t CETAL BA0 o BL
ANNUAL REPOoR 2008

Cover Painting: Belize City Habour by Rachael Heusner, 2007

Cover and Layout Design: Rasiel Vellos CBB Research Department

Prepared by: CBB Research Department

Printed by: CBB Reprographic Centre

April 30, 2009

Hon. Dean Barrow
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, 2008, together with
a copy of the Bank's Statement ofAccounts, as certified by the External Auditors.

Yours sincerely,

Glenford Ysaguirre
Governor

CENTRAL BANK OF BELIZE

Twenty-seventh Annual Report
&
Statement of Accounts

For the Year Ending 31 December 2008

Abbreviations and Conventions
used in this Report

BFIA Banks and Financial Institutions
Acts, 1995
BKE Bilateral KeyExchange
BMC Belize Mortgage Company
BPM Balance of Payments Manual
BSI Belize Sugar Industries Limited
BSSB Belize Social Security Board
BTB Belize Tourism Board
BTIA Belize Tourism IndustryAssociation
BWSL Belize Water Services Limited
CARICOM Caribbean Community and Common
Market
CABEI Central American Bank for Economic
Integration
CARTAC Caribbean Regional Technical
Assistance Centre
CBB Central Bank of Belize
CCMS Caribbean Centre for Monetary Studies
CDB Caribbean Development Bank
CEMLA Centre of Monetary Studies for Latin
America
CFZ Corozal Free Zone
CGA Citrus Growers Association
CIF Cost Insurance and Freight
CPI Consumer Price Index
CPBL Citrus Products of Belize Ltd.

CMCF Caricom Multilateral Clearing Facility
CPR Cardiopulmonary Resuscitation
CSDRMS Commonwealth Secretariat Debt
Recording and Management System
DFC Development Finance Corporation
DGBAS The Directorate General of Budget,
Accounting and Statistics
E CCB E astern Caribbean Central Bank
E CLAC Economic Commission for Latin
America and the Caribbean
EIB European Investment Bank
EPZ Export Processing Zone
ERM Enterprise Risk Management
EU/EEC European Union
MEMCIDI Fund of the Inter- American Council
for Integral Development
FOB Free onBoard
FSSD Financial Sector Supervision Department
FY FiscalYear
GDP Gross Domestic Product

GOB
GS T
GOB
GS T
HIPC
IAS
IASB
IBA
IDB/IADB
IFRIC

IFRS
IMF
ITD
ITVET

LDC
NEMO

NFC
NGO
NHI
OE CD

OE CS

OPEC

PGIA
PIC
ps
pps
RECONDE V

ROC
SDR
SIB
SIF
SICA
SITC

UHS
UK
US/USA
VEMS
WTO

Government of Belize
General Sales Tax
Government of Belize
General Sales Tax
Heavily Indebted Poor Countries
International Accounting Standards
International Accounting Standards Board
International Banking Act
Inter-American Development Bank
International Financial Reporting
Interpretations Committee
International Financial Reporting Standards
International Monetary Fund
Information TechnologyDepartment
Institute for Technical and Vocational
Education Training
Less Developed Countries
National Emergency Management
Organization
Not from concentrate
Non Governmental Organization
National Health Insurance
Organisation for Economic
Cooperation and Development
Organisation of Eastern Caribbean
States
Organisation of the Petroleum
Exporting Countries
Phillip Goldson International Airport
Public Investment Company
Pound solid
Per pound solid
Reconstruction and Development
Corporation
Republic of China (Taiwan)
Special Drawing Rights
Statistical Institute of Belize
Social Investment Fund
Sistema de Integracion Centro America
System of International Trade
Classification
Universal Health Services
United Kingdom
United States of America
Visitor Expenditure Motivation Survey
World Trade Organisation

Notes and Conventions:

-- $ refers to the Belize dollar unless otherwise stated
-- mn denotes million
-- bn denotes billion
-- The figures for 2008 in this report are provisional, and the figures for 2007 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

2008 ANNUAL REPORT

Directors and Principals ............................................... ......................... vi

Overview of the Bank .................................................................................. vii
M mission, Goals and Objectives .......................... .... ..................... vii
Organization and Functions ................... ........................................... viii

Econom ic Review ....................................................... ............................. 1
Economic Overview and Economic Prospects ...................................................... .. 1
International and Regional Developments.................................................... 5
Monetary and Financial Developments ..................................................... 14
Domestic Production, Prices and Employment .............................. .......... ...... 19
Foreign Trade and Payments...................................................... 30
Central Government Operations and Public Debt........................ ............ 40

Supervision of Banks, Financial Institutions & Credit Unions ................ 49

O operations ............................................................................................... 53
Foreign Exchange Operations ............................. .... ....................... 53
Relations with Commercial Banks ........................................................ 54
Transactions with Central Government ...................................... ................ 57
Inform ation Systems ........................ ............................ ............................. 58

Adm inistration .......................................................... ............................. 59
Financial Performance .............................................................. 59
Board of Directors ............. .. ................ ....... ................ 60
Internal A udit .................. ............ ............. .. ............. ...... .......... 60
H um an Resources ........................ ................................ ............................ 60

A ppendices ............................................................................................... 64
Monetary Policy Developments .................. ............ ........... ................ 64
Statistical App endix ...................... .. ............. ..................... ................ 66

Financial Statem ents ........................................................... .................. 81

DIRECOR AND PRINCIPALS

At December 31, 2008

BOARD OF DIRECTORS

ALAN SLUSHER
Chairman

RAPLH FEINSTEIN
Vice Chairman

KERRY BELISLE

GLENFORD YSAGUIRRE
Ex-officio Member

DARRELL BRADLEY

CHRISTINE VELLOS
Ex-officio Member

JOSEPH WEIGHT
Ex-officio Member

PRINCIPAL OFFICERS

Glenford Ysaguirre
Governor

Christine Vellos
Deputy Governor Economic Intelligence

Ornel Brooks
Chief of Security

Rabey Cruz
Director, Information Technology

Michelle Estelle
Director, Banking & Currency

Effie Ferrera
Director, Internal Audit

Marilyn Gardiner-Usher
Deputy Governor Operations

Carol Hyde
Director, Human Resources

Angela Wagner
Director, Administration

Neri Matus
Director, Financial Sector Supervision

Hollis Parham
Director, Finance

Azucena Quan-Novelo
Director, Research

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 conditions conducive to
the growth of the economy of Belize."

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

To regulate and encourage the development of the financial system and to
formulate economic policies that foster monetary and financial stability,
confidence and economic growth. The Bank is committed to serving the
interest of the people of Belize through highly motivated and skilled
professionals who operate under the ethos of integrity, efficiency and
transparency.

In the pursuit of its mission, the Bank sets a number of goals and operating objectives. These are
listed below:

GOALS
v 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.
v Set high standards of efficiency and organisation so as to encourage higher levels of
attainment in the Bank.

OBJECTIVES
v Promote monetary stability.
v Regulate the issue and availability of money and its international exchange.
v Regulate and maintain the integrity and reputation of the financial system.

2008 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 reviewing
the Bank's policy prescriptions.
* Ensuring that the decisions and relevant
directives of the Board are communi-
cated to all parties concerned.

* 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

* 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.
* Maintaining the Bank's plant and
equipment.
* Providing reprographic services to the
Bank.

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.

2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

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

Banking and Currency

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

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

* 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
and registration of credit unions.
* Supervising and regulating banks, financial
institutions and credit unions through on-
site examination and off-site surveillance.

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

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.

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

Other Support Operations

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

* Maintaining security operations within the
Bank.

Finance

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2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

Table 1: Major Economic Indicators

POPULATION AND EMPLOYMENT

Population (Thousands)
Employed Labour Force (Thousands)
Unemployment Rate (6%)
INCOIVE
GDP at Currert Market Prices ($mn)
Per Capita GDP ($, Current Ikt. Prices)
Real GDP Growth (/%)
Sectoral Distribution of Constant 2000 GDP (%)
Primary Activities
Secondary Actvities
Services
MONEY AND PRICES ($mn)
Inflation (Annual average percentage change)
Currency and Demand deposits (M1)
Quasi-Money (Savings ard Time deposits)
Money Supply (M2)
Ratio of M2 to GDP (3%)
CREDIT ($mn)
Commercial Bank Loans and Advances
Pubic Sector
Private Sector
INTEREST RATE (%)
Weighted Average Lendng Rate
Weighted Average Deposit Rate
Weighted Average Interest Rate Spread
CENTRAL GOVERNMENT FINANCES ($mn)
Current Revenue
Current Expendiure
Current Account Surplus(+)/Deficit(-)
Capital Eperditure
Overall Surplus(+)/Deficit(-)
Ratio of Budget Deficit to GDP at mkt. Prices (%)
Domestic Financing (Net)
External Financing (Net)1
BALANCE OF PAYMENTS (US $mn)
Merchandise Exports (f.o.b.)2
Merchandise Imports (f.o.b.)
Trade Balance
Remittances (Inflows)
Tourism (inflows)
Services (Net)
Current Account Balance
Capital and Financial Flows
Gross Change in Official Irtemational Reserves
Gross Official International Reserves3
Import Cover of Reserves (in months)
PUBUC SECTOR DEBT

2553 262.7 271.1 281.1 289.9 299.8 309.8 322.1
85.9 84.7 892 95.9 98.6 102.2 111.8 114.5
9.1 10.0 12.9 11.6 11.0 9.4 8.5 8.2

1,743.7 1,865.4 1,976.4 2,112.6 2,229.7 2,426.2 2,553.5 2,773.4
6,829.9 7,100.7 7,290.3 7,515.1 7,691.9 8,093.6 8,2435 8,610.4
5.0 5.1 9.3 4.6 3.0 4.7 1.2 2.1

144 13.3 16.9
172 17.2 152
57.6 55.2 53.7

18.1 18.1 16.2 12.8 11.0
15.1 14.6 17.5 17.7 19.8
57.8 58.7 57.5 59.9 55.0

1.1 22 2.6 3.1 3.7 4.2 2.3 6.4
364.8 358.1 442.6 4922 516.1 617.9 704.4 706.2
676.0 705.3 659.7 756.1 815.8 887.1 1,031.7 1,260.4
1,040.8 1,063.4 1,102.3 1,248.3 1,331.9 1,505.0 1,736.1 1,966.6
59.7 57.0 55.8 59.1 59.7 62.0 68.0 70.9

7885 904.6 1,056.6 1,1765 1,254.7 1,390.5 1,599.6 1,742.4
12.9 16.0 30.0 46.3 62.4 48.6 40.8 19.1
775.6 888.6 1,026.6 1,1302 1,192.3 1,342.8 1,558.8 1,723.3

14.5 142
45 4.9
10.0 9.3

14.3 14.2
5.5 5.8
8.8 8.5

14.3 14.1
6.0 6.4
8.3 7.8

372.1 425.8 4222 451.9 511.5 566.0 651.5 729.6
333.7 3334 393.0 474.1 561.2 550.8 636.1 618.9
384 92.3 29.1 -222 -49.7 15.2 15.3 110.6
267.4 260.3 2764 1732 123.1 97.1 160.4 144.5
-196.5 -108.8 -216.0 -133.6 -152.3 -46.7 -30.8 31.2
-11.3 -5.8 -10.9 -6.3 -6.8 -1.9 -1.2 1.1
72.7 -180.9 -62.4 -362 -19.0 -8.9 20.3 -21.3
123.9 278.3 380.7 179.9 127.6 56.0 -2.0 -7.0

269.1 309.7 3155 308.4 325.2 427.1 425.6 464.7
478.1 496.9 522.3 480.7 556.2 611.9 642.0 788.1
-209.0 -1872 -206.8 -172.3 -231.0 -184.8 -216.4 -323.4
26.4 24.3 29.3 30.9 40.9 57.8 70.8 74.1
1105 1215 149.7 168.1 213.6 260.1 288.6 281.1
46.1 46.0 71.1 882 143.0 210.7 229.9 219.5
-190.4 -165.3 -184.3 -154.9 -151.2 -25.4 -52.1 -153.7
1792 168.0 1885 127.3 147.3 83.2 113.8 218.1
-2.7 -5.4 -30.1 -312 -12.2 49.8 22.9 57.6
120.1 114.7 84.6 48.0 35.8 85.6 108.5 166.2
32 32 2.1 1.4 0.8 1.8 2.3 2.8

Dsbursed Outstandng External Debt (US $mn) 4895 632.8 805.9 893.1 970.5 985.7 972.7 955.5
Ratio of Outstanding Debtto GDP at Mkt. Prices (%) 56.1 67.8 81.6 84.5 87.1 81.3 76.2 68.9
External Debt Service Payments (US $mn) 76.9 77.3 82.8 96.8 88.9 134.3 135.2 97.1
External Debt Service Ratio (%)4 17.3 15.7 15.7 17.8 14.2 17.0 16.4 11.4
Dsbused Outstandng Domestic Debt ($ mn) 208.7 171.9 2565 2785 279.4 299.9 321.9 332.8
Domestic Debt Service Payments ($ mn)5 17.7 19.2 13.7 18.8 23.1 27.5 30.4 47.7
Sources Ministry of Finance, Statistcal Insttute of Belize, & the Central Bankof Belize
(1) Indudes Privatization Proceeds
(2) Indcudes CFZ gross sales
(3) Starting in 2005 these numbers have been revised to reflect only usuable reserves as defined by BPM5
(4) Excludes refinana ng of US$992mn (2002), US$502mn (2003), US$95 4rm (2004), US$1367mn (2005), the restructuring amount of US$541 Omn in 2007 and US$0 8mn in
2008
(5) The 2007 CS excludes $6 7mn that was owed to DFC and now talen over by BSSB

GDP growth accelerated slightly to 2.1% in
2008 notwithstanding a deepening global
financial crisis and extensive damage from
floods in June and October. The main
impetus came from the secondary sector as
marked expansions in construction activity
and petroleum extraction more than
compensated for the halt in the Williamson
factory's garment export production. A
positive contribution came from the tertiary
sector with a contraction in 'Hotels and
Restaurants' being outweighed by continued
buoyancy in 'Transport and Communications'
and distributive trade. Meanwhile, output
from the primary sector experienced a decline
as floods and disease took its toll on the
agricultural sector and the contribution from
fishing fell as a result of reduced production
of farmed shrimp.

The unemployment rate was measured at
8.2% in the month of May (down from 8.5%
in April 2008) with the seasonal rise in
economic activities yielding a 2.4% expansion
in jobs relative to a 1.9% increase in the
labour force. Surging prices for fuel and food
in the first three quarters of the year pushed
the domestic price level up by 6.4%, the
highest increase of the past twelve years.
Prices for 'Food, Beverage and Tobacco'
were up by 13.3%, mostly due to the rising
cost of staples such as rice, flour, bread,
milk, cooking oil, eggs and whole chicken.
'Rent, Water & Fuel" was next with a 3.6%
increase that largely reflected higher butane
prices.

On the external side, the trade deficit
widened by 49.4% with rising prices and
substantial capital investments feeding a
22.8% surge in imports while exports rose
by a lesser 9.2%. The result was a near tripling
of the external current account deficit, which
was financed by foreign direct investment
into real estate, tourism and petroleum as
well as private sector external borrowings.
The buoyancy of these inflows contributed
to a $115.2mn increase in the gross official
foreign reserves bringing it to a level that was
equivalent to 2.8 months of merchandise
imports at year-end.

In its fiscal operations for the 2008 calendar
year, Central Government generated an
overall surplus (the first in 20 years)
equivalent to 1.1% of GDP while its primary
surplus rose to 4.9% of GDP. Foreign grants
and heightened receipts from petroleum
operations accounted for a significant portion
of total revenues during the year. (The overall
balance reverts to a deficit and the primary
surplus shrinks to 2.9% of GDP when grants
are not factored in.) While total revenues
were up by 3.8%, expenditures were 4.2%
lower due to marked reductions in capital
transfers and foreign interest payments as well
as the non-repetition of substantial debt
restructuring fees incurred in the previous
year.

The improved fiscal outturn contributed to
net reductions in financing from abroad as
well as from the domestic banking system. A
1.8% contraction in the public sector's
external debt occurred with amortization

2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

payments, a loan transfer to the private sector
and downward valuation adjustments
summing to $117.8mn while disbursements
totaled $83.0mn, approximately 57.0% of
which came from Venezuela in the form of
credit for fuel imports. At year-end, the
public sector's external debt to GDP ratio
stood at 68.9%. While its net use of domestic
financing was down, the government's gross
domestic debt rose by 3.4% due to its
increased use of the Central Bank overdraft
facility.

No monetary policy interventions were
undertaken in 2008 with commercial banks
statutory reserve requirements being
maintained at the heightened levels set in
September 2006 in order to restrain credit
expansion and facilitate the replenishment of
foreign reserves. The fiscal outturn
supported this with a build-up in deposits at
the Central Bank contributing to a 14.5%
contraction in net credit to the government
from the banking system as well as a
deceleration in overall credit expansion from
14.3% to 7.4%. Private sector credit growth
slowed from 15.4% to 10.6% marked by a
sizeable increase in personal loans, a slight
deceleration in lending for services and
primary production as well as a small
contraction in lending to the secondary sector
due to the clearing of the Universal Health
Services (UHS) debt.

Supported by the growth in private sector
credit and buoyant foreign exchange inflows,

the broad money supply expanded by 13.3%
(compared to 15.4% in 2007) with growth
being largely concentrated in time deposits,
particularly those held by individuals. While
the Central Bank's net foreign assets rose by
53.1%, this was somewhat offset by a
downward shift of 29.9% in the commercial
banks' net position reflecting increased
borrowings abroad to facilitate unusually
large one-off cash transfers on their own
account and on behalf of their customers.

In line with expectations, holdings of
statutory reserves by commercial banks were
18.0% above requirements in the first half
of the year with some seasonal tightening
occurring in the third quarter as lending
accelerated. A deceleration in lending as well
as a surge in inflows, partly from tourism and
partly from repatriation of funds held abroad
sharply boosted the banks' liquidity in the
fourth quarter resulting in a 43.8% rise in the
end of year position relative to the previous
year. Both primary and secondary liquidity
remained unevenly distributed across banks,
with the disparity occasionally fostering
competition for the business of large
depositors. This led to a 38 basis points rise
in the weighted average deposit rate while the
weighted average lending rate declined by 20
basis points. The shrinking of the interest rate
spread brought it to 7.8%, the lowest level
since 1990.

The negative impact of the global financial
crisis on tourism, foreign direct investment
and remittances underscores the continued
need for careful domestic economic
management, especially since Belize's heavy
external debt burden severely limits the space
for fiscal maneuvering. The government's
financial position could be further
complicated by projected declines in
revenues from petroleum and grants,
developments that would heighten the need
for specific revenue measures to head off a
widening fiscal gap if current expenditure
levels are to be maintained. With this
backdrop, GDP growth in 2009 is projected
to decelerate to approximately 1.8%
reflecting contractions in distributive trade,
tourism, construction and citrus production
as well as a slowdown in real estate, rental
and business services.

The reduction in economic activity is
consistent with a lower external current
account deficit and current projections are
for the deficit to shrink from 11.1% to 9.7%
of GDP mainly due to a lower trade gap.
Imports are projected to contract by about
12.0% mainly because of lower prices
(particularly for fuel), a significant slowdown
in imports for large, capital intensive projects
that will be winding down and reduced trade
activity in the CFZ. The slump in export
earnings, will be even larger at 16.0% due to
a substantial weakening in the prices of the
country's major commodity exports. On the
other hand, projected declines in inflows

from tourism and remittances are likely to
be counterbalanced by lower international
freight charges and profit repatriation. Net
inflows on the capital and financial account
adequately covered the current account gap
in 2008, but since these are projected to
decline by nearly 40.0% due to a contraction
in foreign direct investment and private
sector external borrowing, the external
current account deficit will need to be
financed partly by drawing down on the
official foreign reserves. Even so, import
coverage should rise to around 3.0 months
of merchandise imports due to the lowering
in value of monthly imports.

In 2009, the main growth drivers are likely
to come from the primary sector with a
significant increase in petroleum extraction
coinciding with expansions in fishing and
agriculture. The addition of 2 wells in the
Spanish Lookout field should boost annual
production by 21.0% to 1.6mn barrels. Even
with 13.0% of gross production targeted for
local refining, export volume should expand
by 18.0% although a sharp fall in the average
export price is expected to slice export
earnings by 52.0%.

The citrus harvest is forecasted to decline by
16.9% as a result of bad weather, a poor first
crop and flood damage to groves, but this
will be outweighed by a strong rebound in
sugarcane production together with
expansions in papaya, banana and rice.
Recovering fully from hurricane damage,
deliveries of sugarcane for the 2008/2009
crop are expected to rise by 17.3% to 1.2mn

ECONOMIC PROSPECTS

long tons. This will facilitate a rise in
production and exports of sugar. While a
36.6% expansion in the latter is being
projected, the rise in export value will be
smaller (6.6%) mainly due to a further
programmed cut in the EU sugar price and
the depreciation of the Euro against the US
dollar. Papaya should continue its modest
pace of recovery with growth of 7.0% and
the Banana Growers Association has
indicated that banana output will increase by
a marginal 0.7%. Rice producers are
expecting a 25.0% boost in output, whereas
output of corn should flatten due to setbacks
from the flood.

After three consecutive years of contraction,
fishing should deliver growth of 7.4% with
some farmers expanding shrimp output to
offset falling prices, and cobia production
surging by some 70.0% as the hatchery
becomes fully operational. Minimal change
is expected in tilapia production due to the
temporary shelving of expansion plans;
however, the overall growth in land and sea
based farmed output will still more than
compensate for the cyclical downturns in the
lobster and conch catch.

The outlook for the secondary sector includes
the expected decline in citrus juice processing
and a contraction in tourist oriented
construction projects occurring alongside a
robust 30% expansion in the utilities. The
latter reflects an increase in diesel generation

capacity and the coming on stream during
the latter part of the year of the co-generation
plant.

Almost all tertiary sector activities are likely
to decelerate resulting in a fall in sectoral
growth from2.8% to about 1.5%. The main
dampeners will be distributive trade and
hotel and restaurant activities, which are
sensitive to declines in imports and stay-over
tourist arrivals, as well as a slowdown in cross
border trade in the CFZ. Transport and
communication activities should continue to
grow, but at a slower pace, as the three year
cellular expansion/upgrade programme
winds down early in the year. Real estate,
renting and business activities should also see
a fall in growth to 1.0% due to the continued
instability in the international financial
markets and economic recession in the major
developed economies.

The general price level will be favourably
affected by low international prices for fuel,
which will reduce acquisition costs and lower
fuel prices at the pump. On the other hand,
international food costs may still remain
relatively high if agricultural lands continue
to be diverted into the production of grains
for bio-fuels. The overall impact of these
movements should yield an average, annual
increase in the consumer price index of at
least 3.0%.

ME I

Global growth decelerated to an estimated
2.5% in a year that was marked by steep crude
oil price increases and the continuing
meltdown of the US sub-prime mortgage
market that eventually developed into a full
fledged global financial crisis in the fourth
quarter. As the crisis deepened, consumer
confidence and demand plummeted, and
unemployment rates progressively increased
in major developed countries
notwithstanding across the board loosening
of monetary policy in an effort to shore up
tottering financial institutions and maintain
the free flow of credit. In addition to lowering
interest rates, various bail-out packages were
rolled out in an effort to restore stability by
injecting equity and liquidity into the financial
institutions at the heart of the turmoil.While
booming economies such as China and India
continued to grow robustly, these advances
were jeopardized by the economic downturn
in their major trading partners. The outlook
for 2009 is for slackening growth and actual
contractions in some of the major economies
that does not bode well for the developing
areas of the world.

US economic growth decelerated to 1.3%
in 2008 with the collapse of its sub-prime
mortgage market contributing to the
bankruptcy of such major investment firms
as Bear Stears and Lehman Brothers as well
as the substantial weakening of other major
players in its financial system. Plunging stock
market prices decimated wealth that had been

built up over an extended period and
reverberated throughout the system with an
increase in bankruptcies, drying up of credit
and general reduction in investment and
consumption. This toxic combination sent
the economy into recession with two
consecutive quarters of negative growth
being recorded. As job losses mounted, the
unemployment rate rose to 5.8% with signs
of a likely continuation in this negative trend
over the next twelve months. Inflation also
rose from 2.9% to 4.6% partly due to record
high oil prices that peaked at over US$140
per barrel in July. Responding to the crisis in
credit and confidence, the US government
began injecting substantial sums into the
financial system via the Troubled Assets
Relief Programme, an initiative that had
limited short term impact, notwithstanding
Federal Reserve support in the form of
extensive monetary injections and
progressively lower interest rates. One
immediate result of these measures was a
weakening of the dollar against the Euro and
Yen that was manifested in a decline in
imports and fall in the external current
account deficit from 5.3% to 4.9% of GDP.

Growth in the United Kingdom slowed
significantly (from 3.0% to 0.7%) as its
financial system was dealt a series of hard
blows stemming from the US financial and
sub prime mortgage crises. Many of the major
investment houses were heavy investors in
Wall Street and deeply exposed when the
derivatives market began imploding. The
spread effects were shown in slowing growth
of the manufacturing, construction and

CENTRAL BANK OF BELIZE

Table 2: Selected Indicators for Some OECD and Newly Industrialized Countries

Coutr N i Nm Ni Rat Ii m

United States
United Kingdom
Eu ro Area
Japan
China
Republic of China

2.0
3.0
2.6
2.4
13.0
5.7

-5.3
-3.8
0.3
+4.8
+9.7
+7.7

-4.9
-1.9
-0.4
+3.8
+10.5
+5.8

Sources: OECD, World Economic Outlook, United States Department of Commerce, The Economist,
UK Government Statistics, IMF International Financial Statistics, DGBAS

services sectors while inflation rose to 3.7%
as the Bank of England lowered its
benchmark interest rates to an unprecedented
1.0% in an attempt to restore life into the
ailing economy. Notwithstanding the
economic slowdown in the latter part of the
year, the unemployment rate rose only
slightly from 2.7% to 2.8%. Apparently
benefiting fromthe drop in prices of primary
commodities, the annual external current
account deficit fell to 1.9% of GDP as
exports expanded by 2.4% and imports grew
by a marginal 0.2%.

Growth in the Euro Area also declined from
2.6% to 1.3% with private consumption and
investment slowing significantly due to the
fall in external demand and severe disruption
in banking and financial markets. In the face
of this, unemployment was reported to
remain steady at 7.5% while inflation rose
from 2.0% to a projected 3.4% due to the
spike in oil prices earlier in the year. The
external current account position
deteriorated, swinging from a surplus of
0.3% to a deficit measuring 0.4% of GDP
with imports and exports recording similar

percentage declines.

The slowing world economic momentum had
an inevitable impact on China, which has
been focusing on exports to drive its
domestic economy. GDP growth was
however still robust at 9.0% (down from
13.0%) with across the board increases in the
primary, secondary and tertiary sectors of
5.5%, 9.3% and 9.5%, respectively. Food
prices surged by 14.3%, driving up inflation
to 5.9%, while unemployment marginally
increased by 0.2% to reach 4.2%. Even with
external demand slowing in the latter part of
the year, the trade surplus increased by 11.0%
during the year bringing the external current
account surplus to an estimated 10.5% of
GDP for 2008.

Japan's reliance on trade was also
highlighted with negative GDP growth of
0.3% being recorded against the backdrop
of world economic deceleration and
decreased international demand for its goods.
The latter was exacerbated by the strength
of the Yen which appreciated against most
of the world's major currencies. The external
current account surplus deteriorated from

2008 ANNUAL REPORT

INTERNATIONAL & REGIONAL DEVELOPMENTS

4.8% to 3.8% of GDP while inflation and
unemployment rose modestly from 0.1%
and 3.8%, respectively, to an estimated 1.4%
and 4.0% in 2008.

A fall-off in the rate of growth in exports
was a significant contributor to a plunge in
the Republic of China/Taiwan's
economic growth from 5.7% in 2007 to 1.9%
in 2008 as well as the reduction in its external
current account surplus from 7.7% of GDP
to an estimated 5.8% of GDP. The country's
inflation rate rose to 3.5% due to rising food
and commodity prices while unemployment
increased marginally from 3.9% to 4.1% as
the economy was formally declared to be in
recession in the latter part of the year.

Caribbean

While growth in the Caribbean slowed to
2.4%, price levels were pushed up by
escalating prices for food and petroleum.
High import prices prompted governments
to implement counter measures that included
tax reductions on selected consumer items

and suspension of specific import duties.
Trade and external current account positions
deteriorated in tandem with the unfavourable
shift in the terms of trade and many of these
economies continued to be burdened by high
debt ranging from 112% of GDP in Jamaica
to an average of 94% in the Organisation of
Eastern Caribbean States (OECS). The
downturn in the global economy is being
manifested regionally in decreased tourism
and related industries, and this is expected
to constrain growth in the short and medium
terms. Employment levels have already been
affected by the fall in tourism with the
potential for further job losses due to the
cancellation and slow down of public and
private sector construction projects. While
the impact on remittances to the region is
expected to be negative, the size of the
reduction is uncertain. In other notable
developments, the regional integration
process received a boost as Trinidad &
Tobago signed a memorandum of
understanding with Grenada, St. Lucia and
St. Vincent and the Grenadines agreeing to
create an economic union for 2011 and a

Table 3: Selected Indicators for Some Caribbean Countries

Barbados
Belize
Guyana
Jamaica
OECS
Trinidad & Tobago

0.7
2.1
3.1
0.3(2)
3.1
3.5

8.1
6.4
6.4
16.9
n.a.
12.0

8.4(2)
8.2
n.a.
11 .1
n.a.
4.2(1)

Sources: ECLAC, Central Bank of Barbados, Central Bank of Guyana, Central Bank of Jamaica,
Central Bank of Trinidad & Tobago, Eastern Caribbean Central Bank
n.a. = not available
(1) as at the end of second quarter of 2008.
(2) as at the end of third quarter 2008

774
109
313
1,878
2,059
7,038

678
166
352(2)
1,773
n.a.
8,520

I N,

2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

political union for 2013.

Declining tourism activity and higher
commodity prices caused a slowing in
Barbados' GDP growth to 0.7%, as a 1.2%
growth in the non-traded sector slightly
outweighed a 1.0% decrease in the traded
sector. Unemployment increased to 8.4% at
the end of the third quarter as labour demand
scaled down in utilities, construction and
merchandise trade. The price level was up by
8.1% at the end of the year due to higher
prices of food, fuel, electricity, housing and
household operations. The accumulated fiscal
deficit grew to 4.5% of GDP, as the increase
in fiscal revenue was outmatched by a 12.8%
rise in government expenditure. The external
current account deficit almost doubled in
response to higher import expenditure and
sluggish travel receipts. Concurrently, the
surplus on capital and financial accounts
diminished, causing a contraction of
US$96.0mn in net international reserves.

Guyana's growth slowed to 3.1%, with the
economy being driven by mining, services

14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0

and construction while inflation rose by an
estimated 6.4%. In response to declining
terms of trade, higher import demand and
the increasing cost of services, the external
trade and current account deficits
deteriorated over the year. However,
international reserves were kept stable due
to improvements in the capital and financial
account, attributable mainly to official capital
flows and direct foreign investment in
telecommunications, mining and forestry.
During the year, the government's fiscal
primary balance worsened as a 4.9% increase
in revenue was eclipsed by increases in
expenditure of 24.0%. By mid-2008, the
national debt stock was equivalent to 96.0%
of GDP, as the sale of new treasury bonds,
increased disbursements from multi-lateral
organizations and bilateral inflows under the
PETROCARIBE Agreement overshadowed
debt relief under the Heavily Indebted Poor
Countries and Multilateral Debt Relief
Initiatives.

The Jamaican government focused its efforts
on stabilizing the economy, controlling

Chart 1: Real GDP Growth for Selected Caribbean Countries

Barbados

Guyana

Jamaica

OECS

Trinidad &
Tobago

* 2007 2008

N 2007

m 2008

INTERNATIONAL & REGIONAL DEVELOPMENTS

inflationary pressures and keeping the
exchange rate stable during the year. GDP
grew by only 0.3% during the first three
quarters with agriculture, forestry and fishing
being negatively impacted by bad weather,
fire and a fall in input usage. Activity was weak
in transport, storage/communications,
manufacturing and construction, while the
services sector performed well with an
estimated 6.0% rise in tourist arrivals. Surging
fuel and food prices pushed annual inflation
up by 16.9%, prompting the Bank of Jamaica
to increase interest rates by 50 basis points
to 14%. The trade deficit expanded
significantly, pushed up by higher
expenditures on fuel, food and chemicals.
The external current account deficit
consequently measured 20.0% of GDP for
the first six months with a capital and financial
account surplus (derived mostly from robust
foreign direct investment) being sufficient to
cover this deficit as well as adding to official
international reserves. These gains were
somewhat depleted later on as the Bank of
Jamaica was impelled to intervene in the
foreign exchange market to support the value
of the Jamaican dollar.

Growth in the OECS decelerated from 5.3%
to 3.1%.Value added from tourism and
construction was estimated to rise by 5.0%
in contrast to only a marginal increase in
agriculture (which has been affected by
hurricane) and manufacturing. The rise in
consumer prices ranged from 5.0% to 9.5%
and this underpinned a variety of measures
including public sector wage increases in

Anguilla, St. Kitts & Nevis and St. Vincent
& the Grenadines, the elimination of VAT
and the suspension of the common external
tariff in Antigua, Dominica, Grenada and St.
Lucia. In the middle of the year, the debt to
GDP ratio stood at 94%, with national debt
surpassing 100% of GDP in Dominica,
Grenada and St. Kitts & Nevis and exceeding
70% of GDP in Antigua & Barbuda, St. Lucia
and St. Vincent & the Grenadines. Monetary
policy remained unchanged with the discount
and the interbank rates set at 6.5% and 4.5%,
respectively. Higher expenditure on imports
pushed the external current account deficit
up to 4.1% of GDP and the overall balance
of payments also registered a deficit due to
declines in financial inflows from foreign
direct investment associated with tourism.

As in the rest of the Caribbean, economic
activity decelerated in Trinidad & Tobago
with GDP growth falling from 5.5% to an
estimated 3.5% in 2008. While there was a
slowing in the energy sector, non-energy
activity including construction,
manufacturing, tourism, wholesale/retail
trade and financial services accelerated.
Annual inflation rose to 12.0% pressured
upward by escalating food prices. Central
Government's surplus stood at 6.5% of
GDP for the 2007/08 fiscal year, with excess
fiscal collections above the forecasted budget
being transferred to the Patrimonial Fund
and the Infrastructure Development Fund.
The previous years of strong fiscal out-turns
kept the national debt to GDP ratio at 28.0%
and the external debt at 6% of GDP. On

I N,

2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

the external front, the surplus on the trade
and current accounts of the balance of
payments measured 24.0% and 22.0% of
GDP, respectively, and external reserves
consequently rose to US$8.5bn (equivalent
to 11 months of import cover).

Mexico and Central America

A weakening in domestic demand combined
with a slow-down in exports in the second
half of the year in response to the US
recession caused Mexico's GDP growth to
fall from 3.2% to 1.8%. The growth sectors
were agriculture and basic services while
industrial activity weakened with a
contraction in mining, lower growth in
manufacturing and a fall in construction. The
unemployment rate (up to September)
remained at the 4.0% of the previous year,
while inflation hovered around 6.0% due to
higher prices for food, fuel, electricity and
housing. To counter the effects of the global
slowdown, a government program to
stimulate growth and employment was
launched in October. Private consumption
nonetheless remained subdued throughout
the year in response to the tightening of
monetary policy in the first semester and a
3.7% decline in family remittances later on.
While imports rose by 15.4% partly due to
high prices of cereals, machinery and
electrical equipment, exports declined by
1.6%, so the trade deficit widened to
US$8.4bn at the end of September.

Indications are that Central American

economies expanded by 4.6% in 2008,
marking the sixth consecutive year of growth
that has been spurred by exports and private
consumption and supported by inflows of
family remittances. Higher prices for
petroleum and food drove up inflation, while
the unemployment rate held steady with the
continuation of various private and public
sector projects. Notwithstanding measures
taken to mitigate inflationary pressures and
the implementation of programs to stimulate
economic growth, the average fiscal deficit
was a modest 0.3% of GDP. On the external
front, inflows of family remittances and a
9.4% increase in tourism receipts partially
offset a larger trade deficit and lowered the
external current account deficit to 0.6% of
GDP.

Growth in the Guatemalan economy
decelerated from 5.8% to 3.3% as a
contraction in family remittance inflows
caused a softening in private consumption.
All sectors grew during the year except for
construction. While the transport,
communications and banking sectors
reported double digit growth, and value
added from agriculture and manufacturing
was up by 2.0%, construction activities fell
moderately due to a delay in private projects
and public infrastructure works. Inflation
rose to 10.9% due to higher prices of fuel
and food, while the unemployment rate was
estimated at 5.5%. Notwithstanding a fall in
capital expenditures, the central government
recorded a modest deficit of 1.2% of GDP
as the economic slowdown contributed to a

INTERNATIONAL & REGIONAL DEVELOPMENTS

3.5% fall in revenues. On the external side,
the trade deficit measured 16.0% of GDP
but this was ameliorated by higher current
transfer receipts that narrowed the external
current account deficit to 5.0% of GDP.
Strong capital inflows financed this deficit
and boosted international reserves.

The Honduran economy grew by 3.8% as
compared to 6.3% in 2007. Growth drivers
included private consumption, which was
strongly supported by family remittances,
construction, and a 5.5% surge in agriculture.
To deal with the international financial crisis,
the monetary authority reduced the reserve
requirement from 12.0% to 10.0% in
October, thereby injecting about US$95.0mn
into the national banking system. This
improved the availability of credit and
provided resources to alleviate flood
damages. Annual inflation rose from 8.9%
to 12.0%, boosted by higher prices of
petroleum and basic food items such as corn
and beans. An increase in taxation rates in
September and a reduction of subsidies on
fuel and electricity reduced the fiscal deficit
from2.9%to 1.9% of GDP. While exports
expanded by 21.0%, fuelled by favourable
prices for traditional exports as well as
"maquila" goods, imports grew even faster
by 25.0%. At 29.0% of GDP, the trade
deficit was only partially offset by family
remittances that amounted to 8.0% of GDP
and inflows on the capital account. The
external current account deficit consequently
rose to 12.0% of GDP, leading to a draw
down on international reserves of some

US$160.0mn.

In El Salvador, GDP grew by 3.0%,
approximately one and a half points below
the previous year. Favorable prices for some
traditional exports stimulated an 8.4%
increase in the agricultural sector, while the
construction, manufacturing and mining
sectors expanded by 1.7%, 3.6% and 4.5%,
respectively. On the other hand, growth in
public investment didn't compensate for a
0.9% reduction in private investment caused
by the global financial uncertainty and US
economic deceleration. The government's
fiscal deficit rose to 0.6% of GDP with
revenues being boosted by improved tax
administration, but with expenditures also
rising because of subsidies for electricity,
water, liquid gas and public transportation.
Inflation rose from 4.9% to 5.3%
notwithstanding the various measures taken
to soften price increases for food and fuel.
Although decelerating, family remittances
(amounting to 17.5% of GDP) partly offset
the negative effect of higher international
prices for petroleum and food, so the
external current account deficit rose by a
modest 0.5 percentage points to 6.0% of
GDP. A substantial surplus on the capital and
financial account stemming from growth in
foreign direct investment and the
restructuring of the Euro-Bonds covered the
deficit and raised net international reserves
to US$2.3bn, equivalent to 2.5 months of
imports of goods and services.

Economic activity in Nicaragua decelerated

I N

Table 4: Selected Indicators for Mexico and Central America
GD Got Ia R Ne Ir
Country ~ ~ ~ ~ ~ Rat (06 (00 ai 06) Rsre Sb
200 200 200 200 200 200 200 200

iviexico
Guatemala
Honduras
El Salvador
Nicaragua
Costa Rica
Panama
Source: ECLAC

4.U
8.8
8.9
4.9
16.2
10.8
6.4

10.9
12.0
5.3
15.2
15.0
10.0

u.u
-1.2
-1.9
-0.6
-0.8
-0.5
-1.0

d/ .Z
4.3
2.7
2.2
1.1
4.1
1.9

00.1
4.7
2.5
2.4
1.1
3.7
1.8

to 3.0% with private consumption falling in
the face of higher prices for food, fuel and
raw materials while public sector expansion
boosted the overall level of investment.
Growth in agriculture was up (from 1.4% in
2007 to 7.0% in 2008) due to the recovery
from hurricane damages sustained in 2007
and better prices for the main export
products. The government's operations
yielded a fiscal deficit of 0.8% of GDP as
expenditures outpaced revenue growth.
Contributing to the growth of the former
were subsidies for electricity and food aimed
at easing inflationary pressures. These efforts
were reinforced by the fall in international
prices during the latter part of the year and
the inflation rate consequently fell from 16.2%
in 2007 to 15.2%. The trade deficit
worsened with the situation being
exacerbated by the depreciation of the
exchange rate and the external current
account deficit consequently expanded from
18.3% in 2007 to 26.0% in 2008.

Increases in the international price of food
and fuel as well as the deceleration of the
global economy caused growth in Costa

Rica to fall from 7.3% to 3.3%. Gross
investment continued to expand, albeit at a
slower pace with the most dynamic sectors
being construction, transport &
communication and financial services.
Unemployment increased to 5.0%, while
annual inflation rose to around 15.0%, which
was in excess of the central bank's target of
9.0%. The government's fiscal deficit was
around 0.6% of GDP and included higher
spending on infrastructure and on social
assistance to alleviate the rise in prices during
the year. On the external side, higher fuel
prices caused the growth in the value of
imports to outpace the increase in export
earnings and inflows of family remittances.
The external current account deficit therefore
expanded from 6.2% of GDP to 8.0% of
GDP with the gap being partly financed by
foreign direct investment inflows that rose
by 8.0% to some US$2.0bn.

Panama registered growth of 9.2%, its fifth
consecutive year of growth above 7.0% while
its unemployment rate fell from 6.4% to
5.6%. The principal economic growth drivers
were the construction, commerce and

CENTRAL BANK OF BELIZE

2008 ANNUAL REPORT

INTERNATIONAL & REGIONAL DEVELOPMENTS

transport sectors. Significant private sector
investments into residential projects boosted
growth in construction to approximately
22.7% during the year. In September, the
inflation rate peaked at 10.0%, the highest in
two decades, before beginning to subside in
October with the decrease in fuel prices. The
fiscal deficit was maintained below 1.0% of
GDP even with measures taken to absorb the

increases in the cost of living. In the external
sector, a significant rise in the value of
imports contributed to an external current
account deficit of $2.1bn (10.0% of GDP).
Despite the world economic slowdown, the
tourism sector increased by 12.0%, while the
financial account yielded a surplus of
US$1.8bn.

I N

Belize's broad measure of money supply
increased by 13.3% in 2008 (down slightly
from 15.4% in 2007) with deposits continuing
to grow robustly as increases in credit and
foreign direct investment inflows for
construction, petroleum exploration and real
estate underpinned an acceleration of
economic activity. Most of the expansion
was in the first semester, a period that
included the general elections, the peak of
the tourist season and heightened inflows for
construction of tourist condominiums. After
a slight third quarter contraction coinciding
with the seasonal tourism downturn,
monetary growth surged again as the start of
the tourism high season boosted the level of
foreign inflows.

Among the notable developments was a
24.4% expansion in time deposits, of which

an unusual 40% of the increase was
attributable to holdings by individuals, some
of whom were associated with various real
estate transactions. Significant boosts also
came from the shifting by a major firm of a
substantial sum from demand to time
deposits and new deposits by the credit
unions and Belize Social Security Board
(BSSB). The latter reflected BSSB's decision
to discontinue sterilizing its monthly
surpluses with the Central Bank in an effort
to get higher returns. After growing by 14.0%
in the previous year, narrow money edged
up by a marginal 0.3% as an increase in
savings/checking deposits was largely offset
by a decline in demand deposits. Currency
held by the public also grew by a minimal
0.3% in comparison to the 12.1% expansion
of the previous year.

Notwithstanding a deterioration in the
external current account, the banking system's
net foreign asset position improved by

Chart 2: Ratio of M2 to GDP

75.0%
70.0%
65.0%
60.0%
55.0%
50.0%
45.0%

40.0%

94 95 96 97 98 99 00

01 02 03 04 05 06 07 08

--M 2/GDP

I ONTAY& INNIA DVLOMET

Chart 3: Growth in Commercial Bank Deposits

2007
* Demand 0 Savings M Time

21.0%, as buoyant foreign direct investments
and loan disbursements to the private sector
coincided with a reduction in public sector
external debt payments. The Central Bank
increased its foreign assets by $115. mn with
inflows rising by 8.8% to $385.6mn and
outflows amounting to $270.5mn.
Commercial banks accounted for
approximately one-third of the Central Bank's
foreign exchange purchases as they stepped

up sales to meet their statutory cash reserve
requirements. Grants (mostly from ROC/
Taiwan), petroleum royalty/tax payments and
sugar export receipts accounted for another
14.0%, 13.7% and 13.4%, respectively. The
balance came from the sale of Venezuelan
fuel, loan disbursements, interest received
from investments and revaluation gains.
Outflows were $75.2mn lower than the
previous year and reflected the cutback in

Chart 4: Annual Change in Net Foreign Assets of the Banking System

99 00 01 02 03 04 05 06 07 08

-* Commercial Banks m--Central Bank

(f IJU
E
9 100

50
0 -

2006

2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

government's foreign exchange requirements
for debt servicing subsequent to the 2007
debt restructuring. The government
accounted for 68.0% of outflows with the
remainder being used to cover Venezuelan
fuel imports, sales to statutory bodies and
commercial banks, bilateral payments and
revaluation losses.

While the Central Bank's position improved,
the commercial banks experienced a net
reduction that reflected a 108.2% rise in their
short term foreign liabilities. This contrasted
with the previous year when short term
foreign liabilities fell by 46.5%. A notable
spurt in external borrowing took place in the
first quarter as one bank replenished its
foreign holdings after making very
substantial dividend payments to its foreign
shareholders. Even so, the bulk of the
borrowing actually occurred in the second
half of the year when the banks more than
doubled their foreign liabilities to help finance

import payments and significant one-off cash
transfers that included the return of the
Venezuelan housing grant to government.
The surge in their liabilities, coupled with net
sales to the Central Bank, caused the
commercial banks' net foreign asset position
to contract by 29.9%, the first decline in five
years.

Growth in net domestic credit was private
sector driven, since, even with a significant
expansion in its Central Bank overdraft in the
first quarter due to pre-election spending and
external debt payments, the government was
able to reduce its net borrowing by 13.3%
facilitated by substantial grant receipts and
higher revenue collections as the year
progressed. The postponement of budgeted
capital expenditure until 2009 also
contributed to the reduction. For the third
consecutive year, credit to statutory bodies
fell, this time by $2.9mn.

Chart 5: Annual Change in Commerical Banks' Loan Distribution

80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
-10.0
-20.0
y.o

mm

sa-

M-U

.os q;$' &
p
`'Y ~~0~-
9-

*
O

0

C
0

I ONTAY& INNIA DVLOMET

Loans to the private sector were up by 10.6%
(compared to 16.1% in 2007), the size of the
deceleration being partly due to the clearing
of the $40.0mn Universal Health Services
(UHS) debt in the first quarter. If the UHS
loan had not been paid off, the annual growth
in commercial bank private sector loans
would measure 13.1%. Accounting for
approximately 50% of the increase, personal
loans for miscellaneous purposes rose by a
very robust 19.9%. Loans to the tertiary
sector rose by 9.3% as financing for
businesses engaged in distribution, real estate
and transportation activities outweighed net
repayments from entities in tourism. In the
primary sector, producers of sugarcane,
banana and grains were the main beneficiaries
of the 7.3% increase. Meanwhile, the
retirement of the UHS debt and repayments
by utilities offset new lending for beer and
soft drinks manufacturing and resulted in a
0.6% contraction in credit to the secondary
sector.

During the entire period reviewed, the
Central Bank maintained commercial bank
statutory reserve requirements at the
heightened levels set two years prior as part
of the policy framework aimed at restraining
credit expansion and facilitating the
replenishment of the official foreign reserves.
Against this, bank liquidity behaved as
expected with consolidated statutory reserves
exceeding requirements by an average of
22.0% in the first six months. The seasonal
third quarter dip was however greater, as in
addition to the customary acceleration in
loans, portfolio maturities were lengthened
by the purchase of longer term Treasury
notes from the Central Bank. This was
reversed in the fourth quarter as deposit
liabilities were boosted by inflows from
tourism and repatriation of foreign funds by
residents who may have been motivated by
the financial turmoil and declining
international interest rates. With lending in
the final quarter also being significantly lower

Chart 6 : Quarterly Change in Excess Liquidity

I Lu
100
on

o5 o o 5 c5 c o 5o o o5 5 5
SExcess Liquid Assets0
R Excess Liquid Assets

2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

than in the same period of the two previous
years, liquidity spurted upward ending the
year some 43.6% above the position at the
beginning of the year. Flush with liquidity,
the commercial banks demand for Treasury
bills was significantly higher in 2008 with most
of their acquisitions occurring in the latter
half, particularly in the fourth quarter.
Primary liquidity was also maintained at
comfortable levels with monthly excess cash
reserves averaging 10.8% in the first semester
and 7.4% in the second.

Domestic interest rates were relatively stable
(compared to those in the developed
countries) with a 38 basis points rise in the
weighted average deposit rate reflecting a

series of marginal increases in each of the
first eleven months. These were mainly due
to frictions caused by an uneven distribution
of liquidity. There was greater volatility in the
weighted average lending rate with seven
months of downward movement and five
months of increases yielding a net decline of
20 basis points for the year. The narrowing
of the commercial banks' spread to 7.75%
marked the seventh year of a downward trend
that started when an additional commercial
bank began operations in 2001, a period
which follows an eleven year stretch in which
spreads were consistently increasing.

Chart 7: Commercial Banks' Weighted Average Interest Rate Spread

11.5 n

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08

Production

GDP growth accelerated slightly to 2.1%
principally due to a surge in construction
activity and petroleum extraction. The
unemployment rate was estimated to be
8.2% in May 2008, significantly below the
12.1% in September of the previous year,
when activity is generally at a seasonal low.
Meanwhile, surging prices for fuel and food
(both imported and locally produced) caused
a heightening of inflationary pressures that
was shown in an average annual increase of
6.4% in the Consumer Price Index (CPI) as
compared to 2.3% in 2007.

Activity in 'Agriculture, Hunting and

Forestry' declined as a strong rally in citrus
and banana production could not offset grain
losses from two floods and lower outputs of
sugarcane and papaya. Fishing was down by
7.4% as a 17.9% decline in farmed shrimp
production eclipsed a significant expansion
in the output of marine and land based fish
farms.

The sharpest growth was in the secondary
sector, which was led by a 35.2% expansion
in construction activities largely driven by the
funneling of foreign investments into
condominium developments for tourists. A
significant part of the growth was also due
to the classification of petroleum extraction
in manufacturing. The 13.0% rise in the latter
reflected a 23.5% increase in petroleum
production that more than compensated for
the closure of the Williamson garment

Table 5: Annual Percent Change in Selected Indicators

GDP at Current Market Prices 8.8 5.3 8.6

Real GDP (2000 prices)

Primary Activities
of which: Agriculture, Hunting & Forestry
Fishing

Secondary Activities
of which: Construction
Electricity and Water

Services
of which: Restaurant & Hotel
Trade
Public Administration
Transport and Communication

Consumer Price Index
Average
End of period
Source: Statistical Institute of Belize

4.7

-6.2
-0.8
-15.5

25.3
-2.0
41.4

2.5
-0.8
1.3
-5.1
3.5

4.2
3.0

1.2 2.1

-19.8
-1.4
-57.0

2.3
-3.0
2.4

5.4
5.2
1.6
4.7
13.1

2.3
4.1

-9.6
-10.2
-7.4

14.4
35.2
2.8

2.9
-3.0
3.7
2.5
4.9

6.4
4.4

2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

factory, which used to produce for the export
market. Hydroelectricity was significantly
boosted by heavy rains in the third quarter
and accounted for a modest 2.8% rise in the
utilities.

In services, a 4.9% increase in transport and
communication activities reflected the
upgrading and expansion of the cellular
network and services. Meanwhile, an increase
in the Commercial Free Zone (CFZ) cross
border trade as well as an import surge linked
to the capital requirements for large
investment projects contributed to a 3.7%
expansion in wholesale and retail
transactions. Government services expanded
moderately with spending increasing in the
latter months of the year. In contrast to the
otherwise positive out-turn by services,
'Hotels and Restaurants' declined by 3.0% as
arrivals by stay-over and cruise ship tourists
fell in response to the international financial
crisis and the global economic downturn.

Agriculture

Sugarcane

With the crop suffering the residual effects
of damages inflicted by Hurricane Dean in
2007, floods caused by Tropical Storm
Arthur, and extensive froghopper
infestation, sugarcane deliveries fell by 18.4%

to 980,114 long tons, the lowest since 2005.
Farmer deliveries were down by 20.7% to
915,760 long tons, while those from the
Belize Sugar Industries' (BSI) cane growing
project increased by 37.1% due in part to a
modest acreage expansion. Persistently high
levels of mud in the sugarcane and a
reduction in crop quality due to the impact
of the hurricane during the critical growing
period caused a slight worsening in the cane/
sugar ratio relative to the previous crop year.

The average final price paid to farmers edged
up by 1.8% to $55.20 per long ton, mostly
due to exchange rate gains from the Euro
denominated average unit price negotiated
on the futures market and the decision by the
processor to ignore the lower priced
CARICOM and US markets and sell virtually
all its limited sugar supply to the EU market
where the highest prices are realized.

Citrus

Expectations for the citrus crop were
exceeded with deliveries rising by 5.3% to
7.4mn boxes relative to the modest 1.0%
increase that had been projected for the
2007/2008 crop year. Approximately 96.5%
of the citrus crop was processed at the
factory, 2.9% was rejected and 0.6% was
exported as fresh fruit. Deliveries of orange
to the factory were up by 8.4% while those

Table 6: Sugarcane Deliveries

II2.005/06 2006/07 201017/

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

1,173,469 1,200,429 980,114

I DOMESTIC PRODUCTION PRICES & EMPLOYMENT

Table 7: Citrus Fruit Deliveries
2005/0 20 2 007/0

Deliveries ('000 boxes)
Oranges
Grapefruits
Source: Citrus Grow ers Association

of grapefruit were down by 4.3%. The boost
in the orange crop resulted from sustained
annual efforts to replace dead trees and
improved grove management as the Citrus
Growers Association stepped up its
extension services to several communities.
The decline in grapefruit, on the other hand,
was triggered by significantly lower crop
prices that discouraged harvesting.

With international prices for orange juice in
Belize's key markets falling due to the
rebound in US production, declining per
capital consumption of orange juice by US
consumers and higher Brazilian inventories
at the start of the season, the final price paid
to farmers for the 2007/2008 orange crop
was down by 35.6% to $1.41 per pound solid
(pps). Grapefruit prices likewise fell by 38.2%

to $0.89 pps as the US entered the season
with higher juice inventories.

Banana

Good weather and improved agronomic
practices helped to boost banana production
by 30.8% to 4.4mn boxes with yields
increasing by 18.8% to 639 boxes per acre,
as farmers took advantage of an increased
market size with the advent of Dole as a new
buyer.

The industry has maintained banana acreage
relatively constant at around 6,000 acres over
the past four years, with any increases in
production expected to come from
improvements in field productivity rather
than acreage expansion. At the start of the
year, 5,916 acres contained harvestable trees

Chart 8: Banana Acreage

January 2008

Plantilla
499 acres To be Planted
0 3creV ?

Producing
5,916 acres

6,619
4,931
1,688

6,726
5,221
1,505

7,101
5,660
1,441

September 2008

Pantilla
30 acres

To be Panted
55 acres

Producing
6,280 acres

I

2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

and 499 acres were under plantilla (young,
non-harvestable trees). By September, the
acreage under cultivation had increased by
6.2% to 6,280 acres, while the area under
plantilla decreased to 55 acres.

Papaya

The papaya industry in the northern districts
was still in recovery mode after damages
sustained fromthe hurricane in the latter part
of 2007. At the end of 2008, the total area
under production was 1,413 acres, which was
higher than the December 2007 figure of
1,216 acres, but still well below pre-hurricane
cultivation of 1,910 acres. Recovery has been
slowest amongst the small, more financially
vulnerable farms. Approximately 58.1% of
the total area cultivated held mature trees
including 721 acres of large papayas and 100
acres devoted to the smaller solo variety.
Groves remained concentrated in the Corozal
district since the Orange Walk district
accounted for just 75 acres. Approximately
seven acres in the Belize district were wiped
out in the October floods.

Other Agricultural Production

The October floods also caused a significant
drop in production of basic grains. The
notable exception was sorghum, output of
which rose by 55.9% to 23.6mn pounds as
farmers substituted it for yellow corn and
soybean thereby increasing the area under its
cultivation from 7,116 to 13,325 acres.
Annual production of corn, the grain hardest
hit by the floods, declined by 17.7% to

80.0mn lbs, with harvested acreage and
average yield per acre down by 10.9% and
7.9%, respectively. Lower yields and acreage
due to the adverse weather conditions also
contributed to a 35.0% reduction in rice
output, while that of soybean plummeted by
93.5% to 0.05mn pounds as acreage shrank
from 486 to 45 acres with the switch by
farmers to sorghum. Bean production
registered a 1.0% decline to 15.4mn lbs.

Production of vegetables, root crops and
plantains was mixed. While output of onions,
squash, okra, sweet pepper, pumpkin,
carrots, tomatoes, coco yams and sweet
potatoes rose, decreases were recorded for
lettuce, cauliflower, celery, cassava, ginger,
yam and yampi. Plantain output surged by
143.6% with increases of 13.0% in acreage
and a more than doubling in yields.

Notwithstanding some flood loss in small
animals, livestock production did well overall.
Cattle dressed weight increased by 19.1% to
8.4mn pounds in response to strong, internal
demand. Pig dressed weights grew by 10.4%
to 19.6mn pounds, while that of poultry
declined by 25.9% to 27.8mn pounds as high
feed costs prompted processors to grow
smaller chickens. An additional problem was
presented to the industry by the emergence
of poultry Newcastle disease that may have
been borne by flood waters from Guatemala.
Milk output rose by 7.9% to 6.5mn pounds
and egg production also increased by 14.4%.
In contrast, honey yields declined by 38.0%
to 0.lmn pounds.

I\ DOMESTIC PRODUCTION. PRICES & EMPLOYMENT

Marine Products

Annual marine production fell by 11.4% as a
fall-off in farmed shrimp overshadowed a
higher conch catch and significant increases
in tilapia and cobia.

The shrimp outturn was influenced by falling
prices stemming from the US economic
downturn, which caused farmers, who were
already squeezed by high costs for inputs such
as fuel and feed, to shelve their expansion
plans. At 12.7mn pounds, shrimp production
therefore came in about 17.9% below the
amount originally forecasted. The
cooperatives also reported a decline in
output of whole fish and fish fillet as many
producers sold their product directly to local
hotels and restaurants.

The conch catch rose by 6.8% to 0.6mn
pounds as the population recovered from the
damage to their natural habitat caused by
Hurricane Dean in August 2007. While
lobster output remained stable, wild capture
of sea shrimp increased by 35.2%, reflecting
a cyclical peak in reproductive patterns.
Maturing investments in land and marine
based facilities to expand production of
farmed tilapia and cobia underpinned an

overall production increase of 31.1%.

Manufacturing

Sugar and Molasses

The reduced sugarcane harvest set the stage
for a 19.5% decline in sugar production
during the 2007/2008 crop year. Apart from
the fall in processing throughput, production
was also affected by a 3.0% decline in factory
time efficiency and the level of extraneous
material in the sugarcane, the most significant
being mud, which was up by 12.5% over the
previous crop year. Efficiency losses
translated into a 1.4% increase in the cane/
sugar ratio, meaning that 1.4% more
sugarcane was required to produce one ton
of sugar. In line with the processing volume,
molasses production contracted by 14.8%.

Citrus Juices and Pulp

While fruit deliveries for the 2007/2008 crop
were up by 5.6%, output of citrus juices rose
by an even higher 10.4% due to increases in
the average pound solids yield per box of
orange and grapefruit of 3.3% and 6.1%,
respectively.

Table 8: Sugar and Molasses Production
20/ I/0'.I 8II.I II I

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

111,323
41,250

91.34
83.95
10.54

97,161
47,118

91.19
80.38
12.36

78,235
40,204

88.46
80.47
12.53

I

2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

Box 1: Economic Impact of 2008 Flood Disasters

As a small open economy with a narrow economic base, Belize is very vulnerable to external shocks,
especially those engendered by natural disasters. This vulnerability was highlighted in 2008 when two
relatively weak weather systems, Tropical Storm Arthur (June) and Tropical Depression Sixteen (October),
caused much devastation and disrupted economic activities. The torrential rains that accompanied both
weather systems affected neighboring countries as well as Belize and resulted in two major flood events
within one year. All six districts were affected and damage to property, physical infrastructure, various
economic sectors and the environment amounted to approximately $100.0mn.

Weather system Tropical Storm Arthur Tropical Depression 16
Area of Belize affected Southern region Southem, Westem and Central regions
Number of persons directly affected 5,324 46,390
Ratio of persons affected to total population(%) 1.7 14.4
Total cost of damage(Bz$mn) 58.9 42.9
Total damage to GDP(%) 2.1 1.5
Source: NEMO Preliminary Reports ( June 4th and October 20th,29th 2008) and Summary Statements on Tropical Depression Sixteen
(January 2009)
The transportation infrastructure was hit hardest with direct losses through damages to bridges, culverts
and roadways totaling approximately $37.0mn. According to NEMO's reports (Preliminary Damage
Assessment Report, June 4th 2008 and Summary Statements,January 9th, 2009), in excess of 72 roads
were damaged, representing a significant portion of Belize's road infrastructure. Housing infrastructure
was also impacted as over 1,300 homes were inundated with a total of 173 communities being affected.

Heavy losses were sustained in the agricultural sector with approximately 20,000 harvestable acres of
farm lands damaged by flood waters. Citrus was the main crop affected in the June floods, while corn
and sugarcane suffered the most in October. Direct agricultural losses totaled $33.0mn, and other indirect
economic losses were estimated to exceed $80.0mn. While not as severely affected, the estimated losses
of the fishing and tourism industries amounted to roughly $9.0mn and $ 1.Omn, respectively, with the
cottage industries along the Belize River Valley bearing the brunt of the disruptions.

The cumulative impact of the floods which measured almost 4.0% of GDP, and the lingering effects of
Hurricane Dean in August 2007 have tested the country's resiliency and highlighted the critical need for
further efforts and planning to mitigate the impact of any future disasters.

Virtually all fruit deliveries were used to
manufacture orange and grapefruit
concentrates, with increases of 13.6% (to
33.4mn ps) and 7.4% (to 5.8mn ps),
respectively. Only 0.7mn ps of not-from-
concentrate (NFC) juices was produced, a
decline of 41.2% that was partly due to the
difficulties of securing a profitable export

retail market for this product. At 1.7% of
total concentrate juice output, freeze
concentrate production remained minimal
due to its less attractive profit margin and
sluggish market demand.

Pulp production was down by 8.4% with
mostly orange pulp being produced since

I DOMESTIC PRODUCTION PRICES & EMPLOYMENT

Table 9: Production of Citrus Juices and Pulp
25II/06 2006/07 27II /0

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

sales of the grapefruit pulp were temporarily
scaled back while quality improvements at the
field and factory level were effected.

Other Manufacturing Production

Activity in the rest of the manufacturing
sector was rather uneven as lower production
of flour, fertilizer and cigarettes coincided
with expanded output of beer and soft drinks.
Demand for fertilizer was somewhat
dampened as prices surged in tandem with
the rise in petroleum costs. The result was a
15.5% decline in production. Output of flour
fell by 3.9% and, notwithstanding the marked
increase in local demand after the excise tax
was lowered in mid 2008, cigarette output
fell by 6.4% in continuation of a downward
trend that started in 2005 when the excise tax
was raised. Since 2005, domestic cigarette
production has fallen by approximately 40%,
with a strong possibility that this is due to an
influx of contraband products. In other
developments, beer production increased by
8.9%, which may be indicative of some
measure of success in the crackdown on
contraband trade in beer during the year. Soft
drink output grew by 1.6% as it continued
on a path of steady annual increase.

Tourism

Preliminary figures fromthe World Tourism
Organization (WTO) indicated that growth
in international tourist arrivals decelerated
from 6.9% in 2007 to 1.8% in 2008, in the
face of substantial oil price hikes, higher travel
costs and the economic slowdown in some
key markets. While North and Central
America experienced a combined growth in
arrivals of 3.2% and 7.9%, respectively, the
growth in visitors to the Caribbean was
slower at 1.2%. Belize did not do as well
and recorded a reduction in stay-over visitors
for the first time in 12 years with the number
falling by 2.8% to 234,706 persons. Some
three-quarters of the decline was in visitors
from the US, the country's largest market,
which has been experiencing the recessionary
spinoffs of increasing unemployment,
dwindling consumer confidence and more
conservative spending patterns.

The number of overnight visitors entering
the country through the Phillip Goldson
International Airport (PGIA) decreased by
2.9% and arrivals through the land and sea
borders were also down by 2.4% and 4.5%,
respectively. Visitors from the US, which

35,778
29,332
6,328
117

2,509

36,054
29,414
5,392
1,249

2,079

39,815
33,400
5,793
734

1,904

I

2008 ANNUAL REPORT
CENTRAL BANK OF BELIZE

Box 2: Tourism Developments and Prospects

The impact of the international financial crisis and global economic downturn was manifested in tourism's
lackluster performance in 2008.

In the face of these developments, the Belize Tourism Board's marketing strategy continued to focus on
presentations at trade shows in the USA and Europe during the year and magazine advertisements in
Canada. The BTB was also active in the Sistemade Integraci6n Centro Americana (SICA) with aview to
getting increased exposure in the European market by developing ties with European tour operators that
deal with the Central American region.

Further work was also done to develop the tourism product through infrastructural enhancements. This
included the continuation of work on the international airport which involved a number of small upgrades
such as the construction of a new landside canopy connecting Terminals 1 and 2 as well as the remodelling
of Terminal 2. Upgrades were also done on the air conditioning system, security system and the
informational display system. Internal works were started in Terminal 2 as part of the Departure Hall
expansion project scheduled for completion in 2009.

The year also saw a study conducted to determine which of the potential cruise ship docking facilities
(Stake-Bank or the Port of Belize) would be the most viable. The Port of Belize project was chosen and
the recommendation was sent to Cabinet. The first phase of the 'small business competitiveness' project
was also completed in the Belize and Cayo Districts with the main objective of improving the capacity of
local businesses to deliver high quality tourism goods and facilitate greater access to the local "supply
chain".

For 2009, major developments in the tourism industry are expected to include:

a) Completion of the second phase of the BTIA and BTB project funded by the Inter-American
Development Bank to increase the competitiveness of micro, small and community based
organizations that are aligned with the cruise ship tourism sector.

b) Working along with the Aviation Development Committee, the BTB will continue negotiations
with international airlines and other low cost carriers to entice them to fly to Belize.

c) The Aviation Development Committee will be conducting negotiations aimed at establishing
a direct bus route from Cancun to Belize.

d) Work on the paving of the Placencia road, which began in latter half of 2008 will be continued.

e) The start of the project financed by the Inter-American Development Bank which includes
improving infrastructure in Belize City, Ambergris Caye, San Ignacio and Placencia and
the development of a tourism master plan.

I

I DOMESTIC PRODUCTION PRICES & EMPLOYMENT

Chart 9: Stay-over and Cruise Ship Visitor Arrivals

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Stay-over Cruise Ship

accounted for 63.5% of all stay-over arrivals,
were down by 3.3%. Arrivals from the EU,
which ranks as the second largest market and
accounted for 13.8% of all stay-overs, fell
marginally by 0.5%. The number of arrivals
from other countries was 3.0% lower as
growth in Canadian arrivals was eclipsed by
a significant downturn in visitors from
Guatemala.

After peaking in 2004, cruise ship
disembarkations declined for the fourth
consecutive year, influenced in part by a
relatively active hurricane season, floods in
October which prompted the cancellation of
several port calls and by the continued
redeployment of ships from the Caribbean
to the Mediterranean. Cruise visitor
disembarkations were consequently down by
4.1% to 537,632 with the number of port
calls falling from 278 in 2007 to 274 in 2008.

Prices

A combination of external factors caused the
consumer price index (CPI) to rise by an

annual average of 6.4% as compared to
2.3% in the previous year. Chief among them
was the cost of fuel, which went up
significantly during the first three quarters, as
international crude oil prices peaked at over
US$140 per barrel in July, in response to geo-
political tensions, limited refining capacity
and speculative pressures. Since fuel has a
domino effect on prices elsewhere in the
economy, the CPI moved up significantly
during this period. A fall in crude oil prices
in the fourth quarter caused inflationary
pressures to cool considerably, bringing the
annual increase in 'Rent, Water, Fuel &
Power' to 3.6%, while the average cost of
'Transportation and Communication'
activities moderated to 3.5% by year-end. The
biggest cost push in the former category was
from butane prices, while the latter reflected
fuel prices at the pump.

The largest increase was in the 'Food,
Beverage and Tobacco' category, which rose
by 13.3% due to price hikes for basic food
items such as rice, flour, bread, cooking oil,

I

Chart 11: Consumer Price Index and Inflation Rate

x X
E
a)
0
6 s
5

C Co O O N (O 1 LO CO cO

Consumer Price Index --Inflation Rate

powdered milk, chicken and eggs. Increasing
world demand for grain, livestock and
vegetable oils fuelled by rapidly expanding
economies (such as China and India), rising
petrochemical costs and the continued
development of bio-fuels as an alternative
energy source pushed up prices for grains,
feed and agricultural inputs. Locally, there
were sharp increases in the prices for rice,
chicken and eggs. The global supply shortfalls
of wheat due to disease and drought in 2007
drove up its import cost, and this was passed
on to the public through higher prices for
flour and its by-products.

A further cost boost came from higher
import costs for a broad array of
merchandise, as indicated by the 6.7%
increase in the US export price index (up to
November 2008). Goods in the CPI basket
with a high import content such as
'Household Goods & Maintenance', and
'Personal Care' consequentlywent up by 1.9%
and 2.1%, respectively. Going against the
trend of higher costs was a 0.9% decline in

average prices for 'Clothing and Footwear'.

Employment

The seasonal rise in economic activities in
2008 yielded a 2.4% expansion in jobs that
outpaced a 1.9% increase in the labour force.
The unemployment rate consequently fell for
the fifth consecutive year with the SIB
measuring it at 8.2% in May as compared to
the previous year when it was measured at
8.5% in April and 12.1% in September.

The primary sector accounted for the largest
growth in jobs (18.5%), reflecting the hike in
labour demand to deal with the stepping up
of banana and citrus production.
Employment in the secondary sector was also
up by a robust 16.4% particularly due to
construction of tourism oriented
condominiums and the expansion program
in telecommunications. Contrasting with this
was a 6.7% decline in tertiary sector jobs that
may have been influenced by the slowdown
in cruise arrivals in the first five months of

CENTRAL BANK OF BELIZE

2008 ANNUAL REPORT

I

DOMESTIC PRODUCTION. PRICES & EMPLOYMENT

Table 10: Labour Force Statistics

Aprl Apil May~
206 207 00

Labour Force
Employed Population
Unemployed Population
Unemployment Rate

Employed Population by Industrial Grouping (no.)
Prim ary Sector
Secondary Sector
Tertiary Sector

Employed Population by Industrial Grouping (%)
Prim ary Sector
Secondary Sector
Tertiary Sector

Source: Statistical Institute of Belize

the year. Notwithstanding this, the tertiary
sector remained the largest source of
employment, accounting for 57.3% of the
working population. The primary sector was

second with 26.2% while the secondary
sector trailed with 16.5% of total persons
employed.

Chart 11: Unemployment

14,000.00
12,000.00
10,000.00
8,000.00
6,000.00
4,000.00
2,000.00

112,807
102,234
10,573
9.4

21,645
15,635
64,955

21.2
15.3
63.5

122,258
111,835
10,423
8.5

25,345
16,180
70,310

22.7
14.5
62.9

124,637
114,465
10,172
8.2

30,035
18,835
65,595

26.2
16.5
57.3

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

SUnemployed Labour force -*- Unemployment rate

A sizeable expansion in the trade deficit caused
the external current account deficit to spiral
upward from 4.1% of GDP to 11.1% of
GDP, representing a return to deficit levels
last seen in 2005. The outturn from other
current account transactions was more or less
stable as falling tourism receipts and increasing
international freight costs were
counterbalanced by higher earnings from
other services and an increase in public and
private sector current transfers. While the
current account was under pressure from the
widening trade deficit, the surplus on the
capital and financial accounts almost doubled
to $436.2mn, boosted by robust foreign direct
investment inflows mostly into petroleum, real
estate and tourist oriented activities as well as
higher loan inflows to the private sector. The
current account deficit was therefore financed
without difficulty and gross international

reserves increased to $332.3mn, the equivalent
of 2.8 months of merchandise imports.

Merchandise Trade

With imports far outpacing the growth in
exports, the trade deficit widened by 49.4%
to $646.8mn (23.3% of GDP), the highest
level of the past three years. Total imports rose
by 22.8% to $1.6bn with imports for domestic
consumption and the CFZ up by 23.8% and
18.4%, respectively. The growth in the former
was partly due to substantial imports of
capital investment goods, particularly for the
telecommunication, electricity, aviation and
petroleum industries. Other notable increases
occurred in the acquisition cost of fuel,
electricity from Mexico, wheat, animal feed,
milk products, construction materials,
agricultural chemicals/fertilizers, packaging
material and transport vehicles. CFZ imports
expanded with an increase in cross border

Table 11: Balance of Payments Summary and Financing Flows
$mn

CURRENT ACCOUNT -50.8 -104.2 -307.4
Merchandise Trade -369.6 -432.9 -646.8
Services(1) 421.4 459.8 438.9
Income(2) -250.6 -317.9 -322.7
Current Transfers 147.9 186.8 223.1
CAPITAL ACCOUNT 18.3 8.2 18.1
FINANCIAL ACCOUNT 148.2 219.5 418.1
NET ERRORS & COMMISSIONS -16.1 -77.7 -13.5
OVERALL BALANCE 99.6 45.8 115.2
FINANCING -99.6 -45.8 -115.2
Memo Items:
Import cover in months 1.8 2.3 2.8
Current Account/GDP Ratio (%) 2.1 4.1 11.1
(1) Tourism earnings were based on Visitor Expenditure Surveys.
(2) Data include an estimate for profit remittances from the tourism industry.

FOREIGN TRADE & PAYMENTS

Chart 12: Current Account Deficit and Trade Balance

2000 2001 2002 2003 2004 2005 2006 2007 2008

- --A- - Current Account Deficit --Trade Deficit

trade and a build-up of inventory.
Concurrently, exports grew by a much more
modest 9.2% to $929.5mn with CFZ sales
up by 6.4% and domestic exports expanding
by 12.3% as substantial hikes in banana and
petroleum revenues offset lower sugar, citrus,
garment andpapaya sales.

Domestic Exports

Record international crude oil prices and a

significant increase in export volume ensured
that petroleum was the country's principal
export earner for the second consecutive year
with the largest contribution to the 12.3% rise
in earnings from domestic exports. A surge
in banana receipts and a smaller increase in
non-traditional exports also contributed to
the growth in overall export earnings while
inflows from sugar, citrus, marine products,
molasses, garments and papayas fell.

Chart 13: Domestic Exports by Commodities

250

200

150

100

So -00

I L I" oi
02\03 ~ e\e e<,,012
G I? ,o
0o'

E2006 E2007 m2008

0
-100
-200
-300
-400
-500
-600
-700

A-.
A -A

_- ..r. -

50I
0
^
G^"~

2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

Chart 14: Sugar Exports by Market

120.0
100.0
80.0
60.0
40.0
20.0
0.0

n117.5

2006

* E.U.

2007 2008

] USA

Sugar and Molasses

Unfavourable weather and pests reduced
crop yields and caused a sharp fall in sugar
production. The volume of sugar exports
consequently declined by 20.3% to 66,277
long tons, while earnings fell by 19.0% to
$71.4mn as virtually all sales were to the EU,
the most lucrative market.

Sales to the EU of 65,625 long tons
accounted for 99.0% of annual exports. With
St Kitts opting out of sugar production,
Belize's permanent EU quota was increased
by 6,000 long tons to some 48,000 long tons.
Furthermore, an additional 15,000 long tons
was temporarily reallocated to Belize since
Trinidad and Barbados were unable to meet
their quota. The limited domestic export
supply meant that the temporary increase in
the EU demand could only be met by
sacrificing all sales to the US and reducing
sales to regional markets. Sales of bagged
sugar to CARICOM therefore plummeted by
86.0% to 310 long tons while exports to
Canada and Curacao fell by 41.8% to 341

* CARICOM/Other

long tons.

Molasses exports fell by 20.1% to 32,843 long
tons and earnings decreased by 38.7% to
$3.6mn as the average price plunged from
$141.25 to $108.36 per long ton in response
to higher production from Asian suppliers
such as India and Pakistan.

CitrusJuices and Pulp

A bumper harvest permitted citrus juice
exports to increase by 14.6% to 37.1mn
pound solids (ps), but this was offset by lower
orange and grapefruit juice prices across all
markets and as a result, earnings fell by 15.5%
to $89.7mn. Sales consisted of mostly
concentrates as exports of not-from-
concentrate (NFC) were neglible.

The export volume of orange concentrate
increased by 7.6% to 31.0mn ps, but lower
international prices caused by the rebound
in US production and declining US per capital
consumption of orange juice pushed revenue
down by 18.8% to $76.6mn. US processors
channeled a portion of their excess juice

supplies to the export market to take
advantage of a shortfall in Brazilian juice
production and this enabled smaller
producers like Belize to increase their share
of the US market. The volume sold to the
US consequently grew by a substantial 49.4%
to 20.9mn ps although earnings were up by
only 2.2% due to a $1.06 fall in the average
pound solid price. Following the rescinding
of generous supplier terms offered in the
previous year, sales to the Caribbean
experienced a 32.5% downturn to 6.7mn ps,
and receipts fell by 33.2%. Earnings from the
European market plunged by 64.1% to
$6.8mn in response to reductions of 49.2%
in export volume and $1.14 in the average
price per ps. After a one year hiatus, exports
of orange freeze concentrate recommended
on a very small scale, amounting to 0.8mn ps
valued at $2.7mn.

An almost doubling in the volume of
grapefruit concentrate sales yielded a revenue
increase of only 10.2% due to falling prices
in Europe, the major market. While exports
to the latter registered a 66.2% expansion,
the significantly lower growth in receipts of
4.4% reflected a $1.12 fall in the average unit
price. The potential revenue gains from an
almost threefold volume increase in
grapefruit freeze concentrate were similarly
whittled down to 33.1% due to a $2.40
reduction in the price per ps. In the
Caribbean, prices for grapefruit concentrate
remained relatively stable resulting in growth
in sales volume and value of 5.7% and 5.6%,
respectively.

Sales of NFC were negligible while pulp
exports amounted to 1.7mn pounds valued
at $1.3mn.

Banana

Farmers boosted production during the year
and were able to take advantage of an
expanded market with a new buyer (Dole)
accounting for approximately 16.0% of total
exports. The volume exported rose by 26.1%
to 77,934 metric tons and revenues increased
by a proportionately larger 60.7% to
$64.0mn in response to a global increase in
banana prices that partly reflected an
escalation in the costs for production and
transportation.

The industry's 50.0% share of the out-of-
quota tariffs incurred in the previous year
amounted to $1.6mn, while quality penalties
for the year were $0.2mn. Even after
deducting for these expenses, growers netted
a final average box price of $14.14,
compared to $11.93 received in 2007.

Marine Products

Marine export volume contracted for the
fourth consecutive year as a significant fall in
shrimp sales and a slight decline in that of
lobster overshadowed increases in the other
marine commodities.

Shrimp export volume declined by 11.9%
with revenues estimated at $43.8mn as a $0.68
increase in the average unit price limited the
fall in earnings to 4.9%. The bulk of shrimp
sales were to Europe and Mexico, with the

FOREIGN TRADE & PAYMENTS

M

2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

remainder going to the US. With an already
very sluggish US market being further
affected by the global financial crisis and its
impact on the dining-out market, the Mexican
market continued to be seen as a viable
alternative and farmers took advantage of
its proximity and the willingness of Mexican
importers to purchase whole shrimp at the
farm gate. The US lobster market was
similarly depressed with prices spiraling
downwards in the last quarter of the year.
While the volume of lobster exported
declined by 1.9%, revenues fell by 8.0% to
$14.8mn due to a 6.2% drop in the average
price which stood at $32.97 per pound.

Contrasting with this, exports of whole fish
and fillet increased more than sevenfold to
2.6mn pounds with revenues more than
quadrupling to $4.3mn as the largest tilapia
farm recovered from production problems
experienced in the previous year and the
Cobia cage farming facility had its first full
year of operations. Protective measures such
as size restrictions on harvestable conch
implemented over the last few years were

successful in boosting conch reproduction,
so exports rose by 23.2% to 0.6mn pounds
valued at $6.6mn as the price held steady at
$10.24 per pound.

Other Major Exports

The looming expiration of duty-free access
to the US market led Williamson Industries
to cease operating in early January and
garment exports consequently plummeted to
only 0.03mn pounds valued at $0.3mn.

Papaya's recovery from the hurricane
damages sustained in the previous year was
hindered by excessive rainfall, floods and
diseases that flourished in the wet conditions,
hence, the volume and value of exports
declined by 12.7% to 63,716 pounds and by
13.9% to $22.4mn. The revenue loss was
exacerbated by a 1.5% decline in the average
price per pound that was due to a surge in
Mexican papaya exports to the US, Belize's
sole export market.

For the second consecutive year, petroleum
ranked as the highest export earner with

Chart 15: Exports of Shrimp and Total Marine Products

2000 2001 2002 2003 2004 2005 2006 2007 2008
~/p----"^^^

.---4

2000 2001 2002 2003 2004 2005 2006 2007 2008

m--*-Total Marine Product Exports

--- -- Shrimp Exports

volume and value rising by 24.4% (to
1,189,587 barrels) and 66.4% (to $203.2mn),
respectively. The average f.o.b. price per
barrel rose by 33.8% to US$85.41 due to
record high international crude oil prices
during the first three quarters of the year.

Non-traditional Exports

Higher earnings from sawn wood, beans,
citrus oils and a medley of other non-
traditional products outweighed declines in
receipts from pepper sauces, fresh oranges
and veneer sheets so that the value of non-
traditional exports rose to $33.9mn, a 32.4%
increase.

While earnings from orange and grapefruit
oils were up, the largest increase was in orange
oil, which saw a 26.5% increase in export
volume while the average price was up by
6.9%. Earnings from red kidney beans and
black eye peas rose by 18.8% to $7.7mn
facilitated by an 18.0% increase in the average
unit price. Proceeds from sawn wood were
up by 15.8% to $2.2mn as a volume increase
of 76.0% was tempered by a sharp decline
in the average price per board feet. On the
other hand, revenues from pepper sauce fell
by 3.3% to $1.6mn notwithstanding higher
sale volume while receipts from sales of fresh
oranges were down by 37.1% to $1.7mn as a
42.8% reduction in export volume was
slightly offset by a 10.4% price increase.

Re-exports

Re-exports grew by 4.8% to $371.6mn as

expanded sales in the CFZ offset a 6.2%
decline in re-exports from the customs area.
The increase in CFZ sales reflected strong
gains during the first nine months, as sales
were down by 26.0% in the fourth quarter
(generally the peak shopping season) due to
the peso's depreciation against the US dollar.
The decline in other re-exports was due in
part to lower sales of diesel oil.

Gross Imports

Gross imports (f.o.b) rose by a substantial
$292.2mn as the value of goods imported
into the customs territory and the CFZ surged
by $248.2mn and $44.0mn, respectively. All
categories of imports increased except
'Crude Materials', 'Other Manufactures' and
goods for 'Export Processing Zones', which
fell due to the closure of the Williamson
sewing factory. The largest increase was in
'Machinery & Transport Equipment', which
went up by $91.4mn mainly due to imports
of telecommunication and electrical
equipment, aircraft, transport vehicles and
heavy duty machinery. 'Minerals, Fuel,
Lubricants, and Electricity' expanded by
$66.8mn as the steep hike in international oil
prices pushed fuel acquisition costs up by
$46.9mn even as the volume of diesel and
gasoline imports shrank by almost 15.8%. The
value of electricity imports rose by almost
$20.0mn with a 10.3% volume increase and
a rise in Mexican electricity rates, which are
tied to international oil prices. 'Manufactured
Goods' rose by $54.7mn with higher imports
of packaging materials, inputs for the

FOREIGN TRADE & PAYMENTS

M

2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

petroleum industry, cement, steel and
construction materials. Higher demand and
an increase in the cost of durum wheat,
animal feed, margarine and milk products
explained the $22.4mn rise in 'Food and Live
Animals'. Imports of 'Chemical Products'
also recorded a double digit increase of
$14.7mn due to the higher cost of agricultural
chemicals and fertilizers, most of which were
petroleum-based products.

Direction of Visible Trade

The United States accounted for 42.4% of
Belize's exports and regained its position as
the country's primary market even with
Belize's failure to export any sugar to the US
in 2008. This movement reflected a shift in
petroleum sales to the US from Central
America, whose market share consequently
fell from 28.4% in 2007 to 20.6%. Higher
sales of banana and sugar accounted for the
rise in the UK market share by 1.8 percentage
points to 19.8%. On the other hand, a slump
in shrimp and orange concentrate sales halved
the export share of other EU countries to

7.2%, while that of CARICOM fell from
7.0% to 5.2% with the diversion of sugar to
the preferential EU market and a reduction
in sales of orange concentrate. A fall in shrimp
sales accounted for the small decline in
Mexico's market share from 1.9% to 1.7%.

The direction of trade for imports was
relatively stable. The United States remained
the principal source of imports, maintaining
its market share of 32.7%. Similarly, the share
of imports from Central America and the
UK were unchanged at 19.3% and 1.5%,
respectively. On the other hand, the import
share from other EU countries, CARICOM
and Canada declined slightly. Mexico's share
rose slightly mainly due to higher imports of
electricity, steel and construction materials.

Services

Net income from services declined by 4.5%
to $438.9mn, as earnings fell by $18.6mn and
outlays edged up by $2.3mn. The contraction
in earnings reflected declines in tourism and
transportation receipts that eclipsed higher

Table 12: Percentage Distribution of Visible Trade by Country/Area
Percentage

I Ex ports gg* pot (2

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

41.8
3.2
16.5
14.9
12.7
8.3
0.1
2.5
100.0

26.6
1.9
18.0
14.4
28.4
7.0
0.1
3.5
100.0

42.4
1.7
19.8
7.2
20.6
5.2
0.4
2.7
100.0

Source: Statistical Institute of Belize, Central Bank of Belize
(1) exclude CFZ sales
(2) include electricity imports from Mexico

37.7
11.4
1.3
4.9
20.0
2.0
1.1
21.7
100.0

32.7
12.6
1.5
3.9
19.3
2.0
1.0
27.1
100.0

32.7
12.8
1.5
3.7
19.3
1.6
0.8
27.6
100.0

Chart 16: Net Balances for Services, Income and Current Transfers & PAYMENTS

Chart 16: Net Balances for Services, Income and Current Transfers

----------

-S-
_

2000 2001 2002 2003 2004 2005 2006 2007 2008
--- --- Services Balance -A- Income Balance ---Current Transfers Balance

inflows from other services and funds
channelled through foreign embassies and
other international entities to finance flood
relief efforts and other charitable works. The
robust growth in tourism earnings that
characterized most of the decade stalled in
2008 with the decline in stay-over and cruise
ship visitors driving down those earnings by
some 2.6%. The fall in port calls lowered
earnings by shipping agents and contributed
to a 16.4% contraction in receipts from
transportation services. On the other hand,
outlays on services rose marginally as a 22.0%
growth in transport costs (from the
expansion in international trade) outweighed
the fall in expenditure by residents travelling
abroad and the non-recurrence of the sizable
insurance and financial fees associated with
the debt restructuring exercise in the previous
year.

Income

Outflows of dividends and profits were up
by 45.0%, an unusually large increase that

reflected the decision of a commercial bank
to pay some $60.0mn in accumulated
dividends early in the year. Retained earnings
of commercial banks therefore fell by 30.8%.
Interest payments on the public sector debt
were also 25.6% lower than in 2007 due to
the debt restructuring. Foreign seasonal
agricultural workers in banana and citrus
production accounted for a $2.1mn rise in
income payments while the Central Bank's
interest earnings abroad fell by $1.9mn due
to the decline in international interest rates.
The net result of these transactions was a
$4.8mn increase in net outflows on the
income account for a total of $322.7mn.

Current Transfers

Net inflows from current transfers rose by
19.4% to $223. mn with the major inflows
consisting of the Government of Taiwan
grant of $50.0mn, Fair Trade sugar receipts
($6.9mn), insurance receipts and family
remittances, the latter of which grew by 4.8%
as compared to growth of 22.8% in 2007.

Chart 17: Main Components of the Financial Account

500.0

400.0

300.0

200.0
100.0

0.0

-100.0

2000 2001 2002 2003

On the other hand, outflows contracted to
more normal levels compared to the
previous year in which the government
transfer of $40.0mn to non-resident entities
connected with the UHS debt had occurred.

Capital and Financial Accounts

Grants from the EU sugar and banana
support programs as well as from the
Caribbean Development Bank (CDB) for the
Basic Needs Trust Fund pushed the capital

2004 2005 2006 2007 2008

account surplus up from$8.2mn to $18.lmn.

The financial account surplus also rose by
90.5% to $418.lmn largely due to substantial
foreign direct investments mainly into the
petroleum industry, real estate and tourism
oriented projects. Further savings were
recorded as a result of the external debt
restructuring that led to a considerable
reduction in government's loan payments
during the year. In other developments, the
domestic commercial banks increased their

Chart 18: Gross Official International Reserves and Months of Imports

350 3.0
300 2.5
250 -20
200 E
1.5 -
150 -(
1.0 5
100 1.0
50 0.5
0 0.0
C) C) C) C) C1
C C C C C)
_P1r 0) 0

--- Months of Imports

CENTRAL BANK OF BELIZE

2008 ANNUAL REPORT

Net Borrowings Trendline

S Gross Reserves

FOREIGN TRADE & PAYMENTS

borrowing from foreign affiliates by $72.8mn
to meet specific commitments and their
customers' needs. Simultaneously, they built
up foreign exchange holdings abroad. Net
inflows to the private sector more than
tripled to $34.9mn as loan disbursements for
projects such as the Vaca Dam, co-generation
plant, citrus juice manufacturing, tourism
oriented developments and gaming far
exceeded loan repayments.

Central Government Operations

With revenues being substantially boosted by

foreign grants and receipts from petroleum

taxes and royalties, Central Government was

able to record an overall surplus (the first in

20 years) that amounted to 1.1% of GDP

while its primary surplus rose to 4.9% of

GDP. Revenues were also higher due to the

return of Venezuelan grant monies from the

Belize Bank and robust growth in receipts

from the GST and business taxes. Annual

expenditures were down by 4.1% due to a

significant reduction in external interest

payments, the non-recurrence of the previous

year's large debt restructuring fees and a

substantial reduction in capital transfers.

Without the substantial grants received in

2008, the overall balance would revert to a

deficit of 0.9% of GDP, while the primary

surplus falls to 2.9% of GDP.

The fiscal surplus facilitated a $7.0mn

reduction in external borrowing with

amortizations exceeding loan disbursements.

Net financing from the Central Bank also fell

Table 13: Government of Belize Summary of Revenue and Expenditure
$mn
I. I-Change
Jan -De Jan -Dec Ja-euing

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
Total Expenditure
of which Interest Payment on Public Debt
PRIMARY BALANCE
PRIMARY BALANCE W/OUT Grants
OVERALL BALANCE
OVERALL BALANCE W/OUT Grants

FINANCING REQUIREMENTS
Domestic Financing
Financing Abroad
Other

Ratio to GDP (%)
CURRENT BALANCE
OPERATING SURPLUS
PRIMARY BALANCE
Primary Balance w/out Grants
OVERALL BALANCE
Overall Balance w/out Grants
Sources: Central Bank of Belize, Ministry of Finance

566.0
514.5
51.5
550.8
15.2
10.0
67.9
-42.7
25.3
601.3
97.1
648.0
142.0
95.3
70.0
-46.7
-72.0

46.7
-8.9
56.0
-0.5

0.6
-1.8
3.9
2.9
-1.9
-3.0

651.5
577.0
74.4
636.1
15.3
28.4
77.7
-34.0
85.8
765.7
160.4
796.5
134.9
104.0
18.2
-30.8
-116.7

30.8
20.3
-2.0
12.6

0.6
-1.3
4.1
0.7
-1.2
-4.6

729.6
621.0
108.5
618.9
110.6
8.6
66.3
52.9
56.5
794.6
144.5
763.5
105.4
136.6
80.2
31.2
-25.3

-31.2
-21.3
-7.0
-2.9

4.0
1.9
4.9
2.9
1.1
-0.9

78.1
44.0
34.1
-17.2
95.3
-19.7
-11.4
86.9
-29.4
29.0
-15.9
-33.1
-29.5
32.6
61.9
62.0
91.4

-62.0
-41.6
-5.0
-15.5

3.4
3.2
0.9
2.2
2.3
3.7

CENTRAL GOVERNMENT OPERATIONS & PUBLIC DEBT

Chart 19: Central Government's Development Expenditure

150
125
100
75
50
25

2006

2007

2008

SCapital II

by $68.9mn as the commercial banks took
over the majority of government's short term
securities and government deposits at the
Central Bank expanded by 141.9%, pumped
up by grant monies from Taiwan and
Venezuela.

Boosted by the return of the Venezuelan
grant funds and a $44.0mn improvement in
tax collections, current revenue grew by
11.6% to $729.6mn (26.3% of GDP).

* Capital III

Income and profits accounted for 79.1% of
the increase in tax collections with petroleum
taxes having the largest incremental growth
($23.3mn), followed by business taxes
($7.3mn). The performance of the general
sales tax (GST) also improved with an 11.1%
increase derived mostly from imports, as
collections from locally produced goods and
services edged down by 0.5% due to the zero
rating in August of basic necessities (such as
medical services and food items), the

Chart 20: Development Expenditure for 2008
Youth, Sports & Education
Culture 7.5% Health
2.5% \ J 7.3%
Others Social
23.7% Development
12.0%

Housing Agriculture &
12.5% Fisheries
1.6%
Natural
Infrastructure Resources
26.4% 6.6%

I%

2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

downturn in tourist oriented activities and
reduction in November of fuel prices at the
pump. The gains were partly undermined by
a 7.1% reduction in collections from
international trade as a 15.2% growth in
import duties and environmental taxes was
offset by a 53.3% fall in revenue replacement
duties (RRD). The latter took a downward
path in August when the government
replaced the RRD on imported fuel with a
flat import tax to stem the rapid increase in
fuel prices to the consumer. Non-tax revenue
spiked upward by 45.8% ($34.1mn) due to
the return of the Venezuelan grant monies,
the reimbursement of loan payments made
by government on behalf of Belize Ports
Ltd., a $7.0mn increase in royalties from
petroleum operations and a small increase in
license receipts.

The robust performance of current revenues
more than offset the $19.7mn fall in capital
revenue that reflected a significant reduction
in land sales and 34.3% decline in grants,
which were still sizeable due to a lump sum
of $51.9mn received from Taiwan.

The fall in expenditure reflected reductions
of 2.7% in current outlays and 77.3% in
capital transfers. In the previous year, the
latter had been bumped up by the transfer
of $40.0mn to non-resident entities
associated with the UHS debt. Interest
payments were down by a notable 21.8% due
to the restructuring of the debt. Outlays on
goods and services also fell by 14.8% without
the large insurance premiums and financial
fees incurred for the 2007 debt restructuring.

Whittling down these savings were an 8.9%
increase in the wages, salaries and pension bill
as well as a 16.2% growth in domestic
transfers to municipal and statutory bodies.

Capital expenditure rose by 1.6% ($1.9mn)
with outlays on externally funded projects
increasing by 33.1%, while spending on
locally funded projects declined by 14.7%.
Infrastructural works accounted for 38.9%
of the total, followed by social projects, such
as education, health, and social development,
with 29.3%. Included in the former were
improvements to the south-side of Belize
City, upgrading of the Placencia Road,
completion of the Southern Highway,
placement of a temporary causeway at the
Kendall Crossing, the upgrading of
hurricane shelters and maintenance of
highways, roads, culverts, streets and drains.
Some 11.6% was devoted to housing and
home improvement with funding being
provided by the Venezuelan grant.
Educational projects, such as technical and
vocational training, were allocated another
3.9%, while 5.7% went to health reform and
7.0% went to the Social Investment Fund and
Basic Needs Trust Fund. Agriculture and
natural resource projects received 8.2%, with
the land development and management
program being the largest item (4.3%). Other
notable capital investments were for the
modernizing of the Customs and Excise
ASYCUDA System, purchases of vehicles,
capital contributions to international
agencies, and the Corozal Free Zone
management.

CENTRAL GOVERNMENT OPERATIONS & PUBLIC DEBT

Box 3: Major Fiscal Initiatives in 2008

29th April, 2008 Funding of US$247,270.00 for projects targeting sustainable development in tourism
and the environment were approved by the Organization of American States (OAS) and secured under
the Special Multilateral Fund of the Inter-American Council for Integral Development (FEMCIDI).

2nd June, 2008 The Pension Act was amended to restore the pensions of retired public officers who
are re-employed in the public service, effective 1st April, 2008.

11th July, 2008 The Placencia Road Project commenced as Government signed a civil works contract
with Cisco Construction Ltd to upgrade approximately 20 miles of road between mile 21 of the Southern
Highway and the ending of the Placencia Airstrip. Funded mostly by a CDB loan of $25,881,550.73, the
works include the construction of embankments, sidewalks, concrete drainage structures, a double lane
bituminous running surface and a new multi-purpose center for Seine Bight community.

30th July, 2008 With the late conclusion of the Budget Debate in the House of Representatives, an Act
was passed to appropriate some $888,677,627.00 to cover government operations for the fiscal year
starting April 1st, 2008 and ending March 31st, 2009.

1st August, 2008 Statutory Instrument 77/2008 became effective and resulted in the removal of GST
from cooking oil, instant coffee, tea, chicken sausage, canned corn beef and powder milk as well as a
wide range of over-the-counter medicines, medical supplies and services. Statutory Instrument 78/2008
repealed the revenue replacement duty on aviation spirit, other motor spirit, jet fuel, diesel oil and fertilizer.

30th August, 2008 The Customs and Excise Act was amended (retroactive to 1st August, 2008) to
enable the Minister to remit custom duties in certain cases considered to be in the public interest; to vary
the rates of customs and excise duties on certain goods; and provide for the levying of excise duty on
locally refined fuel products.

(1) The Minister may remit, wholly or partially, the duties set forth in the 1st schedule in the following
cases:

a) Goods imported by charitable or religious organization, or registered NGO's which are aimed
at poverty reduction and not for commercial gain.

b) Goods imported for educational or charitable purposes.

c) Capital goods imported by small licensed hotel and guesthouse operators to improve
their properties.

d) Passenger vans of up to 18 seats imported by small licensed tour operators to improve
the quality of their services.

e) Farm machinery and implements imported by small farmers for use in their farming activities.

(2) Tariffs for feed concentrate for poultry, cattle, and pig were removed.

con't...

2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

Box 3: Major Fiscal Initiatives in 2008 (con't)

(3) The RRD on imported fuel was removed and replaced by flat taxes per gallon, which were added to
the existing custom duties:

Description of Goods

Aviation Spirit

Premium Gasoline

Regular Gasoline

Kerosene (jet fuel)

Rate of Duties

from 0 to $1.15 per Imp. Gal

from $0.54 to $1.38 per Imp. Gal

from $0.54 to $1.26 per Imp. Gal

from 0 to $1.27 per Imp. Gal

(4) Application of excise duty on locally refined fuel products:

Premium Gasoline

Regular Gasoline

Diesel

Illuminating Kerosene

Kerosene (Jet Fuel)

$1.52 per Imp. Gal

$1.42 per Imp. Gal

$0.49 per Imp. Gal

$0.14 per Imp. Gal

$1.27 per Imp. Gal

1st September, 2008 The Income and Business Act was amended to provide for the imposition of a
petroleum surcharge on revenues derived from petroleum operations when the price of crude oil is
above US$90/bbl on the world market and to provide for a more equitable sharing of revenues
between the Government and the oil companies.

16th December, 2008 Two loans from the Inter-American Development Bank were gazetted which
are intended to (1) assist the overnight tourism market by improving, restoring, and diversifying destination
and product and (2) improving solid waste management practices, reduce environmental pollution, and
enhance Belize's image in the eco-tourism market. The Sustainable Tourism Program was estimated at
a cost of US$13,322,000.00 with the IDB providing loan repayment terms of 25 years inclusive of a 56
month grace period at an adjustable interest rate, currently at 5.0% per annum. The full cost of the Solid
Waste Management Project was estimated at US$14,789,000 with the IDB providing US$11,150,000.00
repayable over 25 years inclusive of 54 months grace period and an adjustable interest rate, presently at
5.0% per annum.

30th December, 2008 The Income and Business Tax Act was amended to revise and rationalize the
business tax rates on telecommunication companies from 19.0% to 24.5% and Public Investment
Companies (PIC) from 8.0% to 12.0%, to become effective on 1st January 2009.

Sources: Belize Gazette, GOB Press Office, and the Laws of Belize

CENTRAL GOVERNMENT OPERATIONS & PUBLIC DEBT

Table 14: Central Government's Domestic Debt
$mn

Loans & Advances 129.1 151.2 152.0
Treasury Bills 100.0 100.0 100.0
Treasury Notes 55.8 55.8 65.8
Defence Bonds 15.0 15.0 15.0
Total 299.9 322.0 332.8
Sources: Ministry of Finance, Central Bank of Belize

Central Government's Domestic
Debt

Central Government's domestic debt rose by
3.4% to $332.8mn (12.0% of GDP) with the
government increasing its borrowing from
the Central Bank while reducing its reliance
on other entities. New borrowing consisted
of a $22.2mn increase in the Central Bank
overdraft balance and the issuance of
$10.0mn in new Treasury notes that were
taken up by the Central Bank. While new loans
were obtained from Atlantic Bank ($6.1mn)
during the year, these were paid off by
December.

In addition to paying off its overdraft at the

commercial banks, the government made
amortization payments of $23.7mn, with
some $21.lmn going to commercial banks
for the accelerated payment on the Marine
Parade infrastructural loan and the
retirement of all Atlantic Bank loans.
Payments to other non-bank entities
accounted for the $2.6mn remainder and
included the scheduled payments on the
GOB Debt for Nature Swap ($1.3mn) and
those to the BSSB ($0.7mn), RECONDEV
($0.5mn) and the Fort Street Tourism Village
($0.2mn). At year-end, Central Bank and the
commercial banks accounted for 63.8% and
28.5% of Central Government's domestic
debt.

Chart 21: Sources of Central Government's Domestic Debt

Central Bank Commercial Banks Other

I%

m2006

m2007

n 2008

Table 15: Public Sector External Debt by Source
$mn

Bilateral
Bonds
Commercial Banks
Multilateral
Suppliers Credit
Total

331.5
1,143.2
12.0
458.7
0.0
1,945.4

56.4
11.1
5.2
35.5
0.0
108.3

331.1
1,133.8
6.8
439.3
0.0
1,910.9

Of the $24.0mn in interest payments,
$13.0mn went to the Central Bank for short-
term credit provided through the overdraft
facility and Treasury bills, and the Central
Bank also received $5.1mn on its holdings
of long-term government securities. The
commercial banks received $2.4mn on
government securities and $1.7mn on
infrastructural loans, while non-bank entities
were paid $1.8mn on securities held and loans
extended.

The commercial banks ended the year
holding 88.6% of the Treasury bills available
after buying a total of $58.8mn from the
Central Bank and non-bank entities. The
Central Bank, on the other hand, saw its
holdings of longer term Treasury notes
increase by $18.6mn reflecting purchases of
notes valued at $8.6 from the commercial
banks and $10.0mn in newly issued notes
from the government. Non-bank entities also
bought $1.4mn in Treasury notes from the
commercial banks.

External Public Sector Debt

The public sector's external debt contracted
by 1.8% to 68.9% of GDP ($1,910.9mn) as

amortization payments, a loan transfer to the
private sector and downward valuation
adjustments of $108.3mn, $8.1mn and
$1.4mn, respectively, eclipsed loan
disbursements of $83.0mn, virtually all of
which went to Central Government. The
latter accounted for 95.1% of the outstanding
debt, while the financial and non-financial
sectors held 3.1% and 1.8%, respectively.

Bilateral disbursements consisted of $47.2mn
from Venezuela in the form of credit for fuel
imports and $9.0mn from ROC for hurricane
relief. The Venezuelan loan was a mixture of
short and long-term credit to finance fuel
purchases under the CARICOM-Venezuela
PETROCARIBE initiative. Multilateral
disbursements of $25.0mn included $16.5mn
from the CDB for projects such as the
reconstruction of the Placencia road,
modernization of the Customs & Excise
department, Health Sector Reform, ITVET
and SIF, $5.2mn from the Inter-American
Development Bank (IADB) and $3.4mn
from OPEC for the Belize City south-side
infrastructural project. Late participants in
the debt restructuring tendered commercial
debt to the Bank of New York in exchange

CENTRAL BANK OF BELIZE

2008 ANNUAL REPORT

CENTRAL GOVERNMENT OPERATIONS & PUBLIC DEBT

for $1.7mn in a replacement bond.

Central Government's loan repayments
totaled $88.5mn, of which $55.2mn went to
bilateral creditors, including $29.8mn to the
Government of Venezuela for fuel imports,
$17.0mn to ROC for housing and highway
rehabilitation and the retirement of loans
held with Allfirst Bank of Maryland and the
Government of Great Britain. Multilateral
lenders received $26.7mn and another
$5.0mn went to BWS Finance Limited on a
loan to purchase shares held by Cascal. The
financial public sector repaid $6.7mn to
multilateral lenders and $9.4mn to the Belize
Mortgage Company, while $8. lmn from the
DFC/EIB loan was transferred to the Citrus
Growers Association and subsequently
classified as a private sector loan. The non-
financial public sectors made $3.2mn in loan
repayments to CDB, Kuwait Fund and
Deutsche Bank.

Interest and other payments amounted to
$87.8mn, with Central Government
accounting for 93.0%, of which $47.0mn
went to holders of the bond that replaced
restructured debt. The Government also paid
$15.9mn to bilateral creditors and $17.5mn
to multilateral creditors. Interest payments by
the financial public sector equaled $4.6mn,
most of which went to the Belize Mortgage
Company ($4.1mn), while the non-financial
public sector made payments to CDB
($1.2mn) and Kuwait Fund ($0.3mn).

With an overall depreciation of the pound
sterling, Kuwait dinar and the euro against
the US dollar, the values of loans
denominated in these currencies were
adjusted downwards by $1.4mn.

I%

2008 ANNUAL REPORT
CENTRAL BANK OF BELIZE

Table 16: Public Sector and Publicly Guaranteed Debt

(in millions of BZ dollars)
Public Sector & Publicly Guaranteed Debt
Outstanding (end of period) 2,431.4 2,411.3 2,303.3

Public Sector Debt 2,299.2 2,283.3 2,255.2
External: 1,971.3 1,945.4 1,911.0
Central Government 1,821.0 1,824.0 1,817.6
Non-Financial Public Sector 42.3 38.3 35.1
Financial Public Sector 108.1 83.1 58.3
Development Finance Corporation 106.8 82.2 57.8
Of which is Bonds: 58.2 49.7 40.3
Central Bank of Belize 1.3 0.9 0.5
Domestic: 327.9 337.9 344.2
Central Government 299.9 322.0 332.8
Other Public Sector 28.0 15.9 11.4
Publicly Guaranteed Debt 132.2 128.0 48.1
External: 96.4 86.9 47.1
Other Public Sector 0.4 0.4 0.4
Privatized Enterprises 64.5 60.4 22.6
Private Enterprises 31.5 26.1 24.1
Domestic: 35.8 41.1 1.0
Private Enterprisesl) 35.8 41.1 1.0

(in percent of GDP)
Public Sector & Publicly Guaranteed Debt
Outstanding (end of period) 100.2 94.4 83.0

Public Sector Debt 94.8 89.4 81.3
External: 81.3 76.2 68.9
Central Government 75.1 71.4 65.5
Non-Financial Public Sector 1.7 1.5 1.3
Financial Public Sector 4.5 3.3 2.1
Domestic: 13.5 13.2 12.4
Central Government 12.4 12.6 12.0
Other Public Sector 1.2 0.6 0.4
Publicly Guaranteed Debt 5.4 5.0 1.7
External: 4.0 3.4 1.7
Other Public Sector 0.0 0.0 0.0
Debt for Privatized Enterprises 2.7 2.4 0.8
Private Enterprises 1.3 1.0 0.9
Domestic: 1.5 1.6 0.0
Private Enterprises 1.5 1.6 0.0
Sources: CBB, Ministry of Finance
(1) Includes the UHS debt which is currently being litigated in the court.

A deteriorating global environment and
domestic developments associated with the
change of government presented fresh
challenges for the Central Bank's management
in 2008. The latter brought to light a
controversial transaction in which official
grant funds had been diverted to repay a
private sector debt in contravention of the
grantor's specific written instructions. Since
there was no documentation to show that the
receiving commercial bank had been given
the appropriate authorization, the Central
Bank issued two directives specifying that the
funds should be returned to the government.
These directives were challenged in the courts
which subsequently ruled that the matter
should be decided by the Banks and Financial
Institutions Appeal Board before any
recourse to the judiciary is made. The bank
in question subsequently lodged its appeal
with the Board while simultaneously
challenging the constitutionality of Section
71 of the Banks and Financial Institutions Act
(BFIA) as well as the appointment of the
Appeal Board in the courts. The hearing of
the Appeal Board was therefore suspended

pending the outcome of the constitutional
challenge.

The sequence of events served to highlight
certain deficiencies in the BFIA and the need
for legislative strengthening as a matter of
priority. Notwithstanding these skirmishes,
the Central Bank was able to maintain its
primary focus of ensuring that the institutions
under its regulatory purview are managed in
a safe and sound manner in accordance with
the existing laws. As well as periodic onsite
examinations, continuous off site monitoring
was conducted facilitated by the regular
submission of prudential returns by these
institutions. International best standards and
best practices were encouraged, and
compliance with applicable laws was
enforced.

With respect to the global financial crisis,
while it was impossible for the financial
system to be completely insulated from the
turmoil, the local effects were contained to a
minimum since the Banks and Financial
Institutions Act and the Exchange Control
Regulations ensures that speculative flows are
not allowed within the banking system. Local
commercial banks relied largely on domestic

Table 17: List of Banks and Financial Institutions

I Domestic Banks International Banks0FinancialInsti

Alliance Bankof Belize Ltd.
Atlantic Bank Ltd.
Belize Bank Ltd.
First Caribbean Int'l Bank (Barbados) Ltd.
Scotiabank (Belize) Ltd.

Atlantc International Bank Ltd.
Belize Bank International Ltd.
Caye International Bank Ltd.
Choice Bank Ltd.
Handels Bank & Trust Company Ltd.
Market Street Bank Ltd.
The Oxxy Bank Ltd.
Provident Bank & Trust of Belize Ltd.

Unit Trust Corp. (Belize) Ltd.

2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

Table 18: List of Credit Unions

Belize Credit Union League Holy Redeemer Credit Union Ltd. St. John's Credit Union Ltd.
Blue Creek Credit Union Ltd. La Inmaculada Credit Union Ltd. St. Martin's Credit Union Ltd.
Citrus Growers & Wbrkers Credit Union Ltd. Mount Carmel Credit Union Ltd.11) Toledo Teachers Credit Union Ltd.
Civil Service Credit Union Ltd. Police Credit Union Ltd.11) Vesley Credit Union Ltd.
Evangel Credit Union Ltd. St. Francis Xavier Credit Union Ltd.
(1) Registered active credit unions remained at fourteen, although Vbunt Carrrel Credit Union Ltd. and Fblice Credit Union Ltd. are under
administration.

deposits to fundtheir operations and liquidity
was therefore not affected by the international
credit crunch. At the end of December the
domestic commercial banks reported capital
to risk weighted assets ratios ranging from
10.2% to 22.2%, well above the 8% minimum
requirement established by BASLE. All of
the domestic banks also held comfortable
liquidity positions.

The safety of the financial system was also
fostered by the Central Bank's use of a risk
focused approach during its on-site
examinations of two domestic banks, a
related subsidiary bank, two international
banks and two credit unions in 2008. These
reviews evaluated statutory compliance,
adherence to anti-money laundering/counter
terrorism financing regulations, institutional
viability and prudential performance as it
relates to solvency, liquidity, capital adequacy
and risk management.

Seven applications from banks for extensions
of credit facilities that exceeded 25% of their
paid-up and unimpaired capital and reserves
were received and processed. Of these,
approval was granted for domestic banks to

advance BZ$132.7mn and for international
banks to advance US$25.2mn to specific
customers.

In other developments, while the number of
licensed domestic banks remained at five
during the year, a Class 1 financial institution
licence was granted to MicRoe Finance
Company Limited in October. Work also
continued on the processing of three
applications for international banking
licences received in the previous year. After
receiving its "A" Class international banking
licence in December 2007, Choice Bank
Limited began operations in April 2008,
while Scotiabank (Belize) International
Limited was granted approval for an "A"
Class international banking licence. The latter
should commence operations once all pre-
opening conditions are satisfied. On the other
hand, Investment & Commerce Bank
Limited, another international bank,
completed voluntary winding-up procedures,
while a second international bank, The Oxxy
Bank Limited, is in the process of voluntary
winding-up.

The Inter-American Development Bank

SUPERVISION OF BANKS, FINANCIAL INSTITUTIONS
& CREDIT UNIONS

Chart 22: Domestic Banking System Capital Adequacy

22.31%

21.34%
19.27%

A A A

2007

2006

2008

---Capital /Risk Weighted Assets
-a- International Benckmark (8.0%)

--*-Belize's Legal Requirement (9.0%)

Chart 23: Domestic Banking System Efficiency

70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

50.56%

51.92%

58.76%

0.0% M
2006 2007 2008
Operating Expenses/Adjusted Operating Income
---International Benchmark (60.0%)

Chart 24: Domestic Banking System Profitability

25.0%

20.0%

15.0%

10.0%

5.0%

0.0%

2006

2007

2008

--Return on Avg Assets (ROA)

25.0%
23.0%
21.0%
19.0%
17.0%
15.0%
13.0%
11.0%
9.0%
7.0%
5.0%

21.88%

18.70%

13.33%

3.50%*3.12% 1.99%

-*-Return on Avg Equity (ROE)

2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

Technical Assistance for Banking and Non-
Banking Supervision Project which was
scheduled to end in December 2007 was
extended until August 2008. The Project
improved the supervision of Belize's
financial system and included the initiation
of three new in-country training and technical
assistance programs, the completion of
training in Microfinance Regulation and the

procurement of hardware for establishing a
Remote Access Infrastructure. The three
training programs were conducted by
Bankworld Incorporated, a financial services
consulting firm which specializes in training
of commercial and central banks and the
Microfinance Regulation training was
completed by the IRIS Center, an NGO
which specializes in micro-finance training.

Foreign Exchange Operations

In 2008, the Central Bank's foreign currency
trading in dollars (US and Canadian) and
Pound Sterling yielded net purchases of
$114.5mn with purchases exceeding sales in
eight out of the twelve months. Significant
inflows included net purchases of
US$54.4mn from commercial banks,
US$26.4mn from Belize Natural Energy and
US$25.8mn from BSI. Among the other
notable inflows were a loan disbursement of
US$4.5mn in January, grants of US$12.5mn
received in July and September from ROC/
Taiwan, and US$10.0mn received from
Belize Bank Ltd. in August as the Venezuelan
housing funds were returned to the
government. The largest external payments
consisted of the semi annual interest paid in
February and August to foreign bond
holders of government's restructured debt.

Chart 25: Central Bank E
60

50

40 I

Trading in CARICOM currencies was mostly
for settlement of official transactions and
resulted in net sales of $2.6mn during the year.

External Assets Ratio

Section 25(2) of the Central Bank of Belize
Act 1982 stipulates that it should maintain
external assets that amount to at least 40%
of the currency notes and coins in circulation
and the Central Bank's domestic deposit
liabilities. This ratio was maintained above
the legal threshold throughout the year, and
while fluctuating, trended upwards largely in
response to improvements in external assets
arising from the substantial foreign inflows
into the Central Bank. The ratio fell in
February to 45.2% due to sizeable payments
made to government's external creditors that
included bond holders of the restructured
debt. In March, a further dip occurred to its
lowest level (43.6%) because of an increase
in currency in circulation during the Easter

dealings in Foreign Exchange

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
n Purchases Sales

Chart 26: External Asset Ratio

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

n Foreign Assets / Domestic Liabilities - -*- -- External Assets Ratio

month and a liquidity buildup by the
commercial banks. It was at its highest in
October (67.7%) due to a sharp fall in the
domestic deposit liabilities as commercial
banks significantly boosted their holdings of
government securities, while reducing cash
deposits at the Central Bank. By year-end, the
ratio had leveled at 60.2% in response to
scheduled external debt payments for
government and the seasonal increase in
currency in circulation during the Christmas
period. At the end of December, the Central
Bank's external assets amounted to $311.4mn
that consisted of 90.6% in cash and fixed

deposits, 7.1% in foreign securities and 2.3%
in holdings of SDR with the International
Monetary Fund.

Relations with Commercial Banks

Cash Balances

The commercial banks' cash reserve
requirement remained unchanged at 10.0%
throughout 2008. During the first half of the
year when foreign inflows into the banking
system from exports of goods and services
were at their highest, the banks' cash holdings

Table 19: Commercial Bank Balances with the Central Bank

January 1,bI/.a i ./ 1 b ./ 11.U
February 1,606.7 160.7 170.0 9.3
March 1,631.9 163.2 178.8 15.6
April 1,671.8 167.2 183.2 16.0
May 1,693.7 169.4 195.3 25.9
June 1,724.7 172.4 203.0 30.6
July 1,737.2 173.7 188.9 15.2
August 1,760.6 176.1 189.7 13.6
September 1,767.6 176.8 195.4 18.6
October 1,781.6 178.2 188.3 10.1
November 1,775.8 175.6 181.9 6.3
December 1,770.7 177.1 192.2 15.1

CENTRAL BANK OF BELIZE

2008 ANNUAL REPORT

OPERATIONS

Table 20: Currency in Circulation
$mn
MONTH otes Cins Toa I Comercia Bank u rreny wit

163.6
163.6
169.3
163.2
163.1
161.6
158.0
160.6
155.6
155.3
161.1
175.0

180.8
180.9
186.8
180.8
180.9
179.4
175.9
178.6
173.6
173.3
179.1
193.2

148.7
154.5
155.1
149.4
155.0
152.5
144.2
149.4
143.3
145.1
148.9
153.9

at the Central Bank increased consistently.
Monthly excess cash holdings averaged
$18.lmn during this period, peaking in June
at $30.6mn. Lending activity and increased
purchases of government securities during
the second semester brought down the
average monthly excess holdings to $13.2mn.
November was the month with the smallest
excess cash holdings, which partly reflected
the decision by commercial banks to
minimize their excess cash balances with the
Central Bank, while boosting their holdings
of government securities from $56.7mn in
September to over $80.0mn. Commercial
banks' sale of foreign exchange to the Central
Bank to meet cash reserve requirements
increased by $34.3mn over 2007, with most
of the sales occurring in the first part of the
year. In the second half of the year that
includes the off peak tourism season, these
sales tapered off while activity in the
interbank market rose.

At the end of December, currency in

circulation was $7.4mn (4.0%) higher than in
December 2007 entirely due to an increase
in commercial bank vault cash since currency
held by the public remained virtually flat.
Unlike the previous year when currency held
by the public trended generally upward,
fluctuations in 2008 were in a relatively
narrow range about the monthly average of
$150.0mn with a high of $155.1mn and a low
of $143.3mn. Vault cash holdings were also
relatively stable throughout the year until
December, when holdings rose sharply by
$9.lmn to its highest level. The ratio of notes
and coins was relatively constant with notes
accounting for approximately 90% of the
currency issue. The demand for currency
peaked in March, the Easter season, and
increased once again in December, a peak
sales period for businesses. Currency
holdings with the public was at its highest in
March, May, February and December in
descending order of magnitude and was at
its lowest in September and October.

Jan uary
February
March
April
May
June
July
Aug ust
September
October
November
December

O

Chart 27: Inter-bank Market Activity

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
-*- Offered -- Borrow ed

Inter-Bank Market

Inter-bank lending activity accelerated further
in 2008 with commercial banks routinely
utilizing the facility each month to maintain
their cash balances at the Central Bank within
the required level. Borrowing was more low-
keyed during the first semester because of
the seasonal build-up in bank liquidity.
However, the volumes borrowed picked up
markedly in the second half of the year, when
credit growth continued to expand and

foreign inflows tightened. An average of
approximately four loans was made each
month with activities for the year summing
to 84 offers and 44 loans. While the typical
offer was for approximately $5.7mn, actual
loans worked out to an average of $5.2mn
extended over an average period of fifteen
days. This compared favorably with 2007
when actual loans averaged $3.3mn and the
average loan period was eleven days.

Chart 28: Central Bank Holdings of Government Securities

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

CENTRAL BANK OF BELIZE

2008 ANNUAL REPORT

70
60
50
2 40
40
E 30
69-

s Treasury Bills

-m Treasury Notes

--Treasury Bonds

OPERATIONS

Chart 29: Central Bank Overdraft Financing to Central Government
180
160
140 r \

120
100

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Transactions with Central
Government

Under Section 34 of the Central Bank of
Belize Act, 1982 as amended in 1993, the
Central Bank may extend advances to
Government up to a maximum of 20% of
current revenue collected during the
preceding financial year. Up to March, the
legal ceiling was $117.3mn and in April, this
increased by $17.7mn to $135.0mn. In
February and March, the government
exceeded its overdraft limit largely to meet
external debt payments with advances
peaking at $157.0mn in March. Thereafter,
the overdraft balance fell consistently in the
next four months to its lowest level of
$91.0mn in July due to improvements in
government's revenues arising mostly from
petroleum royalties/taxes, the general sale tax
(GST) and a substantial grant receipt. The
return of the Venezuelan housing funds in
August and receipt of the second tranche of
the ROC/Taiwan grant in September enabled
the government to keep its Central Bank
advances below $ 100.0mn in those months.

By year-end, however, the overdraft balance
had risen to $131.0mn with the largest
increase occurring in December as
government paid off all its Atlantic Bank's
loans and met its external debt payments.

Treasury Bills

The value of Treasury bills available for trade
in the secondary market remained at
$100.0mn, the level to which it had been
raised in 2006. The yield also remained fixed
at the 3.25% set in November 2002. During
the year, the Central Bank and three
commercial banks dominated the markets,
although three insurance companies also
participated on a very limited scale. In
contrast to the previous year when monthly
holdings of Treasury bills averaged $66. mn,
the Central Bank's average monthly holdings
fell to $38.7mn as the commercial banks
increased their purchases during the year. In
October, the amount held by the commercial
banks rose sharply by $23.4mn to $80.2mn,
and this increased further to $88.6mn in
December, leaving Central Bank with only

MOM ME N

2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

$10.lmn and smaller investors with $1.3mn.

Treasury Notes

At the start of the year, $56.8mn in Treasury
notes was outstanding. In December, this
amount rose to $66.8mn as government
issued another $10.0mn in one-year notes, all
of which were taken up by the Central Bank.
Notwithstanding efforts to widen market
participation by institutional and individual
investors, trading in Treasury notes was
sporadic during 2008. The commercial banks
held onto $10.0mn in Treasury notes in nine
of the twelve months, divesting the entire
amount to the Central Bank in May, June and
December. On the other hand, purchases by
small investors increased by 32.5% to $5.6mn
during the year. At the end of 2008, the
Treasury note issue consisted of $35.0mn in
one-year notes and $31.8mn in five-year notes.
Except for the small amount of $0.3mn that
carried a 1.0% nominal rate, all Treasury
notes had been offered at the rate of 9.0%.

Information Systems

Among the major projects spearheaded by
the Information Technology Department
(ITD) was the implementation of the SWIFT
Relationship Management Application
(RMA) in September 2008. The RMA
replaced the outdated Bilateral Key
Exchange (BKE) method of digital
certification and marked the completion of
the last milestone of the full SWIFTNET

Phase 2 migration project.

After a series of testing, the time and
attendance system was implemented in
December. The ITD was also instrumental
in upgrading the Commonwealth
Secretariat's debt recording system, the CS-
DRMS application, from version 1.2 to
version 1.3 in June 2008 as well as installing a
new database server for the Prophecy
financial system in the first quarter of 2008.

The ITD completed the improvement of the
Central Bank's network infrastructure with
the upgrade of the network switches in all
the network segments. Two virtual local area
networks (VLANs) were introduced in late
2008 as the Central Bank subdivided its
physical network into multiple VLANs.
These VLANs alleviated the shortage of IP
addresses and improved network security.
The remote connectivity capability between
the Central Bank's staff and its corporate
network was fully tested in 2008, and the
target date for final implementation will be
in the first quarter of 2009.

To improve the system's security against virus
threats, the ITD introduced a new version of
the CA Etrust anti-virus software and
upgraded the mechanism to deploy the anti-
virus signatures across the network. In
addition, a new application and network
domain server improved disaster/recovery
plans.

Financial Performance

The Central Bank's financial statements for
the year ended December 31, 2008 with
comparative figures for the previous year are
annexed to the report.

was recorded. Gross earnings totaled
$25.7mn that included interest income of
$24.0mn and $1.7mn in commissions and
other income. Domestic operations
contributed 78.0% of the Central Bank's
earnings with 47.0% coming from its lending
to Central Government.

Chart 30: Assets

2UU/

2UUO

*ExternalAssets g Domestic Assets gTotal Assets

During the year, the Central Bank's assets
increased by 20.8% to $554.5mn. The latter
reflected an increase of 57.6% (to $311.4mn)
in external assets and a decrease of 7.0% (to
$243. mn) in domestic assets.

A net operating surplus of $9.6mn, which was
in line with the previous year's performance,

Current expenditure totaled $16.0mn with
staff costs, interest payments and other
operating cost accounting for 46%, 13% and
41% respectively.

As provided for under Section 9(1) and
Section 50 of the Central Bank Act, $0.9mn
(10% of the net operating surplus less any

Chart 31: Foreign and Local Income

F FX Trading
4%

Govt Securities
24%

600,000 -

500,000-
400,000-
300,000-
200,000-
100,000-

For.. n in.:om.
22

\A

Govt Advance
47%

M isc
3%

2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

revaluation loss) will be paid into the Central
Bank's General Reserve Fund. The balance
of $8.0mn will be transferred to the
Accountant General for Government's
Consolidated Revenue Fund.

The Board of Directors

In April 2008, a new Board of Directors was
appointed. The Board, which is the policy
making organ of the Bank, met 11 times
during the year and considered 82
submissions.

statutory reserve requirements, the Central
Bank's pension fund and the accounts of the
Staff Club.

A new Audit Committee was appointed
during the year, and Internal Audit provided
assistance in the work of updating its Charter
and developing a framework for semi-annual
reviews of the external auditors. Internal
Audit also facilitated the Audit Committee's
review of the Central Bank's audited financial
statements and management letter.

Human Resources
Internal Audit

Internal Audit continued its initiative to raise
awareness of the Enterprise Risk
Management (ERM) approach within the
Central Bank during the year. Its efforts
included conducting an employee survey to
establish a baseline position on staff
perception of the Central Bank's culture and
internal working environment. The survey
results highlighted the need for improved
information and communication at all levels
within the organization. A committee was
consequently set up to develop and
implement a communication plan that is
expected to enhance internal cohesiveness,
improve productivity and efficiency and add
to job satisfaction.

In addition to its general administrative
functions and routine monitoring of Central
Bank operations, audits were conducted of
the reconciliation process for the 2007
financial accounts, procedures for monitoring
compliance with the commercial banks'

The work of Human Resources is guided by
its mission to improve efficiency and
productivity, employee development and
satisfaction, and to foster the development
of a culture that is conducive to a positive
job performance. In addition to its traditional
dealings with compensation/benefits and
employee relations, the human resource
function has been steadily moving towards a
more strategic role in planning and decision-
making in the Bank.

Aimed at delivering increased value to the
Central Bank, several activities and
achievements were accomplished in 2008 in
terms of strategic commitment.

Training and Development

To support the development of the Central
Bank as an organization responsive to
individual and organizational needs, human
resources engaged in several initiatives aimed
at increasing opportunities for professional

ADMINISTRATION

development. These included a variety of
customized training courses and workshops
facilitated by the University of the West Indies
Open Campus (Belize) to develop
competencies in team work, supervision,
strategic human resources management and
time management. In addition, staff also
participated in training on report writing and
refresher courses in grammar. Being mindful
of its corporate responsibility, the Central
Bank trained all staff in basic first aid
including cardiopulmonary resuscitation
(CPR) with assistance from the Belize Red
Cross.

The staff's technical skills and knowledge
were also strengthened through other local
and overseas training courses. Locally, the
University of Belize (UB) faculty of
Information Technology facilitated advanced
training in the Microsoft suite of programs
and in-house training was delivered in Crystal
Report Writing. To develop in-depth
specialization and expertise, a total of twenty-
seven staff members, at the management and
professional levels, participated in overseas
training seminars and workshops in sub-
specialties of bank supervision, banking,
economic research, internal audit, and
information technology.

Employee Relations and Management
Services

Under the theme, "What a mind can conceive
and believe can be achieved", the Central
Bank recognized fourteen employees with 10,
15 and 20 years of service at the Annual

Employee Recognition Ceremony. The
"Governor's Choice" award that offers an
employee a full scholarship to a local
university was presented to Mrs. Concepcion
Flores, Manager, International Payments Unit
in the Research Department. Mrs. Flores has
been working with the Central Bank for over
twenty-three years. An additional 4
employees were granted various education
awards and study leave to pursue higher level
education.

A new biometric time and attendance
management information system, WinTA,
was put into production in the last quarter
of 2008. The system is designed to capture
employees' time and attendance using a smart
card and scanned fingerprint images. This has
eliminated manual recording, improved
employee punctuality, and facilitated real-
time monitoring.

Furthermore, to demonstrate commitment
to the wellbeing of its staff, the Central Bank
implemented a comprehensive loans policy
that introduced residential mortgage loans
and improved terms and conditions for
consumer loans.

Staffing

In October, the Central Bank welcomed a
new executive management. Mr. Glenford
Ysaguirre, the Deputy Governor, Operations
was appointed Governor while Mrs. Christine
Vellos and Mrs. Marilyn Gardiner-Usher were
also appointed as Deputy Governor,
Economic Intelligence and Deputy

2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

Governor, Operations respectively. The
Central Bank bade farewell to some long
standing employees including, Mr. Sydney
Campbell, Governor, Mr. Marion Palacio,
Deputy Governor, Economic Intelligence,
and Mrs. Suad Holder, Chief Internal
Auditor.

The staff turnover rate increased slightly
during the year from 4.0% in 2007 to 5.1%
in 2008, with 15 new hires, 3 resignations, 3
contract terminations and 2 retirements. At
the end of 2008, the staff complement
increased to 161 persons including 10
contract officers, 147 permanent staff
members, and 4 temporary persons.

Industrial Relations

On 1 September 2008, negotiations with the
Public Service Union that commenced in
2007 were successfully concluded. As part of
the agreement, the Central Bank's Board of
Directors approved a salary increase as well
as improved benefits for the security staff
members who comprised the bargaining unit.

Corporate Relations

In support of the development of national
education, 1 student at the universitylevel and
5 from junior colleges were accepted for
temporary by the Central Bank to meet their
core requirements for graduation through
participation in tertiary level internship
programs. Meanwhile, at the secondary level,
3 senior students participated in the work-
study programs at the Bank and 8 tertiary

level students were given the opportunity to
develop their practical skills under the Central
Bank's Summer Employment Program.

To recognize World Diabetes Day, a staff
member voluntarily facilitated an awareness
program by testing the blood glucose level
for 60 staff members. In addition, a total of
24 staff members participated in the Belize
Cancer Society's Annual Walk and 31 staff
members volunteered blood donations to the
Belize Blood Bank. As is now customary, the
staff gave generously to the annual Salvation
Army Christmas Appeal, donating the
highest amount to date.

Staff Club

The mission of the Staff Club is to promote
unity among staff, by improved internal and
external relations, and mental and physical
well being through coordination of social and
recreational activities. Consequently, in
addition to organizing social activities for
staff, the Club engaged in several community
services including coordinating relief efforts
for Belizean flood victims, visits to geriatric
centers and the orphanage, and providing
assistance to two needy families.

Communications

In today's business environment effective
internal and external communication has
significant impact on the accomplishment of
the organization's strategic goals. Under the
patronage of the Deputy Governor,
Operations, a project team was consequently

ADMINISTRATION

appointed to develop a comprehensive
communications plan. The plan is expected
to be completed by the end of the second
quarter in 2009 and will provide a framework
to develop and coordinate all internal and
external communication. It is expected that
in addition to facilitating appropriate
responses to internal and external threats, the
project will promote the sharing and

dissemination of vital information to staff
with the aim of improving their productivity,
morale, job satisfaction, commitment, and
teamwork. It is also hoped that the Central
Bank's external communications will improve
with the delivery of timely and accurate
information to all domestic and international
stakeholders.

Box 4: Meetings and Conferences Attended by the Governor and Deputy Governors

Nanrof eetng/onfeenc-Moth--ac

6th Annual Bear Steams Latin American &Caribbean Markets Conference

2008 leadership Best Practices Program at Harvard Business School

CCMS 12th Annual Senior Level PolicySeminar
Meeting on MonetaryUnion at Central Bank of Trinidad &Tobago

Meeting of CARICOM Central Bank Governors

BIS Meeting on Research Management

Federal Reserve Bank of New York Meeting
Central Bank Seminar at Federal Reserve Bank

Meeting of CARICOM Central Bank Governors

CARTAC Steering Committee Meeting

CEMLA's XII Meeting on Central Bank Communications and Seminar
on Web Technologies

January

February

June

ttober

Cttober/November

November

November/December

Miami, UEA

Boston, USA

Port of Spain, Trinidad

Port of Spain, Trinidad

Cusco, Peru

New York Cty, USA

Port of Spain, Trinidad

Nassau, Bahamas

Rio de Janeiro, Brazil

A. Monetary Policy Developments

1998 (1st 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 (3rd 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 (2nd January) Amendments to the Exchange Control Regulations that allowed the licensing and
operations of Casas de Cambios became effective.
(1st 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".
(28th 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.
(1st November) The cash reserve requirements on demand, savings and time deposit liabilities
were harmonized at 6.0%.

2004 (29th 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.
(1st 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%.
(1st 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.
(1st December) Commercial banks' cash and liquid asset ratios were increased from 6% to 7%
and from 19% to 20%, respectively.

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

APPENDICES

2006 (1st January) Commercial banks' cash and liquid asset ratios were raised from 8% to 9% and from
21% to 22% respectively.

(1st January) The Central Bank disallowed the process of co-mingling domestic and offshore
deposits and required the commercial banks to transfer all foreign currency deposits belonging to
non-residents to their offshore branches as stipulated under the International Banking Act.

(1st September) Commercial banks' cash and liquid asset ratios were raised from 9% to 10% and
from 22% to 23% respectively.

2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

B. Statistical Appendix

Table A.1: GDP by Activity at Current and Constant 2000 Prices

$mn
2004 20s5 20 20 2

GDP at current market prices

GDP at constant 2000 market prices
Primary Industries
Agriculture, hunting & forestry
Fishing
Secondary Industries
Manufacturing (incl. mining and quarrying)
Electricity & Water
Construction
Tertiary Industries
Wholesale & retail trade
Hotels & restaurants
Transport & Communications
Other Private Services excl. FISIM
Producers of Government Services
All Industries at basic prices
Taxes less subsidies on products

2,110.4 2,229.6 2,426.2 2,553.5 2,773.4

2,099.5
371.4
237.6
133.8
326.6
187.5
64.3
74.7
1,113.0
306.1
84.4
201.1
326.2
195.3
1,810.5
289.0

2,163.1
382.4
235.5
146.9
315.9
179.9
64.0
72.0
1,172.7
322.6
88.1
218.8
345.1
198.0
1,878.0
285.1

2,263.8
358.1
233.7
124.4
395.8
234.8
90.4
70.6
1,192.5
326.6
87.5
226.4
364.3
187.7
1,955.4
308.3

2,291.3
283.9
230.4
53.5
404.9
243.8
92.6
68.5
1,250.1
331.7
92.0
256.0
373.8
196.6
1,949.4
337.2

2,339.0
256.6
207.0
49.6
463.4
275.6
95.2
92.6
1,285.8
343.9
89.3
268.7
382.4
201.5
2,005.8
333.2

Source: Statistical Institute of Belize

Table A.2: Annual Percentage Change in GDP by Activity at Current and Constant
2000 Prices
Percent

GDP at current market prices 6.8% 5.6% 8.8% 5.2% 8.6%

GDP at constant 2000 market prices 4.6% 3.0% 4.7% 1.2% 2.1%
Primary Industries 9.5% 3.0% -6.4% -20.7% -9.6%
Agriculture, hunting & forestry 11.9% -0.9% -0.8% -1.4% -10.2%
Fishing 5.5% 9.8% -15.3% -57.0% -7.4%
Secondary Industries 7.2% -3.3% 25.3% 2.3% 14.4%
Manufacturing (incl. mining and quarrying) 11.8% -4.1% 30.5% 3.8% 13.0%
Electricity & Water -1.5% -0.5% 41.3% 2.4% 2.8%
Construction 4.6% -3.6% -2.0% -3.0% 35.2%
Tertiary Industries 3.2% 5.4% 1.7% 4.8% 2.9%
Wholesale & retail trade -0.1% 5.4% 1.2% 1.6% 3.7%
Hotels & restaurants 8.3% 4.5% -0.7% 5.1% -3%
Transport & Communications 5.0% 8.8% 3.5% 13.1% -4.9%
Other Private Services excl. FISIM 5.3% 5.8% 5.6% 2.6% 2.3%
Producers of Government Services 1.3% 1.4% -5.2% 4.7% 2.5%
All Industries at basic prices 5.2% 3.7% 4.1% -0.3% 2.9%
Taxes less subsidies on products 1.4% -1.3% 8.1% 9.4% -1.2%
Source: Statistical Institute of Belize

APPENDICES

Table A.3: Bona fide Tourist Arrivals & Expenditure

Stayover Arrivals
Air 179,892 184,332 179,032
Land 49,398 47,253 46,135
Sea 8,550 9,990 9,540
Total stayovers 237,839 241,575 234,706
Cruise Ship Arrivals 590,338 560,478 537,632

Tourist Expenditure ($mn) 509.4 567.2 550.4
Sources: Immigration Department, Belize Tourism Board, Central Bank of Belize

Table A.4: Quarterly Percentage Change in CPI Components
by Major Commodity Group

Food, Beverage and Tobacco 346.6 3.6 4.3 5.8 0.9 13.3
Clothing and Footwear 92.0 -0.7 -0.1 -0.1 -1.0 -0.9
Rent, Water, Fuel and Power 167.0 -0.3 1.0 0.7 -1.4 3.6
Household goods & Maintenance 85.3 0.2 1.3 0.5 -1.0 1.9
Medical Care 20.1 1.4 0.7 1.4 -1.1 3.0
Transport and Communication 170.1 0.2 5.5 1.3 -12.7 3.5
Recreation Education, Culture 80.4 0 0.8 0.2 0.3 0.7
Personal Care 37.9 -0.1 1.9 1.3 0.3 2.1
All items 1000.0 1.3 3.1 2.7 -2.7 6.4
Source: SIB

Table A.5: Balance of Payments MerchandiseTrade

$mn

Goods Exports, f.o.b. 854.3 851.1 929.5 9.2%
of which: Domestic Exports 543.4 496.6 557.8 12.3%
CFZ sales 277.0 310.5 330.3 6.4%
Other Re-exports 33.9 44.0 41.3 -6.2%
Goods Imports, f.o.b. 1,223.9 1,284.0 1,576.3 22.8%
of which: Free Circulation Area 1021.3 1044.5 1,292.6 23.8%
CFZ(1) 202.6 239.6 283.6 18.4%
Merchandise Trade Balance -369.6 -432.9 -646.8 49.4%
(1) This CFZ item excludes fuel and goods obtained from the free circulation area.

Table A.6: Domestic Exports

$mn
0 2I. I7 2I;

Traditional Exports
Sugar
Citrus Juices(1)
Citrus Concentrate
Not-from-Concentrate
M classes(1)
Bananas
Marine(1)
Garm ents
Papayas
Petroleum (2)
Non-traditional Exports
Total Exports
Sources: SIB, BSI, CPBL, CBB
(1) Reflect actuals sales and not export
(2) Estimated F.O.B value of petroleum

436.2
100.1
120.1
120.1
0.0
6.3
50.6
91.6
36.6
31.0
77.0
30.3
543.4

348.9
88.1
106.1
106.1
0.0
5.8
39.8
64.2
18.8
26.1
122.1
25.6
496.6

shipments as reported by SIB
shipm ent.

Table A.7: Exports of Sugar and Molasses

96,309
55,567
18,794
19,660
2,288

100,065
65,330
17,505
15,044
2,186

83,132
67,187
13,143
2,215
587

88,142
75,105
10,302
2,160
575

66,277
65,625
0
310
341

71,384
70,751
0
302
330

Molasses(2) 35,100 6,264
Sources: Belize Sugar Industries, SIB
(1) Reflects value of export shipments.
(2) Relect actual sales as reported by the processor.

41,097 5,805

32,843 3,559

Table A.8: Exports of Bananas

Volume (m etric tons) 70,971 61,811 77,934
Value ($m n) 50.3 39.8 64.0
Source: SIB
(1) Adjusted for the US $0.24 per 40 pound box to cover out of quota
tariff costs for the 2007 shipments.

CENTRAL BANK OF BELIZE

2008 ANNUAL REPORT

320.8
71.4
89.7
89.7
0.0
3.6
64.0
69.5
0.3
22.4
203.2
33.8
557.8

Sugar'(1
E.U.
USA
CARICOM
Other

APPENDICES

Table A.9: Export Sales of Citrus Juices and Pulp(')

Concentrate ('000 ps) 42,793 32,399 37,115
Orange 36,156 28,819 31,012
Grapefruit 6,637 3,580 6,103
Concentrate value ($m n) 120.1 106.1 89.7
Orange 94.9 94.3 76.6
Grapefruit 25.2 11.9 13.1
Not-from-concentrate Exports ('000 ps) 1 0.0 1.5
Orange 1 0.0 1.5
Grapefruit 0 0.0 0.0
Not-from-concentrate Value ($m n) 0.0 0.0 7.4
Orange 2.1 0.0 7.4
Grapefruit 0.0 0.0 0.0

Pulp Export ('000 pounds) 2,002 2,287 1,726
Pulp Value ($m n) 1.1 1.5 1.3
Source: Citrus Products of Belize Ltd
(1) Reflects actual sales as reported by the processor and not the value of export shipments
as reported by the SIB. Export shipments go to inventory for sale at a later point in time.

Table A.10: Exports of Marine Products

Lobster Tail 392.44 13,884 443 15,997 429.91 14,665
Lobster Head 6 43 15 99 19.2 144
Shrimp(1) 17,662 68,082 11,885 41,741 10,467 43,786
Conch 707 8,109 526 5,389 649 6640
Whole/Fillet Fish 540 1,210 363 928 2602 4,272
Other 25.3 250 3 20 0 0
Total 19,333 91,578 13,235 64,174 14,166 69,507
Source: SIB
(1) Data reflect actuals sales and not export shipments as reported by SIB.

Table A.11: Other Major Exports

Garm ents
Volum e (m n Ibs) 3.6 1.7 0.03
Value ($m n) 36.6 18.8 0.3
Papayas
Volume e ('000 Ibs) 76,004 72,943 63,716
Value ($m n) 31 26.1 22.4
Petroleum (1)
Volum e (barrels) 714,004 956,476 1,189,587
Value ($m n) 77.0 122.1 203.2
Source: SIB
(1) Quality differnetials and international transportation cost w as taken
out of the C.I.F. value as reported by the SIB to derive a F.O.B.value.

2008 ANNUAL REPORT

Table A.12: Gross Imports (CIF) by SITC Categories

-I T C .g IIyE 2004,20IIIi -0 20I0 2i0;

0 Food and Live Animals
1 Beverages and Tobacco
2 Crude Materials
3 Fuels and Lubricants
Of which electricity
4 Animal and Vegetable Oils
5 Chemicals
6 Manufactured Goods
7 Machinery and Transport Equipment
8 Miscellaneous Manufactured Goods
9 Commodities not classified elsewhere
Export Processing Zones
Personal Goods
Total
CFZ Direct Imports
Grand Total
Sources: SIB, CBB

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
901.1
156.6

120.7
10.5
9.1
236.0
40.3
3.2
88.7
138.9
199.8
101.1
0.0
124.7
2.7
1,035.4
190.7

118.2
11.2
10.9
246.5
33.2
3.9
93.6
164.2
219.1
102.4
0.0
157.9
3.4
1,131.4
222.6

135.6
12.2
12.9
266.0
46.4
4.0
102.0
164.2
251.2
101.8
0.0
98.5
3.3
1,151.8
263.3

160.2
15.5
12.7
337.5
66.3
5.8
118.1
230.9
351.6
100.0
1.6
91.8
3.3
1,428.9
311.7

1,057.7 1,226.1 1,354.0 1,415.1 1,740.6

Table A.13: Balance of Payments Service, Income and Current Transfers

$mn
2006 20 I I20;
Oi Debit Net Qe Debit Net Ci Dt N

Transportation
Travel
Cther Goods and Serices
Govt. Goods and Services, N I.E
Inoore
Labour I income
Investment Incomel)
Current Transfers
Gomemment
Private

7258 304.3 421.4
57.1 109.1 -52.C
520.2 82.1 438.C
100.9 95.4 5.
47.6 17.7 29.
202 270.8 -250.E
11.9 11.4 0.I
8.3 259.4 -251.1
184.3 36.4 147.S
21.8 4.9 17. C
162.5 31.5 131.C

7962 336.3 459A
59.8 113.8 -54.0
577.3 85.5 491.8
100.7 118.7 -18.0
58.3 18.3 40.0
139 331.8 -317.9
4.7 10.4 -5.7
9.2 321.4 -312.2
273.1 86.3 186.8
81.9 50.3 31.6
191.2 36.0 155.2

(1) Data indudes an esti mate for profit remittances fromthetourism industry.

777.6 338.7 438.9
50.0 138.9 -88.8
562.2 81.6 480.6
104.0 100.8 3.1
61.4 17.4 44.0
11.7 3344 -322.7
4.7 12.5 -7.8
7.0 321.9 -314.9
282.2 59.1 223.1
56.5 11.3 45.1
225.7 47.7 178.0

CENTRAL BANK OF BELIZE

APPENDICES

Table A.14: Balance of Payments Capital and Financial Accounts

$mn

CAPITAL ACCOUNT 18.3 8.2 18.1
General Government 16.1 6.9 16.8
Other Sectors 2.2 1.3 1.3
FINANCIAL ACCOUNT 148.2 219.5 418.1
Direct Investment Abroad -1.1 -2.0 -5.5
Direct Investment in Belize 217.7 280.7 357.5
Portfolio Investment Assets -0.5 -0.8 5.8
Portfolio Investment Liabilities -42.7 158.3 -5.5
Financial Derivatives Assets 0.0 0.0 0.0
Financial Derivatives Liabilities 0.0 0.0 0.0
Other Investment Assets -27.2 9.4 -26.9
Monetary Authorities 24.3 37.1 0.1
General Government 6.9 -3.8 -3.1
Banks -32.8 -22.9 -32.2
Other Sectors -25.6 -0.9 8.3
Other Investment Liabilities 2.1 -226.2 92.6
Monetary Authorities -0.4 0.0 0.8
General Government 64 -175.8 -15.9
Banks -64.5 -58.5 72.8
Other Sectors 3.0 8.1 34.9
CHANGES IN RESERVES (Minus = Increase) -99.6 -45.8 -115.2

Table A.15: Official International Reserves

$mn

Gross Official International Reserves(1' 171.3 217.1 332.3 115.2

Central Bank of Belize 153.1 197.6 311.4 113.7
Holdings of SDRs 5.816 6.8 7.1 0.3
IMF Reserve Tranche 12.796 13.4 13.0 -0.4
Other 134.5 177.4 291.2 113.8
Central Government 18.2 19.4 20.9 1.5
Foreign Liabilities 2.4 2.4 3.2 0.8
CARICOM 0.2 0.0 0.9 0.9
Other 2.2 2.4 2.2 -0.2
Net Official International Reserves 168.9 214.7 329.1 114.5
(1) These numbers reflect only usable reserves as defined by BPM5.

2008 ANNUAL REPORT
CENTRAL BANK OF BELIZE

Table A.16: Balance of Payments Summary
$mn

CURRENT ACCOUNT -50.8 -104.2 -307.4
Goods: Exports f.o.b. 854.3 851.1 929.5
Goods: Imports f.o.b. -1223.9 -1,284.0 -1,576.3
Trade Balance -369.6 -432.9 -646.8
Services: Credit 725.8 796.2 777.6
Transportation 57.1 59.8 50.0
Travel(1) 520.2 577.3 562.2
Other Goods & Services 100.9 100.7 104.0
Gov't Goods & Services 47.6 58.3 61.4
Services: Debit -304.3 -336.3 -338.7
Transportation -109.1 -113.8 -138.9
Travel -82.1 -85.5 -81.6
Other Goods & Services -95.4 -118.7 -100.8
Gov't Goods & Services -17.7 -18.3 -17.4
Balance on Goods & Services 51.9 27.0 -207.9
Income: Credit 20.2 13.9 11.7
Compensation of Employees 11.9 4.7 4.7
Investment Income 8.3 9.2 7.0
Income: Debit -270.8 -331.8 -334.4
Compensation of Employees -11.4 -10.4 -12.5
Investment Income(2) -259.4 -321.4 -321.9
Balances on Goods, Services & Income -198.7 -291.0 -530.4
Current Transfers: Credit 184.3 273.1 282.2
Government 21.8 81.9 56.5
Private 162.5 191.2 225.7
Current Transfers: Debit -36.4 -86.3 -59.1
Government -4.9 -50.3 -11.3
Private -31.5 -36.0 -47.7
CAPITAL ACCOUNT, n.i.e. 18.3 8.2 18.1
Capital Account: Credit 20.5 10.2 20.8
Capital Account: Debit -2.2 -2.0 -2.7
FINANCIAL ACCOUNT, n.i.e. 148.2 219.5 418.1
Direct Investment Abroad -1.1 -2.0 -5.5
Direct Investment in Belize, n.i.e. 217.7 280.7 357.5
Portfolio Investment Assets -0.5 -0.8 5.8
Portfolio Investment Liabilities, n.i.e. -42.7 158.3 -5.5
Financial Derivatives Assets 0.0 0.0 0.0
Financial Derivatives Liabilities 0.0 0.0 0.0
Other Investment Assets -27.2 9.4 -26.9
Other Investment Liabilities 2.1 -226.2 92.6
NET ERRORS & OMISSIONS -16.1 -77.7 -13.5
OVERALL BALANCE 99.6 45.8 115.2
RESERVE ASSETS (Minus = increase) -99.6 -45.8 -115.2
(1) Tourism earnings were based on Visitor Expenditure Surveys.
(2) Data include an estimate for profit remittances from the tourism industry.

M APPENDICES

Table A. 17: Government of Belize Revenue and Expenditure
$'000

TOTAL REVENUE & GRANTS (1+2+3) 770,690 824,940 601,276 765,671 794,647
1) Current revenue 675,303 729,032 566,008 651,467 729,567
Taxrevenue 591,664 636,802 514,495 577,020 621,042
Income and profits 180,093 233,780 136,659 164,671 199,457
Taxes on property 6,521 7,016 4,393 5,985 6,490
Taxes on goods and services 235,974 244,406 207,838 231,789 252,977
Int'l trade and transactions 169,076 151,600 165,606 174,576 162,118

Non-Tax Revenue 83,639 92,230 51,513 74,447 108,525
Property income 12,425 12,800 1,356 12,643 12,247
Licenses 13,219 14,973 10,499 12,276 14,517
Transfers from NFPE's 25,643 24,592 19,642 27,041 23,468
Repaymentof old loans1) 9,290 2,520 4,578 541 29,688
Rent & Royalties (2) 23,062 37,345 15,437 21,945 28,605

2) Capital revenue 30,124 8,508 9,988 28,366 8,629
3) Grants 65,263 87,400 25,280 85,839 56,450

TOTAL EXPENDITURE (1+2) 786,696 824,775 647,954 796,508 763,456
1) Current Expenditure 597,281 649,599 550,832 636,121 618,947
Wages and Salaries 233,920 262,868 218,075 230,045 246,720
Pensions 42,299 39,902 39,016 40,490 47,788
Goods and Services (3) 134,186 156,403 104,676 158,417 135,030
Interest Payments 11 1,188 108,885 141,973 134,885 105,417
Subsidies & current transfers (4) 75,688 81,540 47,093 72,284 83,992

2) Capital Expenditure 189,415 175,176 97,122 160,387 144,509
Capital II (local sources) 71,786 78,664 67,869 77,728 66,339
Capital Ill (foreign sources) 54,888 93,305 25,442 40,253 53,561
Capital Transfer & Net Lending 47,741 3,206 3,811 42,405 9,609
Unidentified Expenditure 15,000 0 0 0 15,000

CURRENT BALANCE 78,022 79,432 15,176 15,346 110,620

OVERALL BALANCE -16,006 165 -46,678 -30,837 31,190

OVERALL BALANCE WIOUT Grants -81,269 -87,235 -71,958 -116,676 -25,260

PRIMARY BALANCE 95,182 109,050 95,294 104,048 136,608

PRIMARY BALANCE WIOUT Grants 29,919 21,650 70,015 18,210 80,157

FINANCING 16,006 46,678 30,837 -31,190

Domestic Financing -32,751 -8,863 20,270 -21,281
Central Bank -29,528 58,788 8,695 -68,860
Net Borrowing 148 47,003 696 -17,300
Change in Deposits -29,676 11,785 7,999 -51,560
Commercial Banks 13,599 -26,970 23,725 40,974
Net Borrowing 5,895 -24,679 22,037 30,177
Change in Deposits 7,704 -2,291 1,688 10,797
Other Domestic Financing -16,822 -9,214 -12,150 6,605
Transaction with Gov'tGuaranteed Debi 0 -31,467 0 0

Financing Abroad 50,035 56,002 -2,042 -7,041
Disbursements (5) 139,311 169,400 1,202,296 82,928
Amortization (6) -87,559 -122,835 -1,203,082 -88,479
Change in Foreign Assets -1,717 9,438 -1,256 -1,489

Other -1,278 -461 12,609 -2,869
Sources Ministry of Finance, Central Bank of Belize
(1) In August 2008, the Belize Bank returned $20 Omn (Venezuela grant monies ) to GOB
(2) Rent and royalties included $16 2m n (2008) and $$9 2m n (2007) in royalties from Belize Natural Energy Ltd
(3) In 2007, goods & service category was bum ped up by expenditure pertaining to prepaid insurance and financial fees amounting to $xmn
associated with the new Bear Stearns bond offering
(4) In FY2006/07 the KH M H was classified as a statutory body and wage, salaries, and pension of its em ployees were removed from this line
(5) 2006 disbursements included proceeds of $2 2mn from the sale of petroleum oil im ported from Venezuela Also included are capitalized
(6) 2006 amortization included $1 5mn as 60% part payment for petroleum oilimported form Venezuela

2008 ANNUAL REPORT
CENTRAL BANK OF BELIZE

Table A.18: Central Government's Domestic Debt
$'000

Overdraft 112,455 0 0 11,949 18,504 130,960
Central Bank 108,810 0 0 11,949 22,150 130,960
Commercial Banks 3,645 0 0 0 -3,645 0

Treasury Bills 100,000 0 0 2,850 0 100,000
Central Bank 68,145 0 0 1,049 -58,076 10,069
Commercial Banks 29,807 0 0 1,760 58,818 88,625
Other 2,048 0 0 41 -742 1,306

Treasury Notes 55,800 10,000 0 5,223 0 65,800
Central Bank 42,571 10,000 0 4,317 8,626 61,197
Commercial Banks 10,000 0 0 581 -10,000 0
Other 3,229 0 0 325 1,374 4,603

Defence Bonds 15,000 0 0 1,250 0 15,000
Central Bank 10,000 0 0 800 0 10,000
Commercial Banks 100 0 0 9 0 100
Other 4,900 0 0 441 0 4,900

Loans 38,696 6,093 23,727 2,697 0 21,061
BSSB (2) 6,820 0 694 492 0 6,126
GOB/US Debt Swap 7,697 0 1,278 199 0 6,419
Reconstruction & Developmen 1,733 0 455 248 0 1,278
BBL (Infrastructure dev.) 18,304 0 12,066 940 0 6,238
Guardian Life Bze 1,000 0 0 90 0 1,000
Atlantic Bank Ltd.(3) 2,930 6,093 9,023 728 0 0
Belize Tourist Village (4) 212 0 212 0 0 0

TOTAL 321,951 16,093 23,727 23,970 18,504 332,820
(1) Transactions associated with UHS loan w ith the Belize Bank is not included in this table due to ongoing litigation.
(2) GOB has outstanding loan w ith BSSB consisting of (1) Hopeville Housing Project and (2) loan used to pay-off the DFC debt.
(3) January 3rd, 2008, GOB assumed government guaranteed W&S Engineering Loan w ith the ABL for the dredging of Belama.
(4) A Promissory Note made to Belize Tourist VIg reimbursing them for cost of dredging of Belize Harbour. This loan is interest
free.

APPENDICES

Table A.19: Public Sector External Debt by Creditors(1)

$'000

CENTRAL GOVERNMENT 1,824,040 82,928 88,479 81,675 -891 1,817,597
Banco Nacional de Comercio Exterior 7,940 0 1,059 468 0 6,881
Fondo de Financ. de las Exportaciones 327 0 218 16 0 109
Government of Great Britain 1,327 0 1,280 0 -47 0
Government of the United States 3,393 0 815 135 0 2,578
Government of Trinidad and Tobago 12 0 4 0 0 8
Government of Venezuela'" 19,094 47,212 29,813 99 0 36,494
Kuwait Fund for Arab Economic Dev 17,569 0 2,772 989 -86 14,711
Republic of China 266,700 9,000 17,041 13,863 0 258,660
Allfirst Bank of Maryland 420 0 420 31 0 0
Manufacturers & Traders Trust Co. 6,055 0 1,730 320 0 4,325
Bear Stearns & CO. Inc. 9,676 0 1,682 0 0 7,994
BWS Finance Limited 9,922 0 4,961 992 0 4,961
Provident Bank & Trust of Belize (TN) 1,000 0 0 90 0 1,000
Caribbean Development Bank 126,955 16,469 7,622 5,437 0 135,803
European Economic Community 19,103 0 990 149 -760 17,353
European Investment Bank 512 0 203 10 -26 284
Inter-American Development Bank 191,690 5,163 8,331 9,564 0 188,522
International Fund for Agric. Dev. 1,262 0 294 40 26 994
Intl. Bank for Reconstruction & Dev. 46,569 0 8,112 1,956 0 38,456
Opec Fund for Intl. Development 10,680 3,392 1,133 565 0 12,939
Bank of New York (New Bond Issue)'" 1,083,834 1,691 0 46,950 0 1,085,525

NON-FINANCIAL PUBLIC SECTOR 38,293 33 3,150 1,587 -117 35,059
Kuwait Fund for Arab Economic Dev 6,589 0 751 260 -47 5,791
Deutsche Bank 1,101 0 284 84 0 818
Caribbean Development Bank 30,603 33 2,115 1,243 -71 28,450

FINANCIAL PUBLIC SECTOR 83,096 0 16,638 4,584 -378 58,290
Paine VWbber Real Estate Securities Inc 1,200 0 100 19 0 1,100
Government of the United States 894 0 441 24 0 454
Caribbean Development Bank 20,898 0 5,979 393 0 14,919
European Economic Community 592 0 39 6 -25 529
European Investment Bank '" 9,834 0 669 39 -353 1,022
Belize Mortgage Company'" 49,677 0 9,410 4,103 0 40,267
GRAND TOTAL 1,945,429 82,961 108,267 87,846 -1,387 1,910,946
(1) Excludes contingent liabilities of the Central Government.
(2) Dsbursements of $47.2rm were for petroleum imported under the Fetrocaribe Initiative.
(3) The new 'super bond' that was exchanged for various commercial bonds and loans.
(4) Effective 11th June 2008, E3.0rm from the BB Citrus Loan was transferred from DFCto CGA as private sector loan.
(5) BMC is the issuer of DFCONorth American Securitization Loan through the Bank of New York.

2008 ANNUAL REPORT
CENTRAL BANK OF BELIZE

Table A.20: Factors Responsible for Money Supply Movements mn

Net Foreign Assets 261.0 351.1 424.8 73.7
Central Bank 206.4 215.1 329.4 114.3
Commercial Bank 54.6 136.0 95.4 -40.6

Net Domestic Credit 1,571.0 1,799.6 1,932.4 133.0
Central Government (Net) 188.6 220.4 191.0 -29.3
Other Public Sector 27.9 15.9 12.9 -2.9
Private Sector 1,354.5 1,563.3 1,728.5 165.2

Central Bank Foreign Liabilities (Long-term) 0.0 0.0 0.0 0.0

Other Items (net) 327.0 414.6 390.6 -24.0

Money Supply M 2 1,505.0 1,736.1 1,966.6 230.7
Table A.21: Money Supply
$mn

Money Supply (M2) 1,505.0 1,736.1 1,966.6 230.7

Money Supply (M1) 617.9 704.4 706.2 1.9
Currency with the Public 136.9 153.4 153.9 0.5
Demand Deposits 326.3 381.3 368.0 -13.2
Savings/Cheque Deposits 154.7 169.7 184.3 14.6

Quasi-Money 887.1 1,031.7 1,260.4 228.8
Savings Deposits 135.9 151.6 165.4 13.9
Time Deposits 751.2 880.1 1,095.0 214.9

Table A.22: Net Foreign Assets of Banking System
$mn

Net Foreign Assets 261.0 351.1 424.8 73.7

Central Bank 206.4 215.1 329.4 114.3
Foreign Assets 208.8 217.5 332.6 115.1
Foreign Liabilities(Demand) 2.4 2.4 3.2 0.8

Commercial Banks 54.6 136.0 95.4 -40.6
Foreign Assets 180.4 203.3 235.5 32.2
Foreign Liab. (Short-Term) 125.8 67.3 140.1 72.8

APPENDICES

Table A.23: Net Domestic Credit
$mn

Total Credit to Central Government 271.7 294.3 307.2 12.9
From Central Bank 228.9 229.5 212.3 -17.3
From Commercial Banks 42.8 64.8 94.9 30.2

Less Central Goernment Deposits 83.1 73.9 116.2 42.2

Net Credit to Central Government 188.6 220.4 191.0 -29.3
Plus Credit to Other Public Sector 27.9 15.9 12.9 -2.9
Plus Credit to the Private Sector 1,354.5 1,563.3 1,728.5 165.2
Net Domestic Credit of the Banking System 1,571.0 1,799.6 1,932.4 131.7

Table A.24: Sectoral Composition of Commercial Banks' Loans and Advances

$mn

PRIMARY SECTOR 155.8 182.0 195.2 13.2
Agriculture 106.5 120.8 133.7 12.9
Sugar 11.5 13.4 17.3 3.9
Citrus 19.4 18.6 18.6 0.0
Bananas 64.4 73.9 78.9 5.0
Other 11.2 14.9 18.9 4.0
Marine Products 15.2 27.4 27.9 0.5
Forestry 2.0 1.8 2.2 0.4
Mining & Exploration 32.1 32.0 31.4 -0.6

SECONDARY SECTOR 373.2 422.7 420.2 -2.5
Manufacturing 24.6 32.0 40.7 8.7
Building & Construction 316.5 365.2 363.8 -1 .4
Utilities 32.1 25.5 15.7 -9.8

TERTIARY SECTOR 539.3 619.6 677.2 57.6
Transport 45.8 55.8 74.8 19.0
Tourism 79.3 133.2 120.7 -12.5
Distribution 173.8 193.9 231.3 37.4
Other1l) 240.4 236.7 250.4 13.7

Personal Loans 322.2 375.3 449.8 74.5
TOTAL 1,390.5 1,599.6 1,742.4 142.8
(1) Includes government services, real estate, financial institutions,
professional services, and entertainment.

2008 ANNUAL REPORT
CENTRAL BANK OF BELIZE

Table A.25: Commercial Banks' Holdings of Approved Liquid Assets

$mn

Holdings of Approved Liquid Assets 374.3 416.7 491.3 74.6
Notes and Coins 39.6 42.5 47.0 4.5
Balances with Central Bank 149.1 167.8 194.3 26.5
Money at Call and Foreign Balances (due 90 days) 131.0 124.4 149.3 24.8
Treasury Bills maturing in not more than 90 days 18.1 34.8 79.4 44.6
Other Approved assets 36.5 47.2 21.3 -25.8
Required Liquid Assets 310.0 358.2 407.3 49.0
Excess/(Deficiency) Liquid Assets 64.3 58.5 84.0 25.6
Daily Average holdings of Cash Reserves 150.0 164.4 192.2 27.8
Required Cash Reserves 134.8 155.7 177.1 21.3
Excess/(Deficiency) Cash Reserves 15.2 8.7 15.1 6.5

Table A.26: Commercial Banks' Weighted Average Interest Rates

Percentages

Weighted Lending Rates
Personal Loans 16.30 16.17 15.94 -0.23
Commercial Loans 13.84 13.80 13.55 -0.25
Residential Construction 13.12 13.14 12.78 -0.36
Other 12.42 13.52 13.45 -0.07
Weighted Average 14.23 14.30 14.10 -0.20
Weighted Deposit Rates
Demand 0.67 1.13 1.10 -0.03
Savings/ Cheque 5.25 5.16 5.09 -0.07
Savings 5.24 5.23 5.28 0.05
Time 8.21 8.38 8.51 0.13
Weighted Average 5.75 5.97 6.35 0.38
Weighted Average Spread 8.48 8.33 7.75 -0.58

APPENDICES

Table A.27: Central Bank Dealings in Foreign Exchange
$mn
M nt U $ andin n UK E CA O Curnce

48.9
12.4
24.0
35.9
32.6
31.8
42.2
51.1
46.1
16.4
15.2
12.2
368.8

21.7
37.4
22.3
9.7
18.9
17.8
14.7
40.5
18.9
18.6
17.3
16.5
254.3

27.2
-25.0
1.7
26.2
13.7
14.0
27.5
10.6
27.2
-2.2
-2.1
-4.3
114.5

0.00
0.00
0.00
0.03
0.24
0.00
0.00
0.02
0.01
0.00
0.00
0.00
0.30

-0.22
-0.36
-0.08
-0.15
0.15
-0.02
-0.02
-0.55
-0.15
-0.66
-0.03
-0.47
-2.56

Table A.28: External Asset Ratio

MON Aset "ibe x...ai. Asse

225.0
200.3
202.4
228.5
242.0
256.1
289.9
293.3
320.3
324.0
314.9
311.4

436.1
442.7
464.5
428.1
448.3
464.8
451.5
460.2
500.5
478.6
488.8
516.8

51.59
45.25
43.57
53.38
53.98
55.10
64.21
63.73
64.00
67.70
64.42
60.26

Table A.29: Inter-bank Market

Activity
$mn

a Averag O d. I .I-'

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

26.0
74.0
12.5
14.0
25.0
7.5
65.0
59.0
30.0
10.0
37.0
116.5
476.5

9.0
2.0
2.5
4.0
11.0
5.0
47.0
12.0
16.0
10.0
35.0
74.5
228.0

January
February
March
April
May
June
July
August
Se ptem ber
October
November
December
Total

Jan uary
February
March
April
May
June
July
Aug ust
September
October
November
December

M N

2008 ANNUAL REPORT

CENTRAL BANK OF BELIZE

Table A.30: Central Bank Credit to Central Government

Jan uary
February
March
April
May
June
July
Aug ust
September
October
November
December

z.0
42.6
42.6
42.6
52.5
52.3
41.9
41.9
41.7
41.6
41.6
61.2

I U..4L
145.54
157.18
109.25
106.52
102.67
90.80
96.94
96.20
100.16
112.83
130.96

4.27
4.44
3.59
3.95
4.24
3.17
2.95
3.13
2.62
2.60
3.06

I 0. 1
25.85
27.92
16.44
16.03
15.45
13.66
14.59
14.47
15.07
16.98
19.70

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
Proposed estimates for Fiscal 2006/2007 $562,944,828 (January March 2008)
Revised estimates for Fiscal 2007/2008 $664,606,668 (April December 2008)

Table A.31: Government of Belize Treasury Bills Issues

Nube Date Dat *m Dicut% il

1/08
2/08
3/08
4/08
5/08
6/08
7/08
08/08
09/08
10/08
11/08
12/08
13/08
14/08
15/08
16/08

12/28/07
01/23/08
02/06/08
12/03/07
03/28/08
04/23/08
05/07/08
06/04/08
06/27/08
07/23/08
08/06/08
09/03/08
09/29/08
10/22/08
11/05/08
12/03/08

03/28/08
04/23/08
05/07/08
06/04/08
06/27/08
07/23/08
08/06/08
09/03/08
09/29/08
10/22/08
11/05/08
12/03/08
01/02/09
01/21/09
02/04/09
03/04/09

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
3.20
3.22
3.22
3.22
3.09
3.22
3.22
3.22

3.25
3.25
3.25
3.25
3.25
3.25
3.25
3.25
3.15
3.25
3.25
3.25
3.11
3.25
3.25
3.25

CENTRAL BANK OF BELIZE
2008 Financial Statements

TABLE OF CONTENTS

Page

INDEPENDENT AUDITORS' REPORT 1- 2

FINANCIAL STATEMENTS FOR THE YEAR ENDED
DECEMBER 31, 2008 AND 2007:

Balance Sheet 3 4

Statement of Operations 5

Statement of Changes in Equity 6

Statement of Cash Flows 7 8

Notes to Financial Statements 9 31

FINANCIAL STATEMENTS

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INDEPENDENT AUDITORS' REPORT

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To the Board of Directors of
Central Bank of Belize:

Report on the Financial Statements
We have audited the accompanying financial statements of Central Bank of Belize, which
comprise the balance sheets as of December 31, 2008 and 2007, the statements of operations,
statements of changes in equity, and statements of cash flows for the years then ended, and a
summary of significant accounting policies and other explanatory notes.

Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with International Financial Reporting Standards, the Central Bank of Belize Act
and the Bank and Financial Institutions Act of Belize. This responsibility includes: designing,
implementing and maintaining internal control relevant to the preparation and fair presentation of
financial statements that are free from material misstatement, whether due to fraud or error;
selecting and applying appropriate accounting policies; and making accounting estimates that are
reasonable in the circumstances.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with International Standards on Auditing. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor's
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entity's preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An
audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.

Independent Correspondent Firm to Deloitte Touche Tohmatsn

Independent Auditors' Report
Page 2

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial
position of Central Bank of Belize as of December 31, 2008 and 2007. and of its financial
performance and its cash flows for the years then ended in accordance with International
Financial Reporting Standards, the Central Bank Act, and the Bank and Financial Institutions
Act of Belize.

Chartered Accountants
March 6, 2009

CENTRAL BANK OF BELIZE

BALANCE SHEETS
DECEMBER 31, 2008 AND 2007 (IN BELIZE DOLLARS)

ASSETS

Notes

APPROVED EXTERNAL ASSETS:
Balances and deposits with foreign bankers
Reserve Tranche and balances with the
International Monetary Fund
Other foreign credits instruments
Accrued interest and cash-in-transit
Marketable securities issued or guaranteed by foreign
government and international financial institutions

BELIZE GOVERNMENT SECURITIES

BELIZE GOVERNMENT CURRENT ACCOUNT

4 $ 8,312,704

5
6
2m,7

20,116,361
258,819,171
2,107,826

8 22,000,000
311,356,062

9 81,265,901

10 122,947,200

$ 7,936,140

20,123,906
166,125,946
1,427,895

2,000,000
197,613,887

120,716,478

100,123,484

BALANCES WITH LOCAL BANKERS AND
CASH ON HAND 152,926

OTHER ASSETS

9,545,451

PROPERTY AND EQUIPMENT

2h,12 29,227,521

TOTAL ASSETS

$554,495,061

10,814,575

29,777,252

$459.120.794

The notes on pages 9 to 31 are an integral part of these financial statements.

2008

2007

75,118

CENTRAL BANK OF BELIZE

BALANCE SHEETS (CONTINUED)
DECEMBER 31, 2008 AND 2007(IN BELIZE DOLLARS)

LIABILITIES, CAPITAL AND RESERVES Notes

DEMAND LIABILITIES:
Notes and coins in circulation
Deposits by licensed financial institutions 13
Deposits by and balances due to Government and
Public sector entities in Belize
Deposits by international agencies 14

2008

$193,195,838
189,228,842

133,23070
2,218,779
517,873,829

2007

$185,773,149
149.482.134

82,006,733
2.378.394
419,640,410

BALANCES DUE TO CARICOM CENTRAL BANKS 948,316 23.174

OTHER LIABILITIES 15 2,295,668 6,506,153

COMMERCIAL BANKS' DISCOUNT FUND 16 1.929.746 2.393.830

TOTAL LIABILITIES 523,047,559 428,563,567

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

REVALUATION ACCOUNT 2k,17 4,015,306 4,015,306

GENERAL RESERVE FUND 18 17,432,196 16.541,921

TOTAL LIABILITIES, CAPITAL AND RESERVES S554495061 $459.20.794

The financial statements on page 3 to page 8 were approved and authorized for issue by the
board f directors on March 6. 2009 and are signed on its behalf by:

) GOVERNOR

__) DIRECTOR

)DEPUTY GOVERNOR,
OPERATIONS

The notes on pages 9 to 31 are an integral part of these financial statements.

CENTRAL BANK OF BELIZE

STATEMENTS OF OPERATIONS
DECEMBER 31, 2008 AND 2007 (IN BELIZE DOLLARS)

INCOME

Notes

Interest
Approved external assets
Advances to Government
Local securities

Discount on local securities
Commissions and other income

19 $ 5,741,168
11,938,269
4,810,113
22,489,550

1,428,733
1,749,391

25,667,674

(2,065,137)

TOTAL INCOME

LESS: Interest expense

Income from operations

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

(2,157,553)

20 (7,452,237)
(984,806)
21 (3,384,953)

Total expenditure

NET PROFIT

(13,979,549)

$ 7,621,551
12,269,943
4,723,747
24,615,241

2,181,552
1,567,088

28,363,881

(5,516,193)

22,847,688

(1,712,404)

(6,972,186)
(974,960)
(3,536,890)

(13,196,440)

$ 9,651,248

NET PROFIT TRANSFERABLE TO THE
REVALUATION ACCOUNT, GENERAL RESERVE
FUND AND CONSOLIDATED REVENUE FUND

Transfer to revaluation account in accordance with
Section 50 of the Act

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

9,622,988

2k,17 (720,237)

18 (890,275)

$ 8.012,476

9,651,248

(965,125)

$ 8.686,123

The notes on pages 9 to 31 are an integral part of these financial statements.

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2008

2007

CENTRAL BANK OF BELIZE

STATEMENTS OF CHANGES IN EQUITY
DECEMBER 31, 2008 and 2007 (IN BELIZE DOLLARS)

Share Revaluation General Accumul
capital account reserve profits

January 1, 2007 $10,000,000 $3,011,360 $15,576,796 $

Net profit

9,651,248

Gain on revaluation

Transfer to general reserve fund

Transfer to Government of Belize

December 31, 2007

Net Profit

Loss on revaluation

Transfer to revaluation account

Transfer to general reserve fund

Transfer to Government of Belize

December 31, 2008

1,003,946

965,125

10,000,000

4,015,306

(720,237)

720,237

16,541,921

890,275

$j0 00 0

$4j015.306

$17 432 196

(965,125)

(8,686,123)

9,622,988

(720,237)

(890,275)

(8,012,476)

$

The notes on pages 9 to 31 are an integral part of these financial statements.

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ited