAL ACCOUNT, n.i.e. 3.0 8.5 2.2
Capital Account, n.i.e.: Credit 4.9 10.0 4.2
Capital Account: Debit -1.8 -1.5 -2.0
FINANCIAL ACCOUNT, n.i.e. 346.0 211.9 312.5
Direct Investment Abroad -0.7 -0.1 -2.0
Direct Investment in Belize, n.i.e. -21.8 205.8 215.5
Portfolio Investment Assets -0.3 -0.5 -0.4
Portfolio Investment Liabilities, n.i.e. 151.1 151.3 34.2
Financial Derivatives Assets 1.4 1.1 0.5
Financial Derivatives Liabilities 0.0 0.0 -11.1
Other Investment Assets -26.6 -14.8 -23.2
Other Investment Liabilities 243.0 -131.0 98.9
NET ERRORS & OMISSIONS -56.4 16.7 24.5
OVERALL BALANCE -60.1 -62.7 36.0
RESERVE ASSETS (Minus = increase) 60.1 62.7 -36.0
*The method of measuring tourim earnings in 2005 was changed from using estimates
based on the revised 2000 VEMS survey to actual inflows into the banking system.

CENTRAL BANK OF BELIZE

2005ANNUAL REPORT

Table 10: Gross Imports (CIF) by SITC Categories
($"000)
-- le e S =,.tm -iIil -iIil liIii iIil i,

0 Food and Live Animals 118.8 107.8 118.7
1 Beverages and Tobacco 7.7 8.3 8.9
2 Crude Materials 11.6 7.5 6.7
3 Fuels and Lubricants 159.7 139.3 161.2
Of which electricity 16.9 23.8 28.4
4 Animal and Vegetable Oils 3.2 3.1 3.3
5 Chemicals 71.7 85.0 82.7
6 Manufactured Goods 136.2 128.2 128.7
7 Machinery and Transport Equipment 230.5 208.5 203.7
8 Miscellaneous Manufactured Goods 75.9 80.5 103.2
9 Commodities not classified elsewhere 0.4 0.2 0.9
Export Processing Zones 87.0 79.9 130.7

Personal Goods
Total
CFZ Direct Imports
Grand Total
Sources: Central Statistical Office; Central Bank

4.3

3.2

3.4

906.8 851.5 952.1
114.5 132.0 221.3

1,021.3

983.5

1,173.3

Table 11: Central Government's Domestic Debt
$'000

Overdraft 91,987 0 0 8,943 4,330 96,317
Central Bank 82,498 0 0 8,943 7,144 89,642
Commercial Banks 9,489 0 0 0 -2,814 6,675

Treasury Bills 100,000 0 0 2,597 0 100,000
Central Bank 72,637 0 0 1,666 548 73,185
Commercial Banks 24,847 0 0 805 -1,007 23,840
Other 2,516 0 0 126 459 2,975

Treasury Notes 24,000 0 0 2,442 0 24,000
Central Bank 158 0 0 87 8,842 9,000
Commercial Banks 23,269 0 0 2,300 -9,000 14,269
Other 573 0 0 55 158 731

Defence Bonds 15,000 0 0 1,250 0 15,000
Central Bank 10,000 0 0 836 0 10,000
Commercial Banks 100 0 0 2 0 100
Other 4,900 0 0 412 0 4,900

Loans 47,621 831 4,305 3,560 0 44,147
DFC (Debt Restructuring) 7,934 0 536 580 0 7,398
BSSB (Housing) 678 0 16 53 0 662
GOB/US Debt Swap 11,309 0 1,169 308 0 10,140
Cohune Walk Loan Bze Bank 2,700 0 297 389 0 2,403
BBL (Infrastructure dev) 24,000 0 2,155 2,120 0 21,845
Guardian Life Bze 1,000 0 0 90 0 1,000
Atlantic Bank Airstrip Loan 0 831 132 20 0 699

TOTAL 278,608 831 4,305 18,792 4,330 279,464
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

109.2
9.8
7.3
184.3
29.7
3.2
76.3
136.8
175.9
81.8
0.0
113.8
2.6
930.8
156.6
1,087.4

120.7
17.4
9.1
236.0
40.3
3.2
88.7
138.9
199.8
101.1
0.0
124.7
2.7
1,042.4
183.8
1,226.2

I

I

2005ANNUAL REPORT
CENTRAL BANK OF BELIZE ANNUAL REPORT

Table 12: Government of Belize Revenue and Expenditure
$'000

TOTAL REVENUE & GRANTS (1+2+3) 482,490 567,088 453,406 523,639 531,910
1).Current revenue 456,222 539,241 422,190 461,993 511,440
Tax revenue 416,017 494,189 370,231 419,308 458,028
Income and profits 99,811 135,579 86,282 99,715 120,292
Taxes on property 4,535 9,506 2,423 3,810 5,980
Taxes on goods and services 140,997 146,159 118,657 145,534 158,375
Int'l trade and transactions 170,674 202,945 162,869 170,249 173,380

Non-Tax Revenue 40,205 45,052 51,959 42,685 53,413
Property income 5,419 3,600 2,274 6,419 8,738
Licenses 10,333 12,343 0 9,866 11,842
Transfers from NFPE's 15,072 20,472 0 16,664 19,308
Repayment of old loans 793 653 18,541 893 3,900
Rent & Royalties 8,589 7,984 31,144 8,843 9,624

2). Capital revenue 11,405 3,500 24,829 26,478 6,390
3). Grants & Debt Service Receipts 14,863 24,347 6,387 35,168 14,079

TOTAL EXPENDITURE (1+2) 684,012 634,094 669,446 648,898 673,827
1). Current Expenditure 532,994 500,751 393,048 467,985 556,187
Wages and Salaries 212,643 235,600 186,672 207,925 221,254
Pensions 32,280 36,425 26,682 31,087 39,754
Goods and Services 78,526 75,027 74,406 75,184 89,908
Interest& Other Payments 175,868 118,340 77,403 121,489 170,262
Subsidies & current transfers 33,677 35,359 27,885 32,300 35,009

2). Capital Expenditure 151,018 133,343 276,398 180,913 117,640
Capital II (local sources) 51,069 75,132 89,627 59,659 50,045
Capital III (foreign sources) 94,949 58,211 99,142 87,754 55,323
of which Hurricane ERF 0 0 2,454 0 0
Capital Transfer & Net Lending 0 0 49,175 0 7,272
Unidentified Expenditure 5,000 0 36,000 33,500 5,000

CURRENT BALANCE -76,773 38,490 29,142 -5,992 -44,747
OVERALL BALANCE -201,523 -67,006 -216,040 -125,259 -141,917

PRIMARY BALANCE -25,655 -138,637 -3,770 28,345

FINANCING 201,523 0 213,586 125,259 141,917
Net Privatization Proceeds 29,000 -104,000 -10,000 44,391

Domestic Financing -306,772 -62,396 -39,351 -24,116
Central Bank -165,926 76,290 74,574 144
Net Borrowing -9,216 101,739 -399 26,990
Change in Deposits -156,710 -25,449 74,973 -26,846
Commercial Banks -9,458 -1,599 18,776 -20,414
Net Borrowing 25,232 -8,002 26,564 -14,217
Change in Deposits -34,690 6,403 -7,788 -6,197
Transaction with DFC (debt) -130,000 -127,998 -130,000 0
Other Domestic Financing -1,388 -9,089 -2,701 -3,846

Financing Abroad 457,355 380,712 174,862 122,075
Disbursements 706,240 499,488 432,916 427,856
Amortization -247,735 -100,876 -248,054 -295,765
Interest & Penanties prepaymt 0 0 0 0
Sinking Fund & JCF -1,150 -17,900 -10,000 -10,016

Other 21,940 -730 -252 -433
Sources Ministry of Finance, Central Bank of Belize

Table 13: Public Sector External Debt by Creditors
$'000

CENTRAL GOVERNMENT 1,624,433 427,856 295,765 130,883 -3,765 1,763,607
Banco Nacional de Comercio Exterior 8,999 0 0 546 0 8,999
Fondo de Financ. de las Exportaciones 980 0 218 56 0 762
Government of Great Britain 12,359 0 3,429 0 -1,158 7,772
Government of Peoples Rep. of China 116 0 58 0 0 58
Government of the United States* 7,793 0 1,418 280 0 6,375
Government of Trinidad and Tobago 24 0 4 1 0 20
Kuwait Fund for Arab Economic Dev 20,581 0 1,157 1,071 207 19,631
Republic of China 198,590 62,044 14,558 10,122 0 246,076
Caribbean Development Bank 84,441 18,257 2,884 3,597 0 99,814
European Economic Community 19,889 0 681 123 -2,571 16,637
European Investment Bank 1,052 0 167 19 -134 752
Inter-American Development Bank 140,831 6,196 5,014 5,885 0 142,013
International Fund for Agric. Dev. 2,065 736 683 81 -115 2,003
Intl. Bank for Reconstruction & Dev. 67,672 1,498 6,552 2,569 6 62,625
Opec Fund for Int'l. Development 7,833 0 633 382 0 7,199
Allfirst Bank of Maryland 2,940 0 840 157 0 2,100
Belize Bank Ltd. 0 12,668 0 0 0 12,668
Bear Stearns & CO. Inc. 450,000 273,366 14,294 50,427 0 709,072
BWS Finance Limited 0 19,844 0 0 0 19,844
Russer Financial Ltd. 0 10,000 0 0 0 10,000
Ctibank, Trinidad & Tobago" 12,000 0 14,277 1,101 0 8,571
Qticorp Merchant Bank Ltd. 48,571 0 2,857 4407 0 45,714
CMFS Note Holders 157,910 0 157,910 9,938 0 0
International Bank of Miami" 97,869 3,868 0 10,351 0 101,737
KBC Bank NV 5,607 0 1,869 286 0 3,738
Manufacturers & Traders Trust Co. 0 7,056 0 225 0 7,056
Provident Bank & Trust of Belize 260 0 143 21 0 117
Royal Merchant Bank 214,523 12,322 5,955 26,161 0 220,891
Salomon Smith Barney 58,200 0 58,200 2,692 0 0
Belize Estate and Co. Ltd. 1,628 0 1,302 313 0 326
Caterpillar Financial Services Corp. 1,326 0 475 52 0 850
Export Import Bank of the United States 373 0 187 23 0 187

NON-FINANCIAL PUBIUC SECTOR 12,125 0 2,822 1,128 88 46,331
Kuwait Fund for Arab Economic Dev 8,141 0 697 328 88 7,532
CIBC Bank & Trust Company 3,984 0 1,646 418 0 2,338
Amtrade International Bank of Georgia 0 0 0 0 0 2,060
Caribbean Development Bank 0 0 479 382 0 34,401

FINANCIAL PUBUC SECTOR 64,780 0 8,425 2,387 -1,149 55,205
Caribbean Development Bank 43,343 0 3,647 1,738 -15 39,681
European Economic Community 640 0 34 5 -71 535
European Investment Bank 11,432 0 612 320 -1,063 9,757
Ctibank, Trinidad & Tobago 1,250 0 1,250 27 0 0
Qticorp Merchant Bank Ltd. 1,250 0 1,250 27 0 0
Paine Webber Real Estate Securities Inc 1,900 0 100 31 0 1,800
N.V. De Smet S.A Engineers 2,825 0 1,130 177 0 1,695
Government of the United States 2,140 0 403 61 0 1,737
GRAND TOTAL 1,701,338 427,856 307,013 134,397 4,826 1,865,143
Bfective 31st Decerrber, 2002 BPA Loans of EB $23.8 rm were re-classified as private sector debt as a result of its full privatization.
Outstanding external debt of private entities remained as a contingent liability of Central Government.
* USAID Dbt for Nature Swap Agreement as at 2nd August, 2001 was implemented on 30th November, 2001 for BZ $17,168
"Yen Swap conversion loss of $10.8rm was categorized as arrortization in GOBs accounts in June 2005.
-H++incipal payments of BZ$190.7rm was part of a reprofiling arrangement with TIBOM Loans that formed part of the package were
US $50mn due in November 04, US$30mn due in Dec 04 and US$15.3mn due in Jan 05.

73

FINANCIAL STATEMENTS

CENTRAL BANK OF BELIZE

2005 Financial Statements

CONTENTS

Auditors' report

Balance sheet

Statement of income

Statement of changes in equity

Statement of cash flows

Notes to the financial statements

PAGE

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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 2005. and
the related statements of income, cash flows and changes in shareholders' equity for the year then ended.
These financial statements are the responsibility of the Bank's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing. 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 2005, and of the results of its operations and its cash flows for the year then
ended in accordance with International Financial Reporting Standards.

16 February 2006

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Page 2
CENTRAL BANK OF BELIZE
BALANCE SHEET
At 31 December 2005
In Belize dollars.

Assets

Notes

2005

2004

APPROVED EXTERNAL ASSETS

Balances and deposits with foreign bankers
and Crown Agents
Reserve Tranche and balances with the
International Monetary Fund
Other foreign credit instruments
Accrued interest and cash intransit
Marketable securities issued or guaranteed by foreign
government and international financial institutions.

BELIZE GOVERNMENT SECURITIES

BELIZE GOVERNMENT CURRENT ACCOUNT

LOANS TO PUBLIC SECTOR

BALANCES WITH LOCAL BANKERS AND CASH
ON HAND

OTHER ASSETS

PROPERTY AND EQUIPMENT

63,882,197 31,821,054

17,087,886
20,800,000
11,401,682

18.195,786
13.220,000
11.242.717

2.000,000 2.000,000

3b 115,171,765 76.479.557

92,184,594 82.795.204

88,536,782 80,659,575

27,521,712 32,521,712

68,795 84.329

8,496,711 6.799,470

30,633,963 31.142.567

362,614,322 310,482.414

2f, 12

TOTAL ASSETS

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

CENTRAL BANK OF BELIZE
BALANCE SHEET
At 31 December 2005 (Continued)
In Belize dollars.

LIABILITIES, CAPITAL AND RESERVES

DEMAND LIABILITIES
Notes and coins in circulation
Deposits by licensed financial institutions
Deposits by and balances due to Government and public
sector entities in Belize
Deposits by international agencies

BALANCES DUE TO CARICOM CENTRAL BANKS

OTHER LIABILITIES

COMMERCIAL BANK DISCOUNT FUND

GOVERNMENT SINKING FUND

BELIZE CREDIT FACILITY

LOANS PAYABLE TO FOREIGN INSTITUTIONS

TOTAL LIABILITIES

REVALUATION ACCOUNT

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

GENERAL RESERVE FUND

TOTAL LIABILITIES, CAPITAL AND RESERVES

Page 3

NOTES

2005

2004

143,089,348 141,949,684
13 112,341,444 87,893,652

73,416,067 13,746.883
14 2,440,333 2,703,774

331,287,192 246,293,993
295.942 87,918

15 3,184.518 3.981,698

16 1,480,663 1,656,124

17 20,210,971

18 8.653.769

19 2,500,000

336,248,315 283.384.473

2i,20 2,081.924 3.658.886

10,000,000 10,000,000

14,284,083

362,614,322

13.439.055

310,482,414

GOVERNOR

DIRECTOR

DEPUTY GOVERNOR

The accompanying notes form an integral part of this financial statement.

Page 4
CENTRAL BANK OF BELIZE
STATEMENT OF INCOME
For the year ended 31 December 2005
In Belize dollars.

INCOME
Interest
Approved external assets
Advances to government
Local securities
Loans to statutory bodies

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

NET PROFIT
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

NOTES

2005

5.019.698
9,497.530
954.282
697,900

2004

2.953.341
8,560,116
800,825
2,751.986

16,169.410 15.066,268
2,100.659 2.383.557
1,481.748 2,075.290

19,751,817 19.525.115

(832.743) (3.774.953)
18,919,074 15.750.162

(1,361,288) (1.248.113)

(5,698,289) (5,153.161)
(860,755) (881.583)
(2,548,460) (2.535.818)

(10.468.792) (9.818.675)

8.450,282 5.931.487

8,450,282 5.931.487

(845.028) (593.149)

7.605,254 5.338.338

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

Page 5
CENTRAL BANK OF BELIZE
STATEMENT OF CHANGES IN EQUITY
At 31 December 2005

In Belize dollars.

Share Revaluation General
Capital Reserve Reserve

Accumulated
Profits

At 1 January 2004
Net profit
Gain on revaluation
Transfer to Government of Belize
Transfer to General Reserve Fund

At 31 December 2004
Net profit
Loss on revaluation
Transfer to Government of Belize
Transfer to General Reserve Fund
At 31 December 2005

10,000,000

-

2,872.621

786.265

12,845,906
5.931,487

(5,338.338)
593.149 (593.149)

10,000,000 3.658.886 13,439.055
8.450,282
(1,576,962)
(7.605,254)
845.028 (845.028)
10,000.000 2.081,924 14,284.083

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 2005
In Belize dollars.

2005

CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit transferred to the general reserve fund
Adjustment to reconcile net profit to net cash provided by
operating activities:
Amortization
Depreciation
Loss/(gain) on disposal
Changes in assets and liabilities that provided (used) cash:
Other assets
Other liabilities
Revaluation account

Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Belize Government current account
Loans to public sector/commercial bank
Acquisition of property and equipment
Proceeds from sale of assets
Reserve tranche in the IMF

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 Governments 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 repayment made to foreign institutions

Net cash (used in) provided by financing activities

845.028

57,815
860,755
16.327

(1,755,056)
(797,180)
(1.576,962)

2004

593.149

57,815
881,583
(10.649)

(1.026.625)
(3,260.265)
786,265

(2,349,273) (1.978.727)

(7,877,207) (8.214.793)
5,000,000 (17.397.626)
(412.204) (229,207)
43,726 11,000
1,043,772 (565,496)

(2,201,913) (26,396,122)

1.139,664 14.322,725
24,447.792 12.821,925

59,669,184 (41,806,124)
(20.210,971) (33.999,099)
(263.441) (2.265.335)
208,025 (732,214)
(175,461) (159.519)
(8,653,769) 692,610
(2.500,000) (5,000.000)

53,661,023 (56.125,031)

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

CENTRAL BANK OF BELIZE
STATEMENT OF CASH FLOWS
For the year ended 31 DECEMBER 2005 (Continued)

In Belize dollars.

NET DECREASE 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 Bills
Government of Belize Treasury Notes

49,109,837 (84,499,880)

136,259,139 220,759.019

185,368,976 136,259.139

65,882,197 33,821,054
20,800,000 13,220.000
11,401,682 11,242.717
5,031,708 5,095,835

103,115,587 63,379.606

68,795 84,329
73,184,594 72.637.204
9,000.000 158.000
185,368,976 136.259.139

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

Page 7

2005

2004

Page 8
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS
In Belize dollars.

1. GENERAL INFORMATION

The Central Bank of Belize, (the "Bank"), was established by the Central Bank of Belize Act
1982 (the Act) and has its principal place of business in Belize City. Belize.

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 Financial Reporting Standards
adopted by the International Accounting Standards Board and the Central Bank of Belize Act.

a. Measurement base

The financial statements are prepared on the historical cost basis, modified by the revaluation of
certain assets and liabilities as identified in specific accounting policies below.

b. Revenue and expenses

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
Bank and the revenue can be reliably measured. Expenses are recognized in the income statement
on the basis of a direct association between the cost incurred and the earning of specific items of
income. All expenditure incurred in the running of the business and in maintaining the Property.
Plant and Equipment in a state of efficiency has been charged to income in arriving at the profit
for the year.

Interest income and expense are recognized in the income statement for all interest bearing
instruments on an accrual basis using the effective yield method based on the actual purchase
price. Interest income includes coupons earned on fixed income investment and trading securities
and accrued discount and premium on treasury bills and other discounted instruments. Interest
income is suspended when loans become doubtful of collection. Such income is excluded from
interest income until received.

Miscellaneous income and expenses are recognized on an accrual basis.

c. Inventories

Inventories are carried at lower of cost or realizable value. Cost is determined on a First in First
Out basis.

Page 9
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS
In Belize dollars.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

d. Changes in accounting policies

There have been no changes in accounting policies during the year. All policies have been
applied on a basis consistent with the prior year.

e. Financial instruments

Financial assets and financial liabilities are recognized on the Bank's balance sheet when the
Bank becomes a party to the contractual provisions of the instrument.

International Monetary Fund balances

The Bank transacts with the International Monetary Fund (IMF) in its own right rather than as an
agent for the Government of Belize. All transactions by the Bank with the IMF have been
included in these financial statements on that basis.

Quota with the IMF is recorded by the Bank as an asset. Exchange gains and losses arising on
revaluation of IMF assets at the exchange rate applying at balance date as published by the IMF
are recognized in the Revaluation account in accordance with section 49 of the Act.

Foreign marketable securities

These consist of debentures issued by the Government of Dominica and are recorded in the
balance sheet at cost.

Belize government securities

The Bank's investment portfolio consists of treasury bills, treasury notes and Belize Defense
Bonds purchased from Government of Belize. Treasury bills are carried at amortized cost. All
other investments are carried at cost which approximates market value.

Loans to government

Loans to Government represent direct provisional advances to Government of Belize under
Section 34 of the Central Bank of Belize Act 1982.

Page 10
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS
In Belize dollars.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

e. Financial instruments (continued)

Loans to public sector

Loans to the public sector are carried at the original amount less an allowance for any
uncollectable amounts. A provision for loan impairment is established if there is objective
evidence that the Bank will not be able to collect all amounts due. The amount of the provision
is the difference between the carrying amount and the estimated recoverable amount.

Other financial assets and liabilities

Local and foreign currency cash, deposits and short-term advances are recognized on settlement
date.

f. 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%
Equipment 10%. 20%
Vehicles 20%

Page 11
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS
In Belize dollars.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

g. Employee benefits

Pension

The Bank operates a defined benefit pension scheme for employees. Contributions are made by
the Bank and employees to a separately administered fund. The cost of providing benefits under
this plan is determined using an accrued benefit valuation method.

Gratuity

The Bank is liable to pay gratuity for contract employees who are not eligible for pension
scheme. In order to meet this liability, a provision is carried forward in the balance sheet.
equivalent to an amount calculated on 20% of the annual salary for each completed year of
service, commencing from the first year of service. The resulting difference between the
brought forward provision at the beginning of a year and the carried forward provision at the end
of a year is dealt within the income statement. The gratuity liability is neither funded nor
actually valued. This item is grouped under other liabilities in the Balance Sheet.

h. Sale of special coins

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

Page 12
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS
In Belize dollars.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

i. 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.

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 19) 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.

j. Valuation of securities

Securities are stated at the lower of cost or market value. Realized and unrealized gains and
losses arising from changes in the market value of securities or the par value of the Belize dollar
are transferred to the Revaluation Account.

k. Accrued interest and cash intransit

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

Page 13
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS
In Belize dollars.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

1. 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

m. Certain accounts from prior year have been reclassified to confinn to current year presentation.

3. 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.

At 31 December 2005 and 2004 total approved external assets approximated 35 percent and 31
percent of such liabilities respectively.

4. BALANCES AND DEPOSITS WITH FOREIGN BANKERS

Included in foreign deposits is $61,255,724 of restricted collateral deposits which are held in
designated reserve accounts with Bank of New York and are primarily used to secure payments on
notes payable to international lenders by Government of Belize.

5. INTERNATIONAL 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 up of currency and non-interest bearing promissory
notes.