• TABLE OF CONTENTS
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 Front Cover
 Title Page
 Letter of transmittal
 Directors and principals
 Table of Contents
 List of Tables
 List of charts and boxes
 Overview of the bank
 Economic review
 Administration
 Operations
 Statistical appendix
 Auditor's report














Title: Central Bank of Belize Annual Report
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 Material Information
Title: Central Bank of Belize Annual Report
Physical Description: Archival
Language: English
Creator: Belize National Library Service and Information System (BNLSIS)
Publisher: Central Bank of Belize
Publication Date: 2001
Copyright Date: 2010
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Bibliographic ID: UF00098955
Volume ID: VID00002
Source Institution: University of Florida
Holding Location: University of Florida
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Table of Contents
    Front Cover
        Front Cover 1
        Front Cover 2
    Title Page
        Page i
        Page ii
    Letter of transmittal
        Page iii
    Directors and principals
        Page iv
    Table of Contents
        Page v
    List of Tables
        Page vi
    List of charts and boxes
        Page vii
    Overview of the bank
        Page viii
        Page ix
        Page x
        Page xi
        Page xii
        Page xiii
        Page xiv
    Economic review
        Page 1
        Page 2
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
        Page 12
        Page 13
        Page 14
        Page 15
        Page 16
        Page 17
        Page 18
        Page 19
        Page 20
        Page 21
        Page 22
        Page 23
        Page 24
        Page 25
        Page 26
        Page 27
        Page 28
        Page 29
        Page 30
        Page 31
        Page 32
        Page 33
        Page 34
        Page 35
        Page 36
        Page 37
        Page 38
        Page 39
        Page 40
        Page 41
        Page 42
        Page 43
        Page 44
        Page 45
        Page 46
        Page 47
        Page 48
        Page 49
        Page 50
        Page 51
        Page 52
        Page 53
        Page 54
    Administration
        Page 55
        Page 56
        Page 57
        Page 58
    Operations
        Page 59
        Page 60
        Page 61
        Page 62
        Page 63
    Statistical appendix
        Page 64
        Page 65
        Page 66
        Page 67
        Page 68
        Page 69
        Page 70
        Page 71
    Auditor's report
        Page 72
        Page A-1
        Page A-2
        Page A-3
        Page A-4
        Page A-5
        Page A-6
        Page A-7
        Page A-8
        Page A-9
        Page A-10
        Page A-11
        Page A-12
        Page A-13
        Page A-14
        Page A-15
        Page A-16
        Page A-17
Full Text




SITRAL BANK OF Iii|
Twentieth Annual Report and Accounts


2001














Central Bank of Belize


Twentieth Annual Report and Accounts, 2001








ScAnnual reportt 2001


Abbreviations and Conventions used in this Report


Abbreviations:


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


EDF
EIB
EU/EEC
FY
GDP
GOB
IBC
IBM
IBRD

IDB
IFS
IMF
NFC
OECD

OECS

PAYE
PGIA
ps
RECONDEV

RMB
ROC
SIF
UK
US/USA
WTO
WASA


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


Notes and Conventions:
--$ refers to the Belize dollar unless otherwise stated
--mn denotes million
--bn denotes billion
--The figures for 2001 in this report are provisional, and the figures for 2000 have been revised.
--Since May of 1976 the Belize dollar has been tied to the US dollar at the rate of US$1.00 = F '"-'
--Totals in tables do not always equal the sum of their components due to rounding.


ACP
APR
BEL
BFIA

BGA
BIS
BSI
BSSB
BTB
BTL
BWSL
CARICOM

CABEI

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

ECU


















April 29, 2002


Hon. Said Musa
Prime Minister and Minister of Finance
and Economic Development
Office of the Prime Minister
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, 2001, together with
a copy of the Bank's Statement of Accounts, as certified by the External Auditors.

I am
Yours faithfully,



Jorge M. Auil
Governor







0Annual Report 2001



DIRECTORS AND PRINCIPALS

At December 31, 2001

BOARD OF DIRECTORS

KEITH ARNOLD
Chairman

YVETTE ALVAREZ
Vice Chairman

JAIME BRICENO

DEREK COURTENAY

FRANCIS FONSECA

ROBERT SWIFT

JOSEPH WEIGHT
Financial Secretary


PRINCIPAL OFFICERS

KEITH ARNOLD
Governor

YVETTE ALVAREZ
Deputy Governor Operations

SYDNEY CAMPBELL
Deputy Governor Research

CECILE REYES
Manager, Administration Department / Bank Secretary

DWAIN DAVIS
Manager, Finance Department

CAROL HYDE
Manager, Human Resource Department

MARILYN GARDINER
Manager, Banking and Currency Department

KENT HAYLOCK
Chief of Security











TABLE OF CONTENTS

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

Overview O f The Bank ............................................................................... viii
M mission, Goals and Objectives ................................................................................ viii
Organization And Functions .............................................................. ................... ix

Econom ic R eview ............................................................................................ 1
O v e rv ie w ........................ .................................... ....................................................... 1
International and Regional Developments......................................... ................... 4
Domestic Production, Employment and Prices .................................. .................. 11
M monetary and Financial Developments ........................................... ................... 23
Central Government Operations and Public Debt........................... ................... 32
Foreign Trade and Payments ............................................................ ................... 38
Economic Prospects ........................................... ............................. ................... 53

A dm inistration ........................................................................................... 55.... 5 5
The Board of Directors ...................................................................... ................... 55
Overseas M meetings ............................................ ............................. ................... 55
Finance ................................................................................................................... 55
Internal Audit Activities .................................................................... ................... 55
Human Resources .......................................... .............................. ................... 56

O operations ...................................................................................................... 59
Foreign Exchange Operations .......................................................... ................... 59
Relations with Commercial Banks..................................................... ................... 59
Transactions with Central Government............................................ ................... 60
Supervision of the Financial System ................................................ ................... 62
Information Systems Developments .................................................. ................... 63

Statistical A ppendix ....................................................................................... 64

Auditor's Report ............................................................................................ 72


v








Annual Report 2001



LIST OF TABLES

Table LI.: Major Economic Indicators ................................................................................................ ............. xi


International and Regional Developments.................................................... 4
Table H.1: Selected Indicators for Some OECD and Newly Industrialized Countries ...................................... 4
Table 11.2: Selected Indicators for Some Caribbean Countries ......................................................................... 6
Table II.3: Selected Indicators for Mexico and CentralAmerica ....................................................................... 8

Domest'ic Production, Employment and Prices............................................. 11
Table IH.1: Annual Percent Change in Selected Indicators ............................................................................. 11
Table IH.2: Sugarcane Deliveries ........................................................................................................................ 12
Table IH.3: Citrus Fruit Deliveries ...................................................................................................................... 14
Table HI.4: Sugar and Molasses Production ..................................................................................................... 18
Table III.5: Production of Citrus Juices and Pulp ............................................................................................ 19
Table 1II.6: Bonafide Tourism Arrivals ......................................................................................................... 21
Table IH.7: Quarterly Percentage Change in CPI by Major Commodity Group ............................................. 21
Table 111.8: Employed Labour Force by Industrial Group .................................................................................. 22

M monetary and Financial Developments .................................................. 23
Table IV.l: Factors Responsible for Money Supply Movements ................................................................... 23....2 3
Table IV.2: M money Supply .................................................................................................................................... 24
Table IV.3: Net ForeignAssets of the Banking System................................................................................... 25
Table IV.4: Net Domestic Credit Summary .................................................................................................... 26
Table IV.5: Sectoral Composition of Commercial Banks' Loans andAdvances .............................................. 27
Table IV.6 : Commercial Banks' Holdings of Approved Liquid Assets ............................................................. 30
Table IV.7: Commercial Banks' Weighted Average Interest Rates ................................................................. 31


Central Government Operations and Public Debt..................................... 32
Table V.1: Government of Belize-Revenue and Expenditure ............................................................................ 32
Table V.2: Central Government's Domestic Debt ............................................................................................ 35
Table V.3: Financial Flows on Public Sector External Debt ............................................................................. 35
Table V.4: Public Sector External Debt by Source ........................................................................................... 36


Foreign Trade and Payments ...................................................................... 38
Table VI.1: Balance of Payments Summary and Financing Flows ................................................................. 38
Table VL2: Dom estic Exports .............................................................................................................................. 39
Table VI.3: Natural Disasters, 2000-2001 ................................................................................................... 40
Table VI.4: Exports of Sugar and Molasses ..................................................................................................... 41
Table VI.5: Export Sales of Citrus Products ................................................................................................ 42
Table VI.6: Exports of Bananas ........................................................................................................................... 44
Table VI.7: Exports of Marine Products ........................................................................................................ 45
Table VI.8: Other Major Exports ......................................................................................................................... 46
TableVVL9: Direction of Visible Trade* ........................................................................................................ 48
Table VI.10: Balance of Payments Invisible Trade ......................................................................................... 49
Table VI.11: Balance of Payments Capital and FinancialAccounts .............................................................. 51
Table VI: 12: Official International Reserves ................................................................................................ 52











O p e ra tio n s .................. ........ ........... .............................................................. 5 9
Table IX.1: Central Bank Dealings in Foreign Exchange 2001....................................................................... 59
Table IX.2: External Assets Ratio 2001 ......................................................................................................... 60
Table IX.3: Commercial Bank Balances with the Central Bank ..................................................................... 60
Table IX.4: Currency in Circulation 2001 ....................................................................................................... 61
Table IX.5: Central Bank Credit to Central Government ................................................................................ 61
Table IX.6: Government of Belize Treasury Bill Issues ................................................................................... 62


Statistical A pp endix .................................................................... .................. 64
Table 1: Gross Domestic Product (GDP) by Industrial Origin at Current Factor Cost .................................. 64
Table 2: Percentage Share Of GDP By Industrial SectorAt Current Prices *............................................... 64
Table 3: Real Gross Domestic Product (GDP) by Industrial Origin at Factor Cost (1984=100) .................... 65
Table 4: Annual Percent Change In GDP By SectorAt Constant 1984 Prices ............................................ 65
Table 5: GDP by Expenditure in Current Prices ............................................................................................ 66
Table 6: GDP by Expenditure in Constant 1984 Prices .................................................................................... 66
Table 7: Net Dom estic Credit ............................................................................................................................... 67
Table 8: Gross Imports (cif) by SITC Categories .......................................................................................... 67
Table 9: Balance Of Payments Summary ...................................................................................................... 68
Table 10: Government of Belize Revenue and Expenditure ............................................................................ 69
Table 11: Central Government's Domestic Debt ............................................................................................... 70
Table 12: Public Sector External Debt by Creditors ......................................................................................... 71



LIST OF CHARTS

Chart IV.1 : Annual Change in Demand, Savings & Time Deposits ................................................................ 24
Chart IV.2 : Demand Deposits held by Business Enterprises .......................................................................... 24
Chart IV.3: Annual Change in Net Domestic Credit (Banking System & DFC) ............................................ 28
Chart IV.4: Sectoral Distribution of Outstanding Commercial Bank and DFC Loans .................................. 28
Chart IV.5 : Excess Liquid Assets ........................................................................................................................ 29
Chart IV.6 : Excess Cash Reserves ...................................................................................................................... 29
Chart IV.7: Quarterly Change in Excess Liquidity ......................................................................................... 29
Chart IV.8 : Quarterly Change in Excess Cash Reserves ................................................................................ 29
Chart IV.9 : Supplemental Loan Rates (2000 & 2001)..................................................................................... 31
Chart IV.10: Commercial Banks'WeightedAverage Interest Rate Spread ................................................... 31
Chart V.1: Central Government's Domestic Expenditure................................................................................ 33
Chart V.2: Sources of Central Government's Domestic Debt ......................................................................... 34
Chart V.3: Sources of Public Sector External Debt ......................................................................................... 37



LIST OF BOXES


Box 1: Sugar Industry Survival Adjustments ......................................................................... 13
Box 2: Soybean Production Projects .......................................................................................... 16
Box 3: Tourism Developments and Prospects ......................................................................... 20
Box 4: Economic Impact of Natural Disasters.......................................................................... 40
Box 5: Banana WTO Update ........................................................................................................ 44
Box 6: Meetings Attended by the Governor and Deputy Governors during 2001 ............ 56







Annual Report 2001



OVERVIEW OF THE BANK


Mission, Goals and Objectives


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

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

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

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

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


Goals
v Provide prompt and well-considered macroeconomic advice to the Government,
the business sector and the general public.
v 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.
v 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 monitor the financial environment.
v Foster credit and exchange conditions.
v Foster the development of money and capital markets in Belize.











Organization And Functions


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

Office of the Governor


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


* Streamlining and monitoring systems
and procedures to ensure appropriate
internal controls.
* Ensuring that all communications
necessary for the deliberations of the
directors are prepared and submitted.
* Supervising authority for anti money-
laundering surveillance.


Administration


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


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


Human Resources


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


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







4. 0pnnual reportt 2001


Finance


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


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


Banking and Currency


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


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


Financial Sector Supervision


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


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


Research


* Monitoring economic activities in Belize
on a continuing basis.
* Conducting focused economic research on
the Belizean economy and aspects
pertaining to its development.


Office of Deputy Governor (Operations)

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


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


* Maintaining the Bank's plant and
equipment.














Table 1.1: Major Economic Indicators

1 [:199 1998 1-99i9 20 20ii


POPULATION AND EMPLOYMENT
Population (Thousands)
Employed Labour Force (Thousands)
Unemployment Rate (%)
INCOME
GDP at Current Market Prices ($mn)
Per Capita GDP ($, Current Mkt. Prices)
Real GDP Growth (%)
Sectoral Distribution of Constant 1984 GDP (%)
Primary Activities
Secondary Activities
Services
MONEY AND PRICES ($mn)
Inflation (Annual average percentage change)
Currency and Demand deposits (M1)
Quasi-Money (Savings and Time deposits)
Money Supply (M2)
Ratio of M2 to GDP (%)
CREDIT ($mn)
Commercial Bank Loans and Advances
Public Sector
Private Sector
INTEREST RATE (%)
Weighted Average Lending Rate (WALR)
Effective 3-year APR
Weighted Average Deposit Rate
CENTRAL GOVERNMENT FINANCES ($mn)
Current Revenue
Current Expenditure
Current Account Surplus(+)/Deficit(-)
Capital Expenditure
Overall Surplus(+)/Deficit(-)
Ratio of Budget Deficit to GDP at mkt. Prices (%)
Domestic Financing (Net)
External Financing (Net)
BALANCE OF PAYMENTS (US $mn)
Merchandise Exports (f.o.b.)+
Merchandise Imports (f.o.b.)++
Trade Balance
Remittances (Inflows)
Tourism (inflows)
Services (Net)
Current Account Balance
Capital and Financial Flows
Gross Change in Official International Reserves *
Gross Official International Reserves
Import Cover of Reserves (in months)
PUBLIC SECTOR DEBT
Disbursed Outstanding External Debt (US $mn)
Ratio of Outstanding Debt to GDP at Mkt. Prices (%)
External Debt Service Payments (US $mn)
External Debt Service Ratio (%)
Disbursed Outstanding Domestic Debt ($ mn)
Domestic Debt Service Payments ($ mn)


222.0 230.0 238.0 243.0 249.8 256.8
65.0 70.7 73.3 77.8 83.7 86.8
13.8 12.7 14.3 12.8 11.1 9.3

1,211.4 1,234.5 1,259.2 1,376.0 1,546.0 1,609.9
5,457 5,370 5,291 5,663 6,189 6,269
1.5 4.2 1.8 6.5 10.8 4.6

21.0 22.7 21.9 23.1 21.9 23.4
25.0 24.2 23.6 23.1 24.5 24.3
54.0 53.1 54.5 53.8 53.7 52.3

6.4 1.0 (0.8) (1.2) 0.6 1.1
177.6 186.0 206.1 255.1 310.2 364.8
467.8 524.1 561.3 585.1 655.7 676.0
645.4 710.1 767.4 840.2 965.9 1,040.8
53.3 57.5 60.9 61.1 62.5 64.6

480.9 547.3 625.6 654.5 695.4 788.5
2.9 5.2 18.9 8.4 11.1 12.9
478.0 542.1 606.8 646.1 684.3 775.6

16.2 16.6 16.3 16.3 15.8 15.4
27.8 28.5 28.0 28.0 27.1 26.4
6.2 6.7 6.0 5.7 5.0 4.3

276.6 282.9 294.5 327.1 349.8 364.3
234.7 252.2 260.0 278.8 308.4 333.5
41.9 30.7 34.5 48.3 41.4 30.8
75.3 81.8 93.6 165.3 247.5 247.7
(4.6) (25.3) (28.6) (29.1) (139.9) (130.3)
(0.4) (2.0) (2.3) (2.1) (9.0) (8.1)
(40.9) 19.5 27.6 (8.6) (74.0) 58.5
46.6 5.8 14.2 38.5 213.5 72.1

171.3 200.0 194.4 263.6 288.4 269.1
229.5 280.8 294.1 366.1 461.6 460.6
(58.3) (80.9) (99.7) (102.5) (173.2) (191.5)
24.4 27.8 31.2 32.2 51.6 41.2
97.5 101.5 105.4 105.6 117.8 119.8
53.1 52.1 49.5 32.9 17.4 38.5
2.3 (16.6) (40.9) (73.1) (151.6) (169.5)
4.9 23.2 17.1 99.1 205.8 144.6
(20.9) (1.0) 15.4 (27.2) (51.6) 10.5
58.3 59.3 43.9 71.1 122.8 112.3
2.7 2.5 1.6 2.3 3.3 3.0

219.8 240.7 260.7 252.5 423.7 475.0
36.3 39.0 41.4 36.7 54.8 59.0
29.7 30.7 33.2 33.7 43.1 65.2
9.6 9.0 9.8 8.1 9.6 14.7
171.9 171.9 180.0 171.5 176.0 211.3
12.9 18.4 15.7 12.2 22.6 17.7


Sources Ministry of Finance
Central Statistical Office *Minus = increase + = 1999 to 2001 includes CFZ gross sales
Central Bank of Belize n a not available ++ = 1999 to 2001 includes CFZ direct imports

xi





























Destruction caused by Hurricane Iris on Placencia Peninsula


Police Station in Seine Bight Village showcasing "All Clear"
after Hurricane Iris.


CENTRAL BANK OF BELIZE


Participants at the XXXIII Annual Monetary Studies
Conference of the CCMS.


Banana plantations making a comeback.


Award Jiresentations tor Kecorcs Management Week.


Harvesting papayas






























BSI Factory at Tower Hill, Orange Walk District.


Harvesting soya beans


Sugarcane trucks making deliveries at the BSI factory.


A soya bean field in Northern Belize


Sculpture at Citrus Growers Association, Stann Creek Valley












ECONOMIC REVIEW


Overview


A slowing world economy coupled with two natural
disasters in rapid succession caused growth in the
Belizean economy to slacken in 2001. Real GDP
increased by 4.6% as compared to the 10.8%
expansion in 2000. Contrasting with the previous
year, the main engine of growth was the primary
sector, which experienced a tripling of output as
increased production in fishing and forestry more
than compensated for mediocre performance by
agriculture. On the other hand, activity in the
secondary sector decelerated with lower growth in
manufacturing and utilities largely offsetting a 9.0%
increase in construction activity. Activity in the
tertiary sector also slowed to a comparative crawl
as a contraction in international trade dampened
growth in other related services. On the up side,
tourism registered a small expansion with robust
growth in the first three quarters being only partly
offset by the fall-off in tourist arrivals after the events
of September 11.

Expansion in primary sector activities as well as in
tourism helped to push the unemployment rate
further downward to 9.3%, a 1.8% improvement
over the previous year's out-turn. These
developments coincided with a rise in the labour
force participation rate to 60.5%. On the other
hand, consumer prices experienced a degree of
upward pressure after two consecutive years of
decline. The CPI rose by 1.1% influenced by higher
fuel costs at the pump that outweighed the effects
of lower import duties and declines in the US


export price index. The largest increases were shown
in 'Medical Care' and in services that were
dependent on fuel inputs such as 'Transport &
Communication' and 'Rent, Water, Fuel & Power'.

Monetary developments were dominated by a
21.8% growth in net domestic credit that pushed
broad money (M2) up by 7.8% to the $1.0bn
threshold during the year. A notable feature of the
expansion was the continued accelerated rise in Ml
as compared to the slowing in growth of quasi-
money. Ml was particularly affected by the upward
surge in demand deposit holdings of business
enterprises, a trend that has become rather marked
over the past three years. The more moderate rise
in quasi-money featured a 17.6% increase in savings
deposits whereas time deposits registered a 2.6%
decline, the first such since 1984.

Higher payments abroad to satisfy the demand for
imported goods and services and cover debt service
obligations coincided with reduced inflows from
exports and other transactions. The net foreign
assets of the banking system consequently declined
by 4 -.2mn including reductions in Central Bank
and commercial bank net foreign holdings of
$22.2mn and $25.0mn, respectively.

Growth in net domestic credit involved increases
in Central Bank financing for the Government as
well as an upswing in commercial bank loans to the
private sector that covered a broad cross section
of activity. Notable among these was the $24.4mn







SAnnual Report 2001


in funds provided for construction followed closely
by the tourism sub-sector, which attracted increased
loans of some $18.2mn in an apparent reversal of
a two-year declining trend. Lending by the
Development Finance Corporation (DFC) was also
a significant factor pushingup the overall level of
financing provided for the construction and
transport sub-sectors in particular.

Substantial growth in loans notwithstanding, the
commercial banks continued to experience excessive
liquidity conditions with both primary and
secondary liquidity holding at levels that far
exceeded historical averages. Given the large build-
up that had already occurred, a $10.0mn decline in
secondary liquidity over the year had only a marginal
effect on the system. Primary liquidity also
experienced further expansion buoyed by the
continued build-up in demand deposits. At year-
end, total excess statutory liquidity stood at
$121.7mn and excess cash reserves was at an historic
high of $51.5mn.

High levels of statutory liquidity served to maintain
downward pressure on interest rates, especially those
on deposits. Weighted average lending and deposit
rates calculated on total existing portfolios declined
by 40 basis points and 70 basis points, respectively,
which increased the interest rate spread accruingto
the banks by an additional 30 basis points to 11.1%.
Of note was the significant fluctuation in monthly
weighted average lending rates for new loans issued
by the commercial banks. After bottoming at the
end of the first quarter, these rates began to exhibit
a clear upward trend in the following months.


As in the previous calendar year, the public sector
continued efforts to boost economic growth
through increased outlays plus additional
expenditures in the fourth quarter to cover
reconstruction costs arising from Hurricane Iris.
Central Government's fiscal operations generated
a current account surplus of $30.8mn (1.9% of
GDP) and an overall deficit of $130.3mn (8.1%
of GDP). Current revenue and expenditure rose
by 4.1% and 8.1%, respectively. Privatization of
WASA and implementation of an indexed
environmental levy pushed capital revenue up by
50% to $73.8mn. Meanwhile, capital expenditures
remained steady at approximately $247.6mn, which
was used to finance a multiplicity of projects. Net
increases in funding from domestic and external
sources to cover the financing gap amounted to
$58.5mn and $72.1mn, respectively.

Central Government's domestic debt rose by
$35.3mn to $211.3mn over the period reviewed,
reflecting the combination of a $17.2mn "debt for
nature swap" with the US Government plus a
$19.5mn net increase in overdraft financing that
outweighed amortization payments of $1.4mn.
Over the same period, the public sector's disbursed
outstanding external debt grew by $102.6mn to
$950.0mn (59.' 1".. of GDP). Disbursements totalled
$219.9mn, which was partly offset by amortization
payments of $70.3mn, negative valuation
adjustments of $1.3mn and the $17.2mn external
debt reduction arising from the "debt for nature
swap".







Overview


With storms, disease, falling prices and shrinking
market share causing a drop in export earnings in
2001, higher levels of domestic expenditure resulted
in a widening of the visible trade and current account
deficits as recorded in the external balance of
payments. While both imports and exports were
lower, the sharper decline was in the latter. At year-
end, the trade deficit stood at .'.2 9)mn (23.8% of
GDP) and the current account deficit at $339.Omn
(21.1% of GDP). The latter was financed by
financial flows from foreign direct investment, loans,
a repurchase agreement for lands and housing and
the draw down of international reserves.

Present economic prospects for 2002 are that real
GDP should grow by approximately 6.0% based
largely on continued strength in services and
recovery in the productive sector although the


performance of the latter is likely to be somewhat
mixed. While deliveries of sugarcane, papaya,
banana and marine products are all expected to rise,
citrus should experience a steep decline given the
severity of the damages inflicted by Hurricane Iris.
Output in the secondary sector will also be mixed
with increased production of sugar but lower output
of citrus juice products. The most substantial
contribution to growth is expected to come from
the services sector, which is scheduled to benefit
from several significant investments during the year.
Projections are for a 6% to 8% rise in stay-over
tourist arrivals and a fivefold surge in cruise ship
passenger visits. Meanwhile, even with higher prices
for fuel and telecommunications services,
inflationary pressure should remain relatively low.







ScAnnual Report 2001


International and Regional Developments


World economic activity slowed significantly in 2001
with total output increasing by 2.4% as compared
to the 4.7" ..::p n,- I. ..,, in 20 )00. Growth had already
begun to slow in the last quarter of 2000 and an
already difficult situation was further exacerbated
by a slowing of trade, falling commodity prices,
deteriorating financing conditions in emerging
markets (particularly in Latin America) and the
terrorist attacks of September 11. Other economic
shocks included the bursting of the information
technology bubble and a jump in oil prices during
the first part of the year. Consumer and business
confidence showed general signs of weakening
around the globe and labour markets softened
considerably. Globally, macroeconomic policies
were substantially eased to mitigate and reverse the
effects of the slow-down while net movements in
major exchange rates remained moderate with the
US dollar appreciating modestly against the Euro
and the Yen.


Developments in Select OECD and
Newly Industrialized Countries

In the midst of a mild recession that commenced
in March 2001, the US economy suffered a major
blow as a result of the September 11attacks. GDP
growth consequently fell sharply from 4.1% in 2000
to 1.0% in 2001. Consumer spending and business
confidence weakened with industrial production
declining by 5.8% over the year, the worst
contraction since 1982. The travel, entertainment and
insurance sectors all faced severe financial difficulties
after September 11 with over one million Americans
losing their jobs after the attacks. The effects of this
worsened the unemployment rate, which ended
the year at 5.8%. In a continuing attempt to stimulate
the economy the Federal Reserve cut short-term
interest rates eleven times during the year to 1.75%,
the lowest nominal value in forty years. Fiscal policy


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




Taiwan 6.0 (2.2) (2.1) (7.5) 1.3 (0.1) 3.0 5.1
United States 4.1 1.0 3.1 (5.8) 3.4 2.9 4.0 5.8
United Kingdom 2.9 2.3 1.9 (4.6) 2.1 2.3 5.6 5.2
Canada 4.4 1.4 3.2 (6.0) 2.7 2.8 6.8 8.0
Japan 2.2 1.0 5.3 (14.9) (0.8) (0.7) 4.7 5.6
Sources: The Economist, IMF World Economic Outlook, Taiw an Institute of Economic Research







International and Regional Developments


was also eased significantly via tax cuts in June and
emergency relief expenditures after the attacks
estimated at US$63.0 billion.

September 11 and the adverse shocks that followed
exacerbated an already troubling situation in Japan.
Mired in a deflationary spiral (consumer prices have
been falling since 1999), household and business
confidence continued to weaken in 2001 with
industrial production declining by 14.9% and
unemployment rising to 5.6%, the highest since
World War II. Loose monetary policy resulted in
interest rates that were close to zero. Meanwhile, a
substantial fiscal stimulus package financed by new
government bond issues raised the public debt to
GDP ratio to a high level which may have future
implications for Japan's credit rating. Declining
export demand, particularly in the technology sector
resulted in GDP growth falling from 2.2% in 2000
to 1.0% in 2001.

Reflecting its proximity and close integration with
the US economy, real growth in Canada's GDP
slowed substantially in 2001 to 1.4%, down from
4.4% in the previous year, while the rate of
unemployment jumped from 6.8% in 2000 to 8.0%
in 2001, the highest level in nearly three years. Over
the first eleven months of the year, industrial
production experienced a 6.0% contraction. In
response, monetary policywas significantly loosened
with official interest rates being lowered by 350 basis
points, and tax cuts that had been legislated in 2000
also acting as stabilizers to moderate the downturn.


Inflationary pressures remained stable, reflecting
the fall in demand and declining oil prices in the
latter part of the year.

While many advanced countries were hit hard during
the year, economic activity in the United Kingdom
appeared to be more resilient to the global
downturn and negative impact of September 11.
Growth in GDP was therefore projected to slow
moderately from 2.9% in 2000 to 2.3% in 2001.
Some adverse effects were nevertheless experienced
as industrial production fell by 4.6% while exports
suffered from the strong exchange rate and shocks
to the information technology sector. On the other
hand, demand was spurred on by strong private
sector consumption and budgeted increases in
government spending. Inflation rose marginally to
2.3% and the unemployment rate saw a 0.4".. decline
to 5.2% over the year.

After a 6.0% growth in 2000, the Taiwanese
economy sank into a deep recession registering a
2.2% contraction over the year despite moderate
signs of recovery during the last quarter of 2001.
Plagued by persistent deflation, excess capacity and
a weak financial system, economic activity slowed
further due to the global downturn and the collapse
of American investment in information technology
and electronics. Private consumption stagnated
largely due to a decline in real salary growth and a
5.1% increase in unemployment while industrial
production fell by 7.5% over the year. In the
fourth quarter, Taiwan's trade surplus rose to
US$5.7bn, up from US$2.4bn in the third, with
imports declining at a faster pace relative to exports.








An coonual Report 2001


Development in Selected Regional Economies


The Caribbean

Preliminary estimates are that Trinidad & Tobago's
GDP grew by only 1% during the first three
quarters of 2001 as expansion in the petroleum
sector was largely offset by weakened performance
of non-petroleum sectors such as manufacturing,
services and agriculture. Drought and industrial
disputes led to a 5.3% decline in sugar production
during the year, while rising food prices helped to
push the inflation rate upward to 5.8%. The financial
system experienced generally liquid conditions
reinforced by a 2% reduction in reserve requirements
in mid-May that increased the downward pressure
on interest rates. Credit growth was nevertheless
slack with demand reflecting the general slowing
of the economy. Over the first half of the year, the
government's fiscal accounts registered a surplus of
TT$1.2bn that was expected to decline by the end
of the fiscal year due to projected increases in
expenditure.

Over the first three quarters, Jamaica's GDP rose
by approximately 3.5%, as output in the mining
industry rebounded to normal levels and all other
major sectors except electricity and water and


miscellaneous services expanded. On an annual
basis, growth is however expected to tail off to
1.0%, as compared to 0.5% in 2000. Between
January and October 2001, consumer prices rose
by 8.3%, a slight decline from that of 2000 that
mainly reflected stability in the exchange rate.
Projections for the end of the year point to a further
decline of 7.6%. The latter enabled monetary policy
to be eased somewhat with reductions in liquid asset
and cash reserve ratios over the period facilitating a
downward movement in interest rates. Central
government operations generated a fiscal deficit of
J$2.6 billion prior to the completion of negotiations
for the privatization of the Jamaica Public Service
Co. (electricity supplier), Jamaica Railway
Corporation, the Sangster International Airport and
the National Commercial Bank ofJamaica.

After growing by nearly 3.0% per annum for eight
consecutive years, real GDP in Barbados declined
by 2.8% in 2001 largely due to the impact of a
slowing world economy and September 11. All
economic sectors were affected by the downturn,
which caused increases in both male and female
unemployment. A 5.9% contraction occurred in the
tourism sector as arrivals of both long-stay and
cruise ship passengers fell. The manufacturing sector
also suffered setbacks partly due to the increased


Table 11.2: Selected Indicators for Some Caribbean Countries


GDP] Grothi~1 Inflaio Rateijm : I I. i. Ue pom enti~' ,,~ Deii m~t/GDP~
Coutr Rat (66 66 666e 66) 666i 66)


Barbados 3.
Jamaica 0.
Trinidad 5.
Source: ECLAC
n.a: not available


(1.5)
1.5
1.0


9.3
15.5
12.5


10.0
n.a
n.a


n.a
n.a
20.9







International and Regional Developments


competition associated with trade liberalization. As
a result, real output of all major sub-sectors declined
significantly. The economic recession pushed credit
demand lower. Coupled with strong deposit growth
this contributed to abuild-up in excess liquidity and
interest rate declines. Meanwhile, weak revenue
growth coupled with increases in current and capital
outlays led to a widening of the fiscal deficit to
3.5% of GDP. Net official reserves nevertheless
rose by $439.7mn reflecting strong inflows in the
first quarter and the proceeds from an international
bond issue in December.

Real GDP growth in Guyana expanded marginally
by 1.3% during the first half of the year as major
productive sectors such as agriculture, mining and
quarrying struggled. Consumer prices registered a
0.4% decline as higher transportation and
communication charges were more than offset by
lower prices for foods such as fresh fruit and
vegetables. Meanwhile, even with a smaller Central
Government deficit, the overall financial position
of the non-financial public sector deteriorated due
to a decline in receipts and increased current
expenditure by public sector enterprises. In the
external sector, the trade and current account deficits
widened, reflecting declines in export volume and
prices of almost all major commodities. When this
was combined with a fall-off in private investment
inflows, the result was a reversal of the overall
balance of payments position from a surplus into
a deficit.


OECS

The overall performance of the Eastern Caribbean
States appeared to have slowed during the first six
months of the year relative to that of the same
period in 2000. Contractions were mainly in the
agricultural sector, which saw a substantial decline
in banana production. Notably, production in St.
Lucia (the region's largest producer) fell by more
than one half (55.1".. Declines also occurred in
tourism with both cruise ship visits and stay-over
visitors generally down except for increased cruise
ship visits to Antigua and Barbuda. The
performance of the manufacturing sectors in
Dominica and St. Vincent and the Grenadines
was mixed with increased output of some products
being offset by declines in others. Meanwhile, the
fiscal operations of the combined Central
Governments generated a current account surplus
that was, however, expected to contract with
projected increases in outlays for personal
emoluments and higher interest payments given the
increased size of the disbursed outstanding debt.




Mexico

The Mexican economy stagnated in 2001, registering
a 0.1% contraction that was in sharp contrast to the
targeted growth rate of 4.5% and well below the
previous year's rate of 7.0%. The economic recession
in the United States (which accounts for 90.0% of
Mexico's exports) was the principal factor causing








An coonual Report 2001


the slow-down in the first six months to deteriorate
into a considerable downturn in the second half of
the year. Monetary and fiscal adjustments in response
to the changing economic situation included an
easing of monetary policy in the latter part of the
year. This coincided with cuts in public sector
spending, which reduced the fiscal deficit to 0.7%
of GDP. With imports also declining, the external
current account deficit was held to 3.1% of GDP.
Meanwhile, strong foreign inflows from foreign
direct investment and international debt issues
boosted reserves and contributed to a real
appreciation of the peso. This helped to reduce
inflation to 5.4%, the lowest level since 1972.


Central America


Central American economies were faced with an
increasingly hostile external environment in 2001 as
growth in world trade and the US economy sharply
decelerated and international prices for raw materials
fell. Financial turbulence associated with declines in
the world's stock markets and uncertainty in the wake
of the events of September 11 in the United States
were significant factors. These were compounded


by a number of regional occurrences, including
natural disasters (earthquakes in El Salvador, drought
in various countries, hurricanes in Belize and
Honduras), that forced authorities to undertake
unbudgeted public expenditures. In a positive
development, the Free Trade Agreement between
Mexico and the Central American Northern Triangle
(El Salvador, Guatemala and Honduras) was
implemented, which should help to mitigate the
impact of the world recession on trade.


The Panamanian economy lost further momentum
in 2001 with GDP growth declining from 2.6% in

2000 to 0.5%. A contraction in capital formation
that was partly due to a decline in foreign investment
inflows as well as a slow-down in domestic
consumer spending were notable developments.
Weakening external demand enabled only marginal
growth in exports during the year. On the other
hand, the domestic slow-down caused imports to
contract significantly resulting in a 56.7% decline in
the external current account deficit. Against the
backdrop of a weakening economy and falling
revenues, the Government was forced to reverse


Table 11.3: Selected Indicators for Mexico and Central America
GDP Growth 666 66I 666 66 66 66 666nf o 6nemlomnt6Deficit/n PT rae lnce
Country Ra te (%) (0/0) Rate (%) Ratio (%)[ US $ bn^^^^^


Costa Rica
El Salvador
Guatemala
Honduras
Mexico
Nicaragua
Panama
Source: ECLAC
n.a : not available


0.3
1.5
2.0
2.5
(0.1)
2.0
0.5


10.2
4.3
5.1
10.1
9.0
9.9
0.7


(3.0)
(2.3)
(1.9)
(5.9)
(1.1)
(7.8)
(1.3)


(3.2)
(3.9)
(2.5)
(5.5)
(0.7)
(8.5)
(2.0)


0.4
(2.0)
(1.5)
(0.8)
(10.4)
(1.0)
(0.5)


(0.2)
(2.2)
(1.6)
(1.0)
(13.3)
(1.1)
(0.1)







International and Regional Developments


its moderate counter-cyclical policy of the first part
of the year and cut back on budgetary expenditures
in an attempt to rein in the fiscal deficit.

GDP growth slowed again in Nicaragua falling
from 4.7% to 2.0% as growth in construction, trade,
transport, agriculture and governmental services
declined. With revenues rising by only 1.2%, total
government expenditure rose by 3.4% with cuts in
capital outlays being more than offset by increased
current expenditure. The result was a worsening of
the fiscal deficit to GDP ratio to -8.5%. At the
same time, the external current account deficit
increased slightly to 39.0% of GDP, reflecting a
widening trade deficit plus higher interest payments
and profits repatriation. Monetary policy remained
tight in view of the high fiscal deficit and costs
associated with the banking crisis of 2000. With a
slowing economy, lower petroleum prices and
greater stability in tariffs for basic services, the rate
of inflation fell to 5.8% while the unemployment
rate rose to 10.7%.

The Honduran economy experienced modest
growth of 2.5% driven by domestic consumer
spending as gross fixed capital formation declined
for the second consecutive year. Central government
outlays to rebuild infrastructure and alleviate poverty
generated a fiscal deficit equalling 5.5% of GDP.
As has been the case since Hurricane Mitch in 1998,
financingwas entirely from foreign sources. A slump
in international coffee prices compounded by the
effects of the US recession led to a minimal 0.3%
growth in exports of goods and services. In


comparison, imports rose by 6.6%, and this raised
the external current account deficit by US$100.Omn
to US$359.Omn which was financed by foreign
investment inflows. The rate of inflation declined
slightly during the year to 9.0% mainly due to a
slight appreciation of the lempira. Around the
middle of the year, the country suffered a drought
and later on in October, the glancing effects of
Hurricane Michelle.

The Guatemalan economy slowed for the third
consecutive year with GDP growth of 2.0% that
was driven by public investment and consumption.
Worseningterms of trade, drought, world recession
and disputes between certain corporate groups and
the government caused a 4.0% drop in private
investment and a contraction in export earnings. The
inflation rate almost doubled to 10.0% due to
exchange rate depreciation, the effect of the
drought on food prices, higher taxes and monetary
liquidity. Inflation remained stubbornly unchecked,
notwithstanding Central Bank open market
operations aimed at reducing monetary expansion.
The government's fiscal deficit rose to 2.5% of
GDP reflecting low levels of tax revenues and
emergency support for the coffee industry. In
addition to external financing of the deficit, a
UL -''.0Omn bond issue was undertaken in
November to facilitate debt restructuring.
Combined with foreign direct investment linked to
privatization of the telephone company, these
inflows swelled international reserves and offset a
current account deficit equivalent to 4.8% of GDP.







f annual report 2001


GDP growth in El Salvador slowed further to
1.5% due to weak domestic and external demand
that was influenced by the US economic recession,
2 earthquakes and agricultural drought. The January
and February earthquakes, which killed almost 1,200
people and caused an estimated US$1.6bn in
material damages (roughly 12.0% of GDP), gave
rise to increased government spending. This pushed
the fiscal deficit up to 3.9% of GDP with financing
mainly sourced externally through the issue of
treasury notes. Meanwhile, a decline in merchandise
exports coupled with expansion in imports led to
an increase in the external current account deficit
that was largely offset by foreign direct investment
inflows and new loans. Dollarization of the
economy was initiated early in the year and by
October, 46.0% of currency and deposits had been
converted. With this as the backdrop, the annual
rate of inflation declined from 4.3% in 2000 to
3.0%.


The contraction in external demand along with a
fall-off in tourist inflows hindered growth in the
Costa Rican economy in 2001. GDP rose by 0.3%
as growth in the construction and mining sectors
were largely offset by declines in manufacturing
(particularly in the high-technology electronic
industry and textiles) and agriculture. The country's
trade gap increased significantly and its current
account deficit rose to 5.0% of GDP resulting in a
US$75.Omn decline in reserves even though capital
flows were much higher in the form of foreign
direct investment and a new central government
bond issue. With regular devaluations arising through
the crawlingpeg exchange regime, the inflation rate
rose to 11.0% even as urban and rural
unemployment rose. Meanwhile, high debt servicing
payments and outlays for salary increases and
transfers pushed the government's fiscal deficit
upward from 3.0% to 3.2% of GDP.












Domestic Production, Prices and Employment


Production

As the country battled with declining revenues from
international markets while facing the need for
reconstruction efforts at home after consecutive
years of hurricane damages, real economic growth
decelerated to 4.6% in 2001, down from the sharp
expansion of 10.8% in 2000. In contrast with the
previous year and despite the shocks suffered, the
main engine of growth was the primary sector.

Output in the primary sector almost tripled, moving
from 4.8% to 12.0%, as growth in the fishing and
forestry sub-sectors more than compensated for a
mediocre performance on the part of the
agricultural sub-sector. The latter decelerated from
4.9% to 2.9%, due mainly to contractions in
sugarcane and banana production caused by
Hurricanes Keith in 2000 and Iris in 2001. On the


other hand, real growth of 36.2% was recorded in
the fishing sub-sector largely because of farmed
shrimp where a substantial expansion of ponds
took place. While actual productivity declined due
to heightened shrimp mortalities caused by the
resurgence of Taura virus, overall output was higher
due to the expansion in industry capacity. A marked
increase in pine wood harvesting also pushed the
contribution of the forestry sub-sector up to 16.0%,
as 1 .- -. i .; attempted to salvage some economic
value from trees infected with the pine bark beetle.
The intensive 1 -. -- i aimed at controlling the
spread of the disease by removing sources of
infection. However, the transitory growth spurt in
forestry also marked the path for future significant
contractions in this sub-sector as the economic
impact ofwidespread damages caused by the beetle
are fully realized.


Table III.l: Annual Percent Change in Selected Indicators
199 2 2001


GDP at Current Market Prices
Real GDP at Factor Cost (1984 prices)
Primary Activities
of which: Agriculture
Fishing
Forestry
Secondary Activities
of which: Construction
Services
of which: Trade, Restaurant & Hotel
Public Administration
Transport and Communication
Consumer Price Index
Average
End of period
Source: Central Statistical Office


11.6
6.5
12.5
9.1
28.8
(0.6)
4.3
20.5
5.4
3.1
2.4
8.2


12.0
10.8
4.8
4.9
13.1
(30.9)
17.6
14.8
10.5
24.1
3.8
3.0


2.8
4.6
12.0
2.9
36.2
16.0
3.7
9.0
2.0
(0.6)
3.5
4.3


(1.2) 0.6 1.1
(1.0) 1.0 1.0







SAnnual Report 2001


The secondary sector experienced a significant
deceleration with growth falling from 17.6% to
3.7%, as lower growth in manufacturing and utilities
largely offset a 9.0% increase in construction
activities.

A slowing of activity was also observed in the
services sector, which delivered a 2.0% increase as
compared with growth of 10.5% in the previous
year. While tourism expanded, this was completely
overshadowed by a contraction in international
trade that resulted in negative growth of 0.6% for
the sub-sector. The trade downturn rippled
throughout the sector, dampening growth in other
services, especially 'Finance & Insurance', which
slowed from 18.8% to 2.6%.

Despite the deceleration in GDP caused by
exogenous shocks towards the end of the year, the
high level of economic activity during the first
quarters lowered the unemployment rate to a
reported 9.3%.

The growth in output was accomplished with very
modest inflation of 1.1%. Helping to keep prices
low was a 0.7% reduction in import costs as
measured by the US export price index as well as
the capping of average levels of import duties at
20.0% as required by the CARICOM External
Tariff agreement.


Agriculture


Sugarcane

In the midst of the sugarcane growing season,
Hurricane Keith ravaged the country's northern
coastline leaving in its wake torrential rainstorms
that caused major flooding of agricultural lands.
The damage from the hurricane further depressed
yields from a crop that was already performing
sub-optimally from low input usage as farmers
* u- -k .. under high debt burdens in the face of
declining prices. The 2000/2001 sugarcane crop
was therefore forecasted to have one of the lowest
industry yields in a very long time.

Sugarcane deliveries consequently totalled 1.0mn
long tons, a 6.9% decrease when compared to the
1999/2000 crop. After grinding for 198 days (six
days less than the 204 days operated in the previous
crop), the factory was forced to close due to the
sugarcane shortage. The quality of the sugarcane
was also lower than that of the previous year, with
cane purity falling from 86.23% to 85.65% as a result
of poor weather conditions and increased mud
content.


Table III.2: Sugarcane Deliveries


*1 1989 199/2 s00/1


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


1,162,578 1,098,771 1,023,440







Domestic Production and Prices



In the face of depressed world market prices as sugarcane prices for the 2000/2001 crop year
well as lower prices from the EU caused by the averaged $41.13 per ton, a further slip downwards
depreciation of the euro against the US dollar, from the $42.18 paid in 1999/2000.




Box 1: Sugar Industry Survival Adjustments


Tightened quotas, declining prices in preferential markets and global production surpluses
were the major underlying causes of the second year of financial losses sustained by the
industry. Forecasts indicate that these losses should continue for 2002, as well.

Several key developments occurred as the industry struggled with the necessary adjustments
for its survival. The first of these was the passage of the new Sugar Industry Act 2001. This
Act puts into place the legal framework for institutional development and other changes that
should effect the far-reaching adjustments so desperately needed to boost productivity and
competitiveness. A major step was the move to dismantle the current inefficient licensing
system where many licenses are in small, uneconomic quantities and many non-farmers are
allowed to hold licenses. For a two-year period, delivery licenses have been suspended and
sugarcane farmers will be allowed to deliver as much as they are able. At the end of this
period, licenses will be re-issued, based on the farmer's average delivery over the previous
two years. Another positive development will be the establishment of a sugarcane research
facility. Such a facility is critical to enhance field productivity by providing farmers with
updated and new technological advances that impact on field yields and costs.
Remuneration to farmers will be based on sugarcane quality, motivating farmers to practice
better field management.

On other issues, the sugar processor was able to obtain permission to expand its sugarcane
production. The objective is to produce between 150,000 to 175,000 long tons over a four-
year period. This will enable farmers to see a model farm in operation and, hopefully,
convince them of the need for greater field efficiency and productivity.

On the diversification front, continued efforts are being made to attract an investor that
would set up a co-generation plant. Such a plant would significantly increase the value added
of the industry.

In conclusion, while the industry has begun to address some of the critical survival issues,
several major factors still remain to be tackled. Chief among these are the rationalisation of
sugarcane harvesting and delivery costs as well as the high handling costs for transporting
sugar from the factory to the ship for export. A speedy resolution to the preceding is
critically important.








( cA~rnual Teport 2001


Table III.3: Citrus Fruit Deliveries


Deliveries ('000 boxes) 5,734 6,981 7,195
Oranges 4,415 5,590 5,734
Grapefruits 1,322 1,391 1,461
Sources: Del Oro Belize Limited, Citrus Growers Association


Citrus

The 2000/2001 citrus crop achieved record
deliveries of 7.2mn boxes of fruit, a 3.1% increase
over the 1999/2000 crop. This strong performance
was achieved despite a one-month delay (the harvest
beginning in November rather than the customary
October). Fruit maturation was delayed because
of heavy rains from Hurricane Keith and the early
onset of cool weather during the beginning of the
harvest. While the industry's fruit output did grow,
maximum crop yields were not obtained due to
labour shortages experienced by the larger farms
and the widespread use of inexperienced harvesters.
The latter occurred as many of the more seasoned
workers exited citrus farming in favour of
employment elsewhere in the economy after
benefiting from the amnesty programme for illegal
aliens. Farmers were consequently left with no
choice but to hire large numbers of inexperienced
seasonal workers.

Young groves coming into production increased
the number of harvestable trees, boosting orange
deliveries by 2.6% to 5.7mn boxes and that of
grapefruit by 5.0% to 1.5mn boxes. As more
trees reached harvest maturity, overall yields for the
industry were expected to increase annually for the


next two or three years. However, the Citrus
Growers Association (CGA) estimates that the
industry has been set back by two years due to
hurricane damage.

The final box price for oranges was $4.37, down
from $5.03 paid for the 1999/2000 crop. On the
other hand, strong export demand kept grapefruit
prices above $4.00 with the final box price settling
at $4.05, still some $0.08 below that received for
the previous year. The result was that farmers were
apparently caught once again in a tight price squeeze
since costs of production per box of orange and
grapefruit are estimated by the CGA to be $5.75
and $5.09, respectively. These costs reflect low field
productivity (yields average 1.1 boxes per tree versus
3 to 4 boxes realized in Florida), thinning groves
(where dead trees are not being replanted) and
measures necessary for fruit fly control.

Banana

In early October, Hurricane Iris wreaked
destruction in a thirty-five miles swath of southern
Belize, an area where the majority of banana
plantations are situated. The devastation to banana
fields brought production to an immediate halt.







Domestic Production and Prices


The premature halt after only 40 weeks resulted in
total production in 2001 of 2.6mn boxes of fruit,
in contrast with the previous year when 52 weeks
yielded 3.6mn boxes. Even before the hurricane,
production had been sub-optimal because of very
poor climatic conditions. Heavy rains and very cool
weather during the early part of the year had
retarded blossom formation and increased field
quality problems.

At the beginning of 2001, the total area under
banana cultivation measured 5,211.9 acres, ofwhich
4,750.6 acres had plants of harvestable maturity
(producing) and 461.3 acres had plants that were
non-producing By the end of December, the total
area under cultivation had risen to 6,146.5 acres, of
which 1,517.3 acres were producing, 3,415.9 acres
were non-producing and 1,213.3 acres were being
replanted. Hurricane damage had been mainly to
the large plants of harvest maturity, most of which
were blown over and completely destroyed. While
some of the young plants were also killed, sufficient
remained alive to avoid the need for complete
replanting of all the fields. Axis International, a
private consultant, estimates the damage to
plantations to be in the region of $19.5mn.


Papaya

During 2001, approximately 741 acres were under
papaya cultivation with 380.5 acres having
harvestable trees. The remaining 360.5 acres
contained young non-producing trees. Cultivation
continued to be concentrated in the Orange Walk


and Corozal districts where participation by local
farmers rose to 33.0%, triple their share since the
previous year.

Acreage was divided relatively evenly between large
and small varieties with the big cultivars accounting
for 51.0% and the remaining 49.0% of papaya
acreage being devoted to small papayas. Local
farmers produced about half of the small papayas
that were exported. It is expected that more acreage
will be shifted to the large cultivar since it is more
resistant to viral diseases. This industry shift to larger
papayas explains the surge in yield and export
volumes.

During the year, producers were plagued by field
problems, a major source being viral damage to
plants and fruits. This caused significant tree losses
(almost as much as the losses from Tropical Storm
Chantal which swept through the north of the
country in mid August destroying as much as 50.0%
of some fields that were at their harvest peak).
Producers therefore intensified efforts to shift to
more resistant cultivars. Fields with younger plants
were able to recuperate faster while others have
undergone major replanting. Most producers
suffered financial losses from the combined effects
of viral and storm damage.


Other Agricultural Production

Despite suffering some damage from Hurricane
Iris and the after effects of Tropical Storm Chantal
during the last quarter of 2001, the production of
other major basic grains did very well. Corn







Annual Teport 2001


production (that had been badly hit by Hurricane Large-scale soybean production began in earnest
Keith in 2000) rose from 60.1mn to 81.1mn pounds. during 2001 with over 450 acres planted in June/
Rice paddy also registered a small increase from July and another 2000 acres planted in October.
24.9mn to 25.3mn pounds. Red Kidney bean (See Box2).
production expanded by 32.7% to 12.3mn pounds,
one of the highest yields in a longwhile.



Box 2: Soybean Production Project


In the early 1980's, extensive work had been done with soybeans as part of a project aimed
at achieving agricultural diversification. The intention was to encourage local cultivation in
order to supply a protein rich base for animal feed as well as to produce cooking oil for the
domestic market. It was felt that achievement of these objectives would not only provide a
cash crop for farmers but also save scarce foreign exchange through import substitution.
However, while some production of soybean did take place and continued on a small scale
thereafter, the major objectives were never fully achieved because the focus at the time was
on small-scale rather than large-scale production units, and the economies of scale weighed
heavily against profitability.

Since then, dynamic expansion in the farmed shrimp industry has occurred in Belize,
providing a ready market for protein rich animal feed and assisting in resurrecting the
original goals of import substitution and foreign exchange savings. In 2001, the
Government launched a soybean production project that aims to eventually cultivate a
minimum of 5,000 acres by 2002. The first phase involved cultivation of 450 acres in June/
July and another 2,000 acres in October. The project undertook the planting of the first 450
acres and farmers were involved in the second planting in October. Field trials took place in
Hill Bank, Little Belize, Blue Creek and Spanish Lookout.

The first phase assessed the most appropriate cultivars suited to Belize's climatic conditions
and refined the technological production package. In June and October 2002, farmers are
expected to plant another 1,000 and 5,000 acres, respectively. Project personnel will be
providing technical advice, and field services such as planting and harvesting. Phase two of
the project will involve the setting up of an oil processing plant, which is to be eventually
sold to the private sector.

While gauging the success of this effort will require at least a three-year period, all indications
have been favourable so far. The 2001 field trials have demonstrated that soybean can be
produced profitably for the local market if done in units of a certain minimum economic
size. Field apparatus like the heavy-duty soybean harvesters and planters are already in place.
More importantly, some farmers have been quick in taking up the production challenge.







Domestic Production and Prices


Livestock production rebounded to a semblance
of normalcy after the disruption to animal rearing
caused by Hurricane Keith in 2000. Cattle and pig
dressed weights increased by over 50.0% when
compared to 2000. Pork in particular appeared to
respond to the higher demand derived from the
increase in local meat processing. Dressed poultry
amounted to 27.5mn pounds, a noticeable increase
over the previous year, while eggproduction totalled
2. lmn dozens. Milk production, including output
from the small cattle farms, measured 4.3mn gallons.
Meanwhile, honey production almost halved as bees
could not forage well due to the destruction of
flora caused by the intense storms that hit the
country during the year. Problems with the export
certification of honey once again stymied exports
to the UK.


Marine Products


The year 2001 was a rather challenging one for the
marine sub-sector which strove to deal with several
calamities.

Farmed shrimp production rose by approximately
30.0% to 9.8mn pounds of whole shrimps due to
prior investments that expanded the area of
harvestable ponds by over 1,070 acres in 2001,
although not all of this area were stocked with
shrimps. The Taura virus, once thought to have
been eradicated, reappeared on all farms, causing
very high mortality rates of 30.' "..or more. Industry
insiders point to the damage caused by Hurricane
Keith to shrimp ponds in late 2000 as the likely
cause of the virus resurgence. Increased pond
acreage was, however, able to offset the mortality
losses and boost industry yields overall.


Hurricane Keith had also inflicted damage to fishing
grounds and destroyed a high percentage of lobster
traps, causing lobster production to plummet by
24.1% to 478,034 pounds in 2001. The lobster
catch is expected to make a slow recovery as the
population recuperates from the disturbance to its
habitat. Production in the south was similarly
affected by Hurricane Iris when it struck the country
in October 2001. Upheaval to the fishing grounds
brought about by these hurricanes also resulted in a
decline in finned fish production. Conch
production, on the other hand, rose by 2.3% to
579,561 pounds as the population recovered from
the damage to grass sea beds, their natural habitat,
caused by Hurricane Mitch three years ago.


Forestry, Mining and Construction

Reversing the declining trend of previous years,
forestry delivered a 16.0% expansion as logging
activities intensified feverishly during the year. The
flurry of activities reflected the increased harvesting
of pine forests as loggers felled pine trees suffering
from severe damage caused by the pine bark beetle
as well as healthy trees to create a buffer zone that
might halt the spread of the disease. The
widespread beetle infestation required that the
forests be cleared of infected trees not only for
disease control but also for fire prevention purposes.
The surge in production is hence of a transitory
nature since the widespread destruction of pine
forests wreaked by the beetle will manifest itself in
the years to come.








4cA~rnua Teport 2001


Construction activities decelerated in the meantime,
from real growth of 14.8% in 2000 to a still robust
9.0% in 2001. Hurricane reconstruction and
residential construction works contributed
significantly to output. The continuation of several
infra-structural projects from 2000, as well as the
commencement of new works such as the seaport
dredging, also assisted in maintaining the momentum
of this sub-sector.

Parallelling the performance in construction
activities, growth in the mining sub-sector also
decelerated from 23.9% to 3.4%, with reported
slowdowns in the extraction of sand, gravel,
limestone and other minerals.




Manufacturing


Sugar and Molasses

Reflecting the decline in sugarcane deliveries, sugar
production for the 2000/2001 year fell by 13.6%
to 103,862 long tons.


Notwithstanding the various investments
undertaken during the year to improve sugar quality
and increase cane acceptance capacity, overall factory
time efficiency declined from an average of 91 t:.'-."
to 88.6%. Increased downtime caused by
mechanical difficulties added to the waiting time
for sugarcane milling, and hence, contributed
somewhat to the drop in cane purity from 86.23%
to 85.65%. However, the major factor that
impacted the level of sugars in the sugarcane was
the sub-optimal input usage and poor field growing
conditions. The loss in overall efficiencies caused
the cane/sugar ratio to deteriorate from 9.14 to
9.85, meaning that 7.8% more sugarcane was
required to produce a given unit of sugar.

Primarily because of the lower processing volumes,
molasses production also decreased by 3.4% to
34,411 long tons.


Citrus Juices and Pulp

Even with a modest 3.1% growth in fruit deliveries,
the volume of juice production contracted by 24.8%
to 6.7mn gallons. The change reflected a shift in


Table III.4: Sugar and Molasses Production
1998/99 1999o0 2000/01


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


116,067
41,361


89.39
84.20
10.02


120,275
35,633


91.08
86.23
9.14


103,862
34,411


88.6
85.65
9.85







D om es ti c P rodu ction and P rices 4


Table III.5: Production of Citrus Juices and Pulp


1 199/9 199/0 200/1


Production ('000 gals) 6,400
Orange Concentrate 2,978
Grapefruit Concentrate 678
Not-from-concentrate (NFC) 2,743
Production (pounds)
Pulp -
Sources: Belize Food Products; Citrus Company of Belize.


processing strategy to maximise production of
concentrate and minimise that of the not-from-
concentrate (NFC) product. This resulted in a
lower gallon volume (since concentrate has less
water than NFC) even though the pound solid out-
turn was higher than the previous year's. The change
in processing emphasis toward the larger and more
stable concentrate market became necessary because
of the drop in NFC prices and smaller market share.

With deliveries up and the bulk of fruits going into
the production of concentrates, output of these
juices rose by 12.7% to 5.7mn gallons, consisting
of 4.9mn gallons of orange concentrate and 0.8mn
gallons of grapefruit concentrate. Production also
included the freeze concentrate juice (very similar in
quality to the NFC product) that more than
doubled in response to trial marketing in Asia.

As expected, the production of NFC juices
declined across board to 1.0mn gallons compared
with 3.9mn gallons in the previous year. Output of
orange NFC (0.5mn gals) was kept to the quantity
necessary to mix with stocks held over from 2000
in order to improve their saleability. On the other
hand, output of grapefruit NFC (0.5mn gals) was
restricted by fruit quality and the low out-turn of


pound solid per box of fruit. The grapefruit crop
experienced the greatest quality problems arising
from the heavy rains caused by Hurricane Keith in
late 2000.

Pulp production entered its second year with output
up by 22.4% to 2.4mn pounds, the majority of
which was orange. However, production of
grapefruit pulp abruptly ceased in December after
quality problems were manifested at the retail level.


Other Manufacturing Production


The performance of other manufacturing
production was mixed. Production of rum,
batteries and garments declined by 25.4%, 30.9%
and 23.1%, respectively. Accounting for the latter
was the switch by one of the largest factories to a
dress style that was more labour intensive to sew
On the other hand, output of beer, soft-drinks,
flour, cigarettes and fertilizer were all higher. An
expansion in brewing capacity boosted beer
production from 2.4mn to 2.9mn gallons during
the year. Soft-drink production also rose sharply
by 7.8% to 5.3mn gallons while flour production
measured 26.1mn pounds, a 3.6% increase over the
previous year.


8,960
4,344
716
3,890

1,983


6,734
4,925
777
1,032

2,427







onnoual Report 2001



Box 3: Tourism Developments and Prospects




Developments in 2001

Recognizing that an increase in tourist traffic would boost overall industry returns, the Belize
Tourism Board intensified its television advertisement in the United States, its major market,
with a three-month coverage on cable television during the first quarter of the year. One
objective was to attract more tourists during the summer or off-peak period, thereby
reducing the marked seasonality that characterizes tourist flows to date. Internet marketing
was also intensified with potential tourists able to make reservations for hotel, vehicles and
tours on the web. The success of these efforts was evident. While tourist traffic temporarily
slowed after the bombing disaster in New York and the ravages of Hurricane Iris in
October, growth in arrivals before September 11 was able to compensate for the subsequent
slowdown.

The consolidation and enhancement works on thirteen archeological sites continued on
target. These works are being carried out under a four-year project that commenced in 2000
and will terminate in 2004. In other developments, work began on the construction of new
buildings and support facilities at the northern and western borders to manage tourist flows
at the land entry points.

The cruise ship sub-sector was quite active during the year. In the first part of the year, port
calls declined significantly as one of the visiting cruise lines went into bankruptcy.
Nevertheless, consistent marketing efforts were successful in attracting new cruise lines as
well as in winning more port calls from existing lines already calling in Belize. The first
phase of construction of the Belize Tourism Village was completed in October, providing an
attractive environment to welcome cruise ship visitors and encourage more spending.

Prospects

During 2002, the tourism industry should accomplish the following:

* Phases 2 and 3 of the Belize Tourism Village should be completed. Phase two
consists of the construction of a marina and water taxi terminal, while phase 3
consists of the construction of an amphitheater and more stores.

* The construction of new immigration and customs facilities at the northern and
western borders should be completed by mid-year.

* Implementation of the third year of reconstruction and improvement works on
major national archaeological sites.

* Implementation of a two-year national training project for all stakeholders in the
industry.







Domestic Production and Prices


Table III.6: Bonafide Tourism Arrivals

Stayover Arrivals
Air 111,578 128,050 129,419
Land 38,319 37,342 38,042
Sea 9,847 9,475 10,144
Total stayovers 159,744 174,867 177,605

Cruise Ship Arrivals 29,011 44,360 40,899
Sources: Immigration Department, Belize Tourism Board, Central Bank of Belize


Tourism

Despite the September 11 disasters and the
devastation in the southern parts of the country due
to Hurricane Iris in October, arrivals ofbona fide
stay-over tourists totalled 177,605, (1.6% higher than
in 2000).

The number of arrivals through all entry points grew,
reflecting the success of promotional efforts to
market Belizean tourism abroad. The bulk of the
visitors (72.9%) came through the Philip Goldson
International Airport (PGIA). The land and sea
borders accounted for 21.4% and 5.7%,
respectively. Immediately following the September
11 disaster in the United States, air arrivals
plummeted as all international airports in the US,
the main feeder link for tourists, were closed. While
air travel has slowly been recovering, the growth in


traffic prior to September was able to more than
compensate for the falloff since, even leading to a
1.1% overall growth in air arrivals for 2001.

The main markets continued to be the United States
and Europe, with Americans accounting for 57.3%
and Europeans for 11.8% of all arrivals by land
and air.

Cruise ship day visitors declined by 7.8% to 40,688
as the number of port calls in the first part of the
year fell abruptly because of financial difficulties
experienced by one of the cruise lines visiting the
country. Intensive lobbying to attract other cruise
lines to Belize proved successful with port calls
starting in the last quarter of the year. The advent
of new cruise lines means that ships shouldbe calling
year-round, a welcome shift from the previous
seasonal October to April port calls.


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












Source: Central Statistical Office








f annual report 2001


Prices

After two years duringwhich the cost of living had
declined, the rate of inflation during 2001 as
measured by the Consumer Price Index (CPI) was
1.1%. Prices rose consistently during the year except
for a transitory decline of -0.3% in August.

Prices of all categories of goods and services rose
except for 'Clothing & Footwear', 'Household
Goods & Maintenance' and 'Recreation, Education
& Culture'. The largest cost increases came from
services, most of which were dependent on fuel
inputs 'Transport & Communication' (5. "' '.."
'Rent, Water, Fuel & Power' (2.1'..) and 'Medical
Care' (1.9%). Contributing substantially to the
increases were butane gas and the relatively high
fuel prices at the pump. The price of butane gas
did eventually fall, but only during the last quarter,
too late to neutralise the effects of higher prices
during the first part of the year.

The largest decrease in prices was in 'Clothing &
Footwear' (-3.5"..) and 'Household Goods &
Maintenance' (-0.9%). The overall average level of
import duties was reduced to 20.0% from 25.0%
in the previous year, helping to keep costs low


Further helping to keep inflation low was the small
reduction in the cost of imports as proxied by the
0.7% decline in the US export price index.


Employment

During the year, the Belizean labour force increased
by 1.7% to 95,690 persons, ofwhich 90.7% (86,780
persons) were employed. The unemployment rate
consequently declined from 11.1% in 2000 to 9.3%
in 2001, representing the third consecutive year of
improvement. Primary sector activities, namely
'Agriculture, Forestry and Fishing', continued
to account for the largest share (some 27.2"..) of
the employed population followed by 'Trade,
Restaurant and Hotels' with 23.0%. This
development is consistent with the growth areas
that have been noted under the GDP by industrial
origin. The rise in the labour force participation
rate to 60.5% was largely due to a higher proportion
of females entering the labour market.
Approximately 37.0% of males were employed in
'Agriculture, Forestry and Fishing' as compared
to 6.5% of females. On the other hand, 33.2% of
females were employed in the 'Trade, Hotels and
Restaurants' category compared to 11.5% of
males.


Table III.8: Employed Labour Force by Industrial Group
Indus t ri l riou 1999 g000o*o00


Agriculture, Forestry &
Mining and Quarrying
Manufacturing
Electricity & Water
Construction
Trade, Restaurant & Hot
Transport
Financing & Real Estat
Public Administration
Education, Health & Oth
Activities not classified
Total, All Sectors
Source: CSO


Fishing 21,360 22,710
300 300
7,305 7,880
1,025 1,090
4,580 4,860
els 17,775 19,275
4,230 4,510
e 2,940 3,165
4,925 5,300
ier services 13,095 14,335
elsewhere 220 235
77,755 83,660
Figures interpolated as there was no survey

22


23,610
315
8,170
1,135
5,055
19,965
4,685
3,285
5,500
14,815
245
86,780
in 2000













Monetary and Financial Developments


Money Supply


Domestic financing for the private sector and
Central Government pushed the broad money
supply (M2) up by 7.8% to the $1.0 bn threshold
during 2001. The strong boost from net domestic
credit was somewhat offset by a '.4-.2mn decline
in the net foreign assets of the banking system that
was not only linked to the $179.3mn expansion in
net domestic credit of the banking system but also
to an additional $67.3mn pumped into the hands
of the private sector via DFC loans and advances.
Also affecting monetary growth was a $65.7mn
increase in other items net (OIN) reflecting inflows
to DFC in December from its asset repurchase
agreement with Royal Merchant Bank that were
temporarily deposited in the Central Bank as well
as increases in commercial bank capital, reserves
and unappropriated profits. Notwithstanding the
strong rise in domestic credit, excess statutory


liquidity saw only a small decline holding at a level
of $121.7mn at year-end. This helped to maintain
downward pressure on interest rates while
facilitating a further widening of the commercial
banks interest rate spread.


Narrow money (Ml) continued its
upward climb during the year registering
a 17.6% increase with currency held by
the public and demand deposits
expanding by 9.6% and 21.2%,
respectively. These developments
appeared to be a partial manifestation
of domestic imbalances in the foreign
exchange market that were exacerbated
by Hurricane Iris' impact on the banana
industry. Transaction balances were
consequently built up due to interim
delays in effecting payments abroad. As
was the case in the previous two years,
demand deposit growth was led by the
accelerated rise in holdings by business


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


Net Foreign Assets
Central Bank
Commercial Bank
Net Domestic Credit
Central Government (Net)
Other Public Sector
Private Sector
Central Bank Foreign Liabilities(Long-term)
Other Items (net)
Money Supply M2


185.0
140.2
44.8
774.4
117.5
7.5
649.4
24.6
94.6
840.2


325.8
243.9
81.9
822.6
42.0
94.5
686.1
102.0
80.5
965.9


278.6
221.7
56.9
1,001.9
126.5
97.0
778.4
93.5
146.2
1,040.8


(47.2)
(22.2)
(25.0)
179.3
84.5
2.5
92.3
(8.5)
65.7
74.9







Annual Teport 2001
^B~fK^TTC^~f^^^^^^^^^^^^^^^^^^^^r.^^B


Chart IV.1: Annual Change in Demand, Savings
& Time Deposits


500 300

4501
400 1- =o





100 -50
50
0 0 i i 0
1997 1998 1999 2300 231
I--Sa-nngs l- irre rrandr]


enterprises. In 2001, the increase by this
category totalled some $38.3mn, or
43.9% which itself followed strong
growth of 36.2% in 2000 and 31.0%
in 1999. Other demand deposit
holdings by individuals and
cooperatives & credit unions also rose,
though by a significantly lesser extent.
In comparison with the rapid growth
in M1, quasi-money rose by only 3.1%


Chart IV.2 : Demand Deposits Held by Business
Enterprises


with a $32.4mn rise in savings deposits
being partially offset by a $12.1mn fall
in the level of time deposits. Individuals
and to a lesser extent, business
enterprises, accounted for almost 90%
of the expansion in savings deposits.
The 2.6% fall in time deposits (the first
to be recorded since 1984) was partly
the result of high levels of excess
liquidity that led some banks to cut back
on the relative share of their deposit


Table .2: liabilities made up of the more costly
Table IV.2: Money Supply
term deposits. New time deposit
$mn
Position as,,tC
I- I- 66 Dur66n6


Money Supply (M2)
Money Supply (M1)
Currency with the Public
Demand Deposits
Quasi-Money
Savings Deposits
Time Deposits


840.2
255.1
84.2
170.9
585.1
150.9
434.2


965.9
310.2
96.0
214.2
655.7
184.5
471.2


1,040.8
364.8
105.2
259.6
676.0
216.9
459.1


74.9
54.6
9.2
45.4
20.3
32.4
(12.1)


U)
0 8a

40
ZI


* Includes Non-Residents Foreign Currency Time Deposits of $49.0 mn.


I


M 94 95 97 98 99 T M 01










contracts were rejected in some
instances and in other cases, certain
existing contracts were not renewed.
Among the categories recording
declines were individuals, cooperatives
& credit unions, private financial
institutions and DFC while holdings by
business enterprises and other
organizations, IBC's and religious
organizations rose.

Net Foreign Assets

A $47.2mn decline was recorded in the
net foreign assets of the banking
system as higher payments abroad to
cover imports and service public and
private sector external debt obligations
coincided with a reduction in inflows
for major exports such as citrus, banana
and marine products. Although
additional loan and asset 'securitisation'
disbursements covered part of the
shortfall, the Central Bank and
commercial banks consequently
experienced declines in net foreign


Monetary and Financial Developments 4 '


assets of $22.2mn and $25.Omn,
respectively.
Central Bank foreign asset holdings
contracted by $21.Omn with foreign
exchange purchases totalling $408.5mn
while outflows amounted to $429.6mn.
Loan disbursements and receipts from
DFC's asset repurchase agreement with
RMB provided approximately
$269.8mn (66.1%) of total inflows with
BSI and privatization proceeds from
the sale of BWSL (formerly WASA)
contributing another $59.Omn (14.4%)
and $49.6mn ($12.1%), respectively.
The remainder was made up largely of
grants, proceeds from the economic
citizenship programme and investment
earnings. Sales to the public sector to
facilitate debt servicing and other
payments abroad totalled $238.Omn,
some $42.Omn higher than that of the
previous year. Commercial banks
received $152.8mn to facilitate
payments for imports, which, although
lower than in 2000, exceeded average
levels in recent years. Other increases


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


Net Foreign Assets of Banking System 185.0 325.8 278.6 (47.2)
Net Foreign Assets of Central Bank 140.2 243.9 221.7 (22.2)
Central Bank Foreign Assets 142.3 245.6 224.6 (21.0)
* Central Bank Foreign Liabilities (Demand) 2.1 1.7 2.9 1.2
Net Foreign Assets of Commercial Banks 44.8 81.9 56.9 (25.0)
Commercial Bank Foreign Assets 86.3 138.7 133.7 (5.0)
# Commercial Bank Foreign Liabilities 41.5 56.8 76.8 20.0
* Does not include Central Bank's Long-term Foreign Liabilities of $93.5mn.
# Does not include Non-Residents Foreign Currency Time Deposits of $49.0mn held w ith Commercial Banks.


$mn








cejfraul jgpork 2001eix


in outflows were linked to BEL loan
payments as well as to relatively higher
bilateral payments and revaluation losses
sustained during the year. Short-term
foreign liabilities rose by $1.2mn
reflecting increases in the CDB ordinary
capital resources account as well as in
the CARICOM bilateral clearings
balance.
The commercial banks reported a
$5.Omn decline in foreign asset holdings
as private sector demand for foreign
exchange to facilitate a variety of
imported goods and services, debt
servicing and other miscellaneous
transactions outstripped foreign
exchange inflows received by the banks
over the year. Whereas foreign currency
deposits derived from IBC's had
contributed $25.6mn to the expansion
in commercial bank foreign asset
holdings in 2000, additional inflows
from this source fell to some $3.7mn
in 2001. At the same time, short-term
foreign liabilities rose by $20.Omn as
additional borrowings from head offices
and other financial institutions abroad
were undertaken to meet some of the


requirements of clients resident in
Belize.
Net Domestic Credit
A 21.8% increase in net domestic credit
of the banking system occurred as loans
to the private sector gained momentum
and a substantial increase in domestic
financing of Central Government's
capital budget was undertaken during
the year. Private sector entities also
benefited from an additional 33.8% rise
in DFC lending. Loans to statutory
bodies rose by $2.5mn, down from the
$87.Omn expansion in loans for this
category in 2000.
Following its $75.5mn decline in 2000,
net domestic credit to Central
Government rose by $84.5mn
(201.2%). The expansion took the
form of deposit withdrawals from the
Central Bank and commercial banks
totalling $68.3mn plus a $20.5mn
increase in the overdraft balance held
with the Central Bank. During the same
period, the overdraft balance held with
commercial banks was completely
cleared as a result of repayments of
some $1.Omn. Secondary trading in


Table IV.4: Net Domestic Credit Summary
$mn
Position ~ asa.hne
I- I- 66 Dur66n6


Total Credit to Central Government
From Central Bank
From Commercial Banks
Less Central Government Deposits
Net Credit to Central Government
Plus Credit to Other Public Sector
Plus Credit to the Private Sector
Net Domestic Credit of the Banking System


147.9
67.8
80.1
30.4
117.5
7.5
649.4
774.4


149.9
62.7
87.2
107.9
42.0
94.5
686.1
822.6


166.1
78.2
87.9
39.6
126.5
97.0
778.4
1,001.9


16.2
15.5
0.7
(68.3)
84.5
2.5
92.3
179.3







Moneutar and Financali Developments


Treasury Bills saw Central Bank holdings
falling by $5.0mn while commercial
banks and insurance companies
increased their share by $1.7mn and
$3.3mn, respectively.
The rest of the public sector received
an additional $2.7mn led by DFC and
local government entities with $3.2mn
and $1.0mn, respectively. Other
statutory bodies including the
Marketing Board, Recondev, the Port
Authority among others were able to
reduce their outstanding loan balances
over the period reviewed.
Private sector credit also accelerated,
achieving overall growth of 13.5% as
compared to the 5.7% increase
recorded in 2000. The expansion
followed a sluggish start in the first
quarter during which loans had declined
by 1.1%. Building and construction
attracted the most attention with


financing for various construction
projects rising by $24.4mn in addition
to the $13.5mn that was advanced by
DFC for this purpose. Over 60.0% of
commercial bank loans for construction
were for residential housing projects, the
balance being shared between
commercial and other types of
construction. In the tertiary sector,
tourism received an additional $18.2mn.
This substantial increase followed two
successive years in which loan balances
for this sub-sector had fallen.
Professional services and transport
(particularly road haulage and passenger
services) were also primary areas of
focus receiving $7.9mn and $7.2mn,
respectively. The latter also benefited
from additional investment of some
$30.2mn through loans from DFC. In
other notable developments, the impact


Table IV.5: Sectoral Composition of Commercial Banks' Loans and Advances
$mn
Position ~ aatCngs
I. I- III -During


PRIMARY SECTOR
Agriculture
Commercial Fishing
Forestry
Mining & Exploration
SECONDARY SECTOR
Manufacturing
Building & Construction
Private Utilities
TERTIARY SECTOR
Transport
Tourism
Distribution
Other*
Personal Loans
TOTAL


68.1
55.6
10.9
0.8
0.8
190.3
44.4
142.5
3.4
226.2
28.6
31.9
117.3
48.4
170.3


77.3
65.5
10.1
0.8
0.9
198.3
44.5
153.3
0.5
252.3
32.9
25.8
133.0
60.6
167.5


96.2
73.8
16.4
1.3
4.7
226.5
44.3
177.7
4.5
292.8
40.1
44.0
136.3
72.4
173.0


654.9 695.4 788.5


18.9
8.3
6.3
0.5
3.8
28.2
(0.2)
24.4
4.0
40.5
7.2
18.2
3.3
11.8
5.5
93.1


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







Annual Report 2001



Chart IV.3: Annual Change in Net Domestic Credit (Banking System & DFC)


of Hurricane Iris on the southern part
of the country helped to push loans to
banana growers up by $10.2mn. Net
loan increases were also recorded for
the commercial fishing and mining sub-
sectors, which along with banana
accounted for almost the entire
$18.9mn rise in loans for the primary


sector over the year.



Liquidity

Even with a $10.0mn decline from the position at
the end of 2000, conditions in the banking system
continued to be marked by high levels of excess
statutory liquidity throughout 2001. A new peak of
$185.4mn developed at the end of March as


Chart IV.4: Sectoral Distribution of Outstanding Commercial Bank and DFC Loans
300

250
200
2 150
E
W9 100

50

0
j .o
op" 'Po o


250-

200-

c 150
.0
E 100
-

50

0-


1997 1998 1999 2000 2001







Monetary and Financial Developments


Chart IV.5: Excess LiquidAssets


additional funds were injected into the system
through DFC loans to the private sector of funds
received from abroad. Substantial increases in credit
to the private sector, particularly during the second
and third quarters, caused some tightening to occur
over the April to December period. By the end of
the year, excess statutory liquidity stood at $121.7mn
with commercial bank holdings of approved liquid
assets risingby $5.7mn relative to a $15.7mn increase
in the level of required holdings. Among notable
portfolio changes were increases in balances held
with the Central Bank and holdings of other
approved liquid assets (i.e. new housing loans) of


Chart IV.7: Quarterly Change in Excess Liquidity



20)
180 -
160
S140-
C 123 -
O

60-
40-
20-
0
3rdqtr 4th qtr 1stqtr 2ndqtr 3rdqtr 4th qtr
2000 2000 2001 2001 2001 2001


Chart IV.6: Excess Cash Reserves


$16.2mn and $13.5mn, respectively. On the other
hand, sustained pressure derived from the
imbalance in private sector transactions with entities
abroad helped to push holdings of short-term
foreign balances downward by $24.Omn.

With the marked growth of demand deposits in
2000 continuing in 2001, primary liquidity
maintained an upward trend adding $11.7mn to
the substantial increase of $37.3mn recorded in the
previous year. This brought total excess cash reserves
to an historic high of $51.5mn as commercial bank
daily average holdings of cash reserves and required


Chart 1V.8: Quarterly Change in Excess Cash
Reserves


3rdqtr 4th qtr lst qtr 2nd qtr 3rdqtr 4th qtr
2000 2000 2001 2001 2001 2001


140
120
100
| 80
60-
40
20
0
0z 0, 0,
NZ NZKZ-^-- -


60

50

40
0
i 30
E
" 20


1994 1995 1996 1997 1998 1999 2000 2001







ScA0nnual Report 2001


Table IV. 6 : Commercial Banks' Holdings ofApproved Liquid Assets
$mn
Positon a at Cange
I- ** I- III DurIing


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


252.9
19.5
42.3
85.2
53.5
23.3
29.1
190.0
62.9
42.1
39.6
2.5


348.5
18.2
71.0
125.3
65.1
23.3
45.6
216.8
131.7
72.2
32.4
39.8


354.2
18.7
87.2
101.3
64.6
23.3
59.1
232.5
121.7
86.6
35.1
51.5


5.7
0.5
16.2
-24.0
-0.5
0.0
13.5
15.7
-10.0
14.4
2.7
11.7


cash reserves increased by $14.4mn and $2.7mn,
respectively. This was in sharp contrast to the normal
practice of the banks whereby excess cash reserves
have generally been held to minimum levels as
demonstrated by the fact that average holdings of
excess cash reserves totalled approximately $2. lmn
over the six years leadingup to 2000.


Interest Rates
Meanwhile, the interest rate spread of
the commercial banks increased further
by 30 basis points to 11.1% as
excessively liquid conditions paved the
way for comparatively greater
downward pressure to be exerted on
time deposit rates. Flushed with
liquidity, several commercial banks
refused new time deposits, which
helped to pressure the weighted average
time deposit rate down by a full 1.1%
over the year. This contributed to a 70
basis points fall in the weighted average
deposit rate to 4.3%, the lowest ever
recorded. Declines were also recorded


in lending rates with the weighted
average lending rate calculated on the
total loan portfolio of the banks down
by 40 basis points to 15.4% reflecting
downward movement in rates applied
on commercial, mortgage and other
loans. On the other hand, there was a
clearly discernable upward trend where
the rate applied to new loans were
concerned. Whereas in 2000 the trend
for such loans was clearly downward,
this changed in 2001 as, after bottoming
at 14.56% in March, loan rates began
to climb back up ending the year at
17.21%. The upward movement was
most pronounced for commercial loans,
which ended 2001 some 93 basis points
higher than it was in December 2000.
Although ending the year
approximately 26 and 50 basis points
lower, respectively, personal and
mortgage backed loans were generally
trending upward after reaching lows in
April and September.








Monetary and Financial Developments



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

Percentages
Positon a at Cange
I- ** I- III DurIing


Weighted Lending Rates
Personal Loans
Commercial Loans
Mortgage Loans
Other
Weighted Average

Weighted Deposit Rates
Demand
Savings
Tim e
Weighted Average
Weighted Average Spread


16.9
16.2
15.3
14.2
16.2


0.0
5.3
8.0
5.7
10.5


16.5
15.5
14.7
14.5
15.8


0.0
5.4
7.2
5.0
10.8


16.8
14.8
14.0
12.6
15.4


0.2
5.4
6.1
4.3
11.1


Chart IV.9: Monthly Supplemental Loan Rates (2000 & 2001)


JFMAMJJASONDJFMAMJJASOND


0.3
(0.7)
(0.7)
(1.9)
(0.4)


0.2
0.0
(1.1)
(0.7)
0.3


Chart IV.10: Commercial Banks'Weighted Average Interest Rate Spread


S 129 I I I .I


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








jAnnual Report 2001



Central Government Operations and Public Debt


Central Government Operations

During 2001, Central Government's fiscal

operations generated a current account surplus of
$30.8mn, representing a decline to 1.9% of GDP,
as compared to 2.7% in 2000. The overall deficit
fell by $9.6mn to $130.3mn leading to a decline in
the deficit to GDP ratio from 9.0% in 2000 to 8.1%
in 2001.


Current revenue registered a 4.1% increase to
^'(.4.3mn as a $35.7mn upswing in tax revenue

overshadowed a $21.2mn decline in non-tax
revenue. The expansion in the former reflected
increased collections from international trade &
transactions ($24.1mn), tax receipts from goods &


services ($7.5mn) and income tax ($3.5mn). The
fall in non-tax revenue was primarily due to a decline
in transfers from public enterprises and lower
dividends from privatized enterprises.


A substantial 50.0% increase was recorded in capital
revenue (from $49.2mn to $73.8mn) due to the
sale of BWSL in April and the implementation of
an indexed environmental levy. Grant receipts, on
the other hand, contracted by approximately 25.0%


At $333.5mn, current expenditure was 8.1% higher
on a year on year basis since, except for outlays on
goods and services that declined by $5.9mn to
$66.8mn, all major categories of current outlays


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


Ja-De Ja-De Ja-DcCag
1999 200 200 duin
200


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


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

32


327.0
266.5
60.5
278.8
48.2
71.5
69.3
50.4
16.5
10.0
415.0
165.3

444.1
(29.1)
(29.1)
29.1
(4.2)
38.5
(5.2)


(2.1)


349.8
286.6
63.2
308.4
41.4
49.2
69.4
21.2
17.0

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


(9.0)


364.3
322.3
42.0
333.5
30.8
73.8
83.5
21.1
12.8

450.9
247.7
21.3
581.1
(130.3)
(109.0)
130.3
58.5
72.1
(0.2)


14.5
35.7
(21.2)
25.1
(10.7)
24.7
14.1
(0.1)
(4.2)

34.9
0.2
1.0
25.3
9.6
10.6
(9.6)
132.4
(141.4)
(0.6)


(8.1)







Central Government Operations and Public Debt


Chart V.1: Central Government's Development Expenditure

100%

80%

60%

40%-

20% N

0%
1998 1999 2000 2001

Capital II E Capital III


increased. The most notable growth was in interest
payments on the public debt, which rose by
$17.3mn to $53.7mn.

While capital expenditure remained steady at
approximately $247.6mn, Capital II (domestically
financed) budget grew by $14.1mn to $83.5mn and
Capital III (externally financed) expenditure declined
by 7.8% to $164.2mn. These outlays were allocated
for development expenditures, as the transactions
with the DFC were treated as deposits.

The significant outlays under Capital II went on
projects such as land development & acquisitions
($6.5mn), infrastructure ($3.6mn), counterpart
funding for the southern highway ($3.1mn), towns
& village roads ($3.0mn), and roads & municipal
drainage ($2.8mn). The balance covered a multiplicity
of small projects ranging from the Social
Investment Fund (SIF) to tertiary level scholarships.


Meanwhile, Capital III expenditure was used to
fund a wide cross-section of small projects plus
rehabilitation works on the Southern Highway
($9.6mn), Ministry of Environment's Vocational &
Technical sector ($5.5mn), community planning &
projects ($5.1mn), housing projects ($4.7mn),
municipal roads and drainage ($4.2mn), product
development & marketing ($2.7mn), and
promissory notes ($2.3mn). Also of note is the
sum of $53.9mn (3.3% of GDP) thatwas allocated
for emergency reconstruction works following
Hurricane Iris.

The overall deficit of $130.3mn was financed from
both domestic and external sources. The latter
amounted to $72.1mn, as loan disbursements of
$140.4mn outweighed amortization payments of
$54.3mn and deposits into a sinking fund
($14.0mn). Net financing from the domestic system
rose to $58.5mn with $75.9mn being sourced from
the Central Bank. Other domestic financing of
negative $26.3mn reflected Central Government's
deposits with the DFC.







f annual Report 2001


Central Government's Domestic
Debt

Central Government's domestic debt rose by
$35.3mn to $211.3mn during the year, resulting in
a domestic debt to GDP ratio of 13.1% as
compared to 11.4% in 2000. The increase was
attributable to the combination of a $17.2mn
GOB/US debt for nature swap plus a $19.5mn
net rise in overdraft financing, which outweighed
amortization payments of $1.4mn. Under the Debt
for Nature Swap agreement, debt service payments
on the outstanding balance of $17.6mn will be
made in Belize dollars into a deposit account to be
subsequently used by Belizean NGO's for the
conservation/preservation of tropical rain forests
in Southern Belize. Amortization payments totalling
$1.0mn were made to commercial banks to clear
overdraft balances that had been built up partly to
facilitate the purchase of land in Ambergris Caye.
On the other hand, financing derived from the
overdraft with the Central Bank increased by
$20.5mn (45.6".., to $65.5mn.


Other principal repayments were to the Belize Bank
Limited on a loan that had been incurred by
Recondev for the Cohune Walk Housing Project
and to the DFC for the debt-restructuring loan
arranged in the previous year.

In secondary trading, the Central Bank sold $5.0mn
in Treasury Bills including $1.7mn to the
commercial banks and $3.3mn to other
organizations and individuals.

Interest payments totalled $16.2mn, with
approximately $6.4mn consisting of charges
associated with the overdraft balance. Interest
payments on Treasury Bills and Treasury Notes
(most of which were held by commercial banks)
amounted to $5.3mn and $2.2mn, respectively.
Holders of Defence Bonds received $1.3mn and
the DFC earned $0.7mn on its debt-restructuring
loan to the Government. The Belize Bank and the
BSSB also received interest payments with respect
to housing loans from the latter to Recondev, and
for financing to facilitate land purchase and housing
loans from the former.


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

100.0 *
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0

Central Commercial Social Other
Bank Banks Security
I 1999 E2000 1 2001







Central Go vernmen t Operations and Public Deb t 4


Table V.2: Central Government's Domestic Debt

$mn


Loans & Advances 56.3
Treasury Bills 70.0
Treasury Notes 24.0
Defence Bonds 15.0
Debentures 6.2
Total 171.5
Sources: Ministry of Finance, Central


External Public Deot


The public sector's disbursed outstanding external
debt rose by approximately $102.6mn to $950.0mn
raising the debt to GDP ratio from 54.8% in 2000
to 59.0% in 2001. Central Government's share of
the debt stood at $675.3mn or 71.1% of the total.
On the other hand, the share for the non-financial
public sector fell marginally from 4.7% to 4.2%
following the privatization of BWSL. The share
of the debt due to the financial public sector went
from 21.7% to 24.7% due to increased loan
disbursements to the DFC. While the share of the
debt from commercial banks increased from 44.6%
to 49.0%, the percentage from multilateral sources
remained steady at approximately 26%. The share
of the debt from other sources contracted with
the obligations from bilateral sources and
commercial suppliers falling from 25.0% to 21.5%
and 4.1% to 3.5%, respectively.



Table V.3: Financial Flows on


Disbursements
Repayments
Net Financing Flows
Interest Payments
Net Transfers


60.8 96.1
70.0 70.0
24.0 24.0
15.0 15.0
6.2 6.2
176.0 211.3
Bank of Belize


Disbursements totalled $219.9mn as compared to
amortization payments of $70.3mn, negative
valuation adjustments of $1.3mn and the external
debt reduction of $17.2mn arising from the "debt
for nature swap". Principal and interest payments
amounted to $130.4mn, pushing the debt service
ratio up from 9.6% to 14.7%.



Approximately 63.8% of total disbursements went
to Central Government during the year. This
included $63.6mn from commercial creditors such
as the International Bank of Miami (IBofM), which
provided 4.3mn to fund various investments in
the country. Another $50.8mn came from
multilateral creditors including $36.6mn from the
IDB that was designated for projects such as
Southern Highway construction, tourism
development, hurricane rehabilitation among others.
The $26.Omn balance came from bilateral creditors,
principally, the Republic of China (Taiwan), which
provided $24.9mn mainly for housing projects.

Public Sector External Debt
$mn


1I 199 200 20


91.1
38.6
52.7
28.9
23.8


409.5
69.4
340.1
39.1
301.1


219.9
70.3
149.6
60.1
89.5







0Annual Report 2001
^^^^B^^~fa^?^^^^^^^^^^^^^^^^^^^^r.^^^


Disbursements to the financial public sector
consisted entirely of loans to DFC from the
International Bank of Miami ($40.0mn), Deutsche
Bank of Germany for the La Democracia project
($11.5mn), CommerzBank ($8.0mn) for the soya
bean project, and CDB ($3.2mn). Disbursements
to the non-financial public sector went to the Port
Authority, as the KBC Bank advanced some
$16.7mn for dredging works.




At 'M4.3mn, Central Government amortization
payments were marginally below that of the
previous year. Approximately $33.6mn went to
commercial creditors, the largest of these payments
being $10.3mn to the International Bank of Miami
and $6.1mn to the Royal Merchant Bank.
Meanwhile, payments on bilateral loans amounted
to $14.6mn including $5.7mn to Taiwan, $4.2mn
to the UK Government and $2.3mn to the
Government of the United States. Multilateral
agencies such as IBRD, CDB and the OPEC Fund
received a combined total of $6.2mn.


Among the $11.3mn in amortization payments
made by the financial public sector during the year
was some $8.5mn to commercial creditors, $2.4mn
to multilateral agents and $0.4mn to bilateral agents.
Amortization payments by the non-financial public
sector more than doubled to $4.7mn, of which,
$2.7mn went to commercial banks, $1.3mn to
multilateral creditors and the remaining $0.7mn to
bilateral creditors.




Interest and other payments experienced a sharp
increase growing from $39.1mn in 2000 to $60. lmn
in 2001. Central Government accounted for
approximately 70.0% ,i'42 1 i'in of these outflows
with sizeable payments to commercial creditors such
as the Royal Merchant Bank ($11.2mn), Salomon
Smith Barney ($5.4mn), Citibank of Trinidad
($2.4mn), Provident Bank and Citicorp Merchant
Bank ($2.0mn each). Other Central Government
payments to multilateral and bilateral creditors
totalled $7.9mn and $7.6mn, respectively. Interest
payments by the financial public sector amounted
to $15.8mn almost 84% being in respect of


Table V.4: Public Sector External Debt by Source


Bilateral* 212.1 26.1 15.7 8.1 (0.5) 204.3
Multilateral 222.7 54.0 9.7 10.7 (0.5) 246.1
Commercial Banks** 378.1 132.9 36.3 38.4 (0.3) 465.9
Suppliers Credit 34.5 6.9 8.7 2.9 33.7
Total 847.4 219.9 70.3 60.1 (1.3) 950.0
*USAID Debt for Nature Swap Agreement as at 2 August 2001v\as implemented on 30 November 2001, for $17.2mn.
"Effective 31st March 2001, WASA loans were re-classified as private sector debt as a result of its full privatization.







Central Government Operations and Public Debt


commercial loans from the International Bank of
Miami and Citibank Trinidad & Tobago.
Multilateral and bilateral lenders received $2.4mn
and $0.1mn, respectively. Non-financial public
sector interest payments went largely to commercial
creditors that received $1.5mn while the remainder
was shared evenly between bilateral and multilateral
creditors.


Depreciation of the Euro and pound sterling against
the US dollar led to negative valuation adjustments
of $1.3mn during the year with the outstanding
value of sterling and Euro denominated loans
decliningby $0.5mn and $0.8mn, respectively.


Chart V.3: Sources of Public Sector External Debt


500.0-
400.0- Z
300.0- 1
200.0---"i
100.0-
0.0
1999 2000 2001


mn Bilateral 0 Multilateral
* Commercial Banks El Suppliers Credit


(4








Annual Report 2001



Foreign Trade and Payments


Financial transactions between residents of Belize

and the rest of the world resulted in net outflows
of $21.0mn during 2001. Gross international
reserves consequently declined from $245.6mn to

$224.6mn.


The current account in the balance of payments
deteriorated with the deficit widening by 11.8% to

$339.0mn (21.1- .. ofGDP). Contractions occurred

in both imports and exports, but the more severe
decline was in exports, which led to a widening of

the visible trade imbalance. In addition, foreign

exchange inflows from services ($77.0mn) and
current transfers ($97.1mn) were overshadowed by

increased outflows for merchandise trade

($382.9mn) and factor income payments
($130.2mn), the growth in the latter being attributed

primarily to increased interest payments on loans

and bonds. The current account deficitwas financed


by financial inflows (arising principally from loans,

direct foreign investment and DFC's repurchase

agreement with RMB for lands and housing) and
the draw down of international reserves.


Merchandise Trade


International trade contracted as import demand
cooled somewhat and exports fared poorly in the

face of exogenous shocks. With a steeper

reduction in export activity relative to imports, the
visible trade deficit grew by $36.5mn to $382.9mn.


The value of total exports fell by 6.7% to $538.2mn,

ofwhich $205.5mn was from the Commercial Free
Zone (CFZ) and $332.7mnwas from the customs

territory of Belize. Since CFZ sales volume

increased by $10.7mn, the decline in exports was
principally due to domestic exports from the

customs territory


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

$mn
1999 200 00


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


(146.2)
(205.1)
(17.8)
65.6
(83.4)
76.5
5.5
192.7
2.5
54.5
(54.5)

2.3
(10.6)


(303.2)
(346.4)
(74.2)
34.7
(109.0)
117.4
3.1
408.4
(4.9)
103.3
(103.3)

3.3
(19.6)


(339.0)
(382.9)
(53.2)
77.0
(130.2)
97.1
1.8
287.3
28.9
(21.0)
21.0

3.0
(21.1)







Foreign Tirade and Payments


Imports of goods fell by $2.1mn to $921.1mn, of
which approximately 16.8% was destined for bulk
re-exports and retail sales in the CFZ. The import
value remained relatively stable since a rise in CFZ
imports was counterbalanced by contractions in
capital imports for the domestic market. The latter
had been higher in the previous year because of the
one-time importation of major investment goods
for expansion of industrial capacity.

Domestic Exports

Severe weather in successive years, shrinking market
share and plummeting prices for major
commodities dealt the export sector a series of
shocks that caused the value of domestic exports
to contract sharply by $78.0mn to $322.0mn in
2001. The traditional export sector absorbed the
full brunt of these debilitating factors, registering a


$75.8mn contraction to $295.3mn over the year.
Non-traditional exports declined by $2.2mn to
$26.7mn.

Hurricane damage to sugarcane fields coupledwith
inadequate levels of agricultural inputs by highly
indebted farmers led to reduced crop yields and
lower sugar production and export volumes.
Revenues consequently declined. Hurricane damage
also resulted in some twelve weeks of banana export
shipments being lost as well as a decline in revenues
from lobster and other marine exports due to the
destruction of traps and disturbance to fishing
grounds. In addition, the value of export shipments
of citrus juices decreased since more concentrate
and less NFC juices were shipped into inventory
abroad. In sole contrast to all other major exports,
the export value of molasses increased as prices
rose in conjunction with higher prices of grain
substitutes.


Table VI.2: Domestic Exports


Traditional Exports 316.7 371.1 295.3
Sugar 86.6 74.2 59.4
Citrus Products* 73.8 118.7 95.1
Citrus Concentrate 54.9 94.5 88.6
Not-from -Concentrate 18.9 24.2 6.5
Molasses 0.4 0.3 1.6
Bananas 56.8 65.8 42.8
Marine** 55.6 67.6 63.7
Garm ents 39.3 39.8 30.4
Sawn Wood 4.2 4.7 2.3
Non-traditional Exports 22.5 28.9 26.7
Total 339.2 400.0 322.0
Source: Central Statistical Office
* Value of export shipment and not sales.
** Reflects the value of export shipments of shrimps and not sales.







Annual Report 2001
^^^^B^^~fa^?^^^^^^^^^^^^^^^^^^^^r.^^^


Box 4 : Economic Impact of Natural Disasters


Belize has recently suffered from three natural disasters within a one-year period that caused damages
of almost one billion dollars to property, infrastructure, various economic sectors and the environment.
While Hurricane Keith (October 2000) and Tropical Storm Chantal (August 2001) affected the northern
parts of the country, Hurricane Iris (October 2001) devastated the southern region of the country
with strong winds, tidal/wave surges, and severe flooding.

As a result of the damages sustained by housing, health, agriculture, utilities, transport and other
infrastructure, existing stocks of finished goods and inventories were destroyed, and the country's
ability to generate goods and services for both domestic use and exports, suffered serious setbacks.

Hurricane Keith, and to a lesser extent Tropical Storm Chantal, caused destruction to tourism sites on
the offshore cayes, especially San Pedro, and t iI -. -. ..i d much flooding of agricultural lands in the
Corozal and Orange Walk Districts as well as in the Belize River Valley of the Belize District. The
devastation brought on by Hurricane Iris was to the southern Stann Creek District and the northern
and central portions of the Toledo District where tourism sites as well as banana and citrus plantations
were destroyed.

With the damages caused by Hurricane Keith and Hurricane Iris amounting to 33.8% and 18.9% of
GDP, respectively, it is clear that the country has been overwhelmed by the cumulative effect of these
natural disasters. It must also be noted that Hurricane Mitch of October 1998 and the terrorist attack
in the US on September 11, 2001 have also had negative contributions and have heightened the
economic challenges facing Belize.

Table VI.3: Natural Disasters, 2000-2001
Da te 6ct-ol Au[-*. 62 6o1


Hurricane / Tropical Storm
Category on Saffir-Simpson Scale
Area of Belize affected
Number of Persons affected
Ratio of persons affected to total population (%)
Total cost of damage (Bz$ million)
Ratio of total damage to GDP (%)
Source: NEMO


Keith Chantal
4
North North
38,208 7,000
15.3 2.7
521.9 31.4
33.8 2.0


Sugar and Molasses

Pressure on the sugar industry increased as a result
of destructive weather and declining prices in both
preferential and world markets. The processor
reported financial losses for the second consecutive
year while farmers continued to struggle under high
debt burdens. The result was a decline in processing


With production down, sugar exports fell to 89,538
long tons valued at $59.4mn, decreases of 16.8%
and 19.9% in volume and value, respectively, when
compared to the previous year. The corresponding
fall in export value was steeper because of a decline
in the average price received from the EU.


volume and sugar production.


Iris
4
South
19,880
7.7
304.4
18.9







Foreign Trade and Payments


Table VI.4: Exports of Sugar and Molasses
($mn)
1999 20000
Vo I u rn e Vau Vo I-ne Vle VoIur au


Sugar (long tons)
E.U. (Quota long tons)


117,848
57,408


USA(Quota long tons) 11,275 1
Other (World, long tons) 49,165 1
Molasses 36,511
Source: Central Statistical Office

Exports to the EU totalled 44,633 long tons valued
at $36.7mn, down from 54,855 long tons valued at
$51.5mn in 2000. The decline in volume was mainly
attributable to downward adjustments that
compensated for the pre-shipment of a portion
of the 2001 Protocol sugar quota during 2000.
Additionally, Belize was not awarded any reallocation
of sugar, unlike the previous year when a shortfall
in Mauritius's production led to a 3,000 long ton
quota increase plus the pre-shipment of
approximately 6,000 long tons. Further exacerbating
the revenue decline was a fall in the average price
from U '1 21 to US$0.18 per pound as the euro
depreciated against the US dollar. (Prices are quoted
in euros on a CIF basis.)

The US quota remained at 11,000 long tons, and
sales to that market amounted to 10,858 long tons
valued at $9.0mn, a 1.4% decrease in volume and
8.4% increase in value. Although the sugar quota is
fixed, small variations around that figure are allowed
once compensatory adjustments in deliveries are
made in the subsequent quota year. In contrast to
the EU, the average price in the US improved from
US$0.17 to US$0.19 per pound, as excess stocks
were drawn down with the implementation of the
payment in kind (PIK) programme by the


86.6 107,597


58.4 54,855
0.3 11,015
7.9 41,727
0.4 33,424


74.2 89,538
51.5 44,633
8.3 10,858
14.4 34,047
0.3 31,228


59.4
36.7
9.0
13.7
1.6


Commodities Credit Corporation (CCC). (The PIK
program encourages US farmers not to plant
sugarcane by giving them sugar from the CCC
stocks that are equivalent to what would have been
obtained from the acreage not planted.)

The residual 34,047 long tons that could not be
sold preferentially went to the world market,
garnering $13.7mn, decreases of 18.4% and 4.9%
in volume and value when compared to the previous
year. Ameliorating the decline in export value was
an improvement in the average price from US$0.08
to US$0.09 per pound. This modest price recovery
can be attributed to a contraction in global sugar
production after six consecutive years of positive
harvest growth. Aiding the global supply situation
was the move by Brazil, one of the largest
producers, to utilise a higher proportion of its
sugarcane for ethanol rather than sugar production.

Molasses did very well with exports of 31,228 long
tons valued at $1.6mn, compared to 33,424 long
tons valued at $0.3mn in 2000. Prices made a
substantial recovery from $8.98 to $51.23 per long
ton largely due to the rebound in prices for grain
substitutes in animal feed.


5








Annual Report 2001
^^^^B^^~fa^?^^^^^^^^^^^^^^^^^^^^r.^^^


Citrus Products

The value of citrus juice shipments destined for
storage abroad amounted to $95.1mn, reflecting
not only the limited storage capacity in-country but
also the increased production arising from the 3.1%
growth in fruit deliveries.


However, for the second consecutive year, the citrus
processor suffered financial losses resulting from
price declines, loss in market share and, in 2001, a
major marketing quality mishap. After lacklustre
sales in 2000 that left the processor with a huge
stock overhang and an undesirable cash squeeze, an
,- -,_ ii-- marketing strategy was adopted to
reduce costly inventories, ease the cash constraints
and minimise financial losses. An integral part of
this strategy was to refocus attention on concentrate
juices as the mainstay of the industry rather than the
not-from-concentrate product (NFQ. Further, it
was determined that with prices relatively
unfavourable in Europe, the main target market
would be the United States followed by the much
smaller but highly lucrative regional market.


An i -1. i- effort during the year culminated in
sales of 8.5mn gallons of citrus juices valued at
$88.5mn, significantly exceeding the 5.5mn gallons
valued at $60.4mn realized for the previous year.
Concentrate juices (including the freeze concentrate)
accounted for 5.8mn gallons and $77.5mn, while
NFC juices comprised the remaining 2.7mn gallons
and $11.0mn.


The bulk (68.4% of export volume) of orange
concentrate juices were sold in the US, with sales
equally divided between the spot market, primarily
to address the cash squeeze, and upscale clients.
While higher prices were commanded from
premium clients, product deliveries had to be
consistent throughout the year, raising the cost-of-
sales, since it is the seller and not the buyer that
absorbs inventory costs. On the other hand, the
high proportion of sales on the spot market lowered
average prices from $14.51 to $11.88 per gallon.
The next largest market was Japan, which almost
doubled its intake (1.1mn gallons in 2001 versus
0.6mn gallons in 2000) of orange freeze concentrate,


Table VI.5: Export Sales of Citrus Products


1g 19920020


Concentrate ('000 gals)
Orange
Grapefruit
Concentrate value ($mn)
Orange
Grapefruit
Not-from-concentrate Expc
Orange
Grapefruit
Not-from-concentrate Valu
Orange
Grapefruit
Pulp Export ('000 pounds)
Pulp Value ($mn)
Source: Citrus Industry


rts ('000gals)


e ($mn)


3,857
3,036
821
55.2
45.6
9.6
4,572
3,465
1,107
23.9
18.5
5.4
0
0.0


3,432
2,707
725
50.8
39.5
11.3
2,024
1,231
793
9.6
5.6
4.0
1,524
1.0


5,799
5,008
791
77.5
64.5
13.0
2,650
2,024
626
11.0
7.9
3.1
2,075
1.4







Foreign Trade and Payments


a product very similar to the NFC juice that yielded
an additional $8.6mn in export revenues. Reports
are, however, that the freeze concentrate marketing
trials did not go as well as desired, perhaps because
of the economic recession in Japan and this should
have an adverse impact on future sales of this
product. A concentrated sales push in the Caribbean
was successful in raising export volume and value
to this market by 77.1% and 69.4%, respectively.
An insignificant quantity of orange concentrate went
to the EU since returns in that market were lower
than could be obtained elsewhere due to higher
shipping costs.

With the market flooded by low cost orange NFC
juices from Brazil and Spain, the status of orange
NFC as a premier product was lost. In view of
the huge inventory overhang from the previous year,
the priorities in 2001 were to supply just sufficient
quantities of fresh orange NFC to mix with that in
inventory in order to improve saleability and sell
off stocks, even below cost if necessary, to curtail
further financial losses. An intensive sales drive was
successful in moving approximately three quarters
of the stocks in inventory, almost doubling the
volume of orange NFC sold and increasing sales
revenues from $5.6mn to $7.9mn. However, the
intense competition and increased global supplies
caused the average price per gallon to slide from
$4.54 to $3.91.

While prices for orange juices continued their
downward slide, the market for grapefruit juices
experienced somewhat of a revival in 2000 and
2001. Although not yet back to levels considered


profitable by growers, prices strengthened as a result
of hurricane damage to Florida's grapefruit crop
in 2000 and an internationally funded advertisement
campaign that increased demand for the concentrate
juice both in the United States and Europe.

In contrast with the orange product, the bulk (55.7%
or 0.4mn gallons) of grapefruit concentrate juices
went to health conscious consumers in the EU, with
the average price increasing from $15.82 to $16.14
per gallon. Japan took 0.2mn gallons of the
grapefruit freeze concentrate product valued at
$3.1mn. Like the orange product, the Japanese
response to this new juice was below expectations
and was further negatively affected by quality
problems experienced with grapefruit pulp. The
remaining sales were to the US and Caribbean. Due
to the focus on the freeze concentrate, sales
slackened somewhat for grapefruit NFC, resulting
in revenues of 0.6mn gallons valued at $3.1mn,
decreases of21.1% and 22.5% in volume and value,
respectively.

During the year, pulp sales suffered major setback
as quality problems that manifested themselves at
the retail level in the Japanese market brought the
sale of grapefruit pulp to an abrupt halt in
December. This proved very expensive to rectify.
Much lobbying was done to convince customers
that the problem was restricted to grapefruit pulp,
would not occur in orange pulp and was not a
grapefruit freeze concentrate issue. Since the
marketing disaster occurred towards the end of
the year, pulp sales did manage to exceed the
previous year's, amounting to 2. lmn pounds valued
at $1.4mn, compared with 1.5mn pounds valued
at $1.0mn. Orange pulp sales consisted of 1.5mn








4onnual Report 2001


Table VI.6: Exports of Bananas

199 2 2001 o


Volume ('000 Ibs)
Metric Tons
Value ($mn)


Source: Central Statistical Office


pounds valued at $1.0mn, while grapefruit pulp
totalled 0.6mn pounds valued at $0.4mn. Orange
pulp sales will continue into the next year under
tightened quality assurance standards. Sales of
grapefruit pulp will only resume if certain stringent
quality control measures are implemented and
market credibility can be regained.


Banana

The devastation to banana plantations from
Hurricane Iris in October brought an abrupt halt
to export shipments after only 40 weeks. Hence,
export volume and value contracted to 48,185
metric tons valued at ^42 .' ,', down from 64,912
metric tons valued at $65.8mn for the 52 weeks of


2000.

Box 5: Banana WTO Update


123,879
56,188


143,113
64,912
65.8


106,235
48,185
42.8


Some stability was restored to the banana trade as the EU finally settled on the approach to bring its
banana import regime into conformity with WTO principles. A new tariff only system for banana
imports will be implemented and ACP countries will be given a transitional period within which to
improve their competitiveness. During this interim period, the import quotas for Latin American and
ACP banana will continue to operate.

From June to December 2001, banana import quotas were 2,553,000 tonnes for Latin America and
850,000 tonnes for ACP countries. Import licenses were allocated between traditional importers
(83.0"' ,, and non-traditional importers (17.0" '; The reference quota for Belize was the average of
deliveries between 1994 to 1996 or some 40,000 tonnes. Deliveries above the latter amount were only
made possible by buying unused import licenses from other ACP countries that were unable to meet
their reference quota.

Phase 2 of the adjustment will run from January 2 2 to December 2005. In this phase, the import
quota for Latin American countries was adjusted to 2,653,000 tonnes while that of the ACP countries
was reduced to 750,000 tonnes. Meanwhile, the division of import licenses between traditional and
non-traditional importers is still being debated and there are some indications that the 17.(0" ., allocated
to non-traditional importers may be further sub-divided. A strong lobby is under way to get the EU
to allocate 8.0% to non-traditional importers and 9.0"' to traditional producer organizations. In other
matters, Latin American countries pay a tariff of 75 Euros per tonne of banana. If they decide to
deliver any of the ACP quota, the tariff will be 300 euros, sufficiently punitive to discourage any
incursion into the ACP market.

In 2006, a tariff only system will prevail with ACP banana continuing to have tariff free entry. The
level of tariff for non-ACP banana has not been decided yet, but will be critical in determining the
survival prospects for ACP banana. In Belize, the local industry has already started to avail itself of
EU grant funds to improve field productivity and lower costs in a serious bid to enhance
competitiveness and ensure its future survival.








Foreign Trade and Payments


Claiming market pressure from the 'dollar' banana
countries, Fyffes (the marketer) reduced the average
box price by approximately $2.48, so the final box
price to growers ended at $15.92, down from
$18.40 received in the previous year. The marketer
also imposed a limit of 100,000 boxes per week
for the first 45 weeks and 80,000 boxes per week
from week 46 to 52, the latter limit being totally
superfluous, given the crop losses from hurricane.
The payment method where a basic box price was
guaranteed upon shipment and a further quality
bonus per box paid after inspection at the port of
destination remained in force for 2001.

During the year, the EU import regime remained
essentially the same as that which had operated from
January 1999 import quota for Latin America
was 2,553,000 tonnes while that of ACP countries
was 850,000 tonnes. Since individual country quotas
were removed, Belize was able to secure import
licenses from countries unable to meet their reference
quantity for amounts above her reference quantity
of 40,000 tonnes.


Marine Products


Disturbed fishing grounds, the resurfacing of
disease in shrimp ponds, and the negative impact
on export prices of the September 11 disaster
presented challenges to the export performance of
marine products in 2001.


While export volume rose by 20.9% to 7.5mn
pounds, this was largely attributable to increases in
shrimp and conch since all other exports declined.
At $63.7mn, value was 5.8% below that of the
previous year principally due to the decline in lobster
exports and lower shrimp prices.


Expansion of shrimp ponds in 2000 and 2001 paid
off with a 30.3% surge in export volume to 6.4mn
pounds. However, the Taura virus re-emerged
during the year on all farms, raising shrimp mortality
significantly, though the higher pond fatalities were
more than offset by the increase in pond acreage.
The September 11 disaster dealt another blow to
the industry due to the subsequent dramatic
contraction in the dining out market and resultant
lowering of shrimp demand and prices. In a further


Table VI.7: Exports of Marine Products


1999 20000
Vou e Vau -oume Vle Vl au
(e00 lbs ($-000 (666 lbs ($-000 6660 ls ($-000


Lobster Tail 561
Lobster Head 45
Whole Lobster 0
Shrimp* 4,637
Conch 365
Whole Fish 65
Other 10
Total 5,683
Source: Central Statistical Office
* Reflects value of export shipments, not sales.


16,493
256
0
36,064
2,557
96
100
55,566


573
49
0
4,897
564
97
4
6,184


16,760
289
0
46,418
3,950
143
42
67,603


433
28
0
6,381
622
11
0
7,475


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








cejfraul Jgaepof 2001iz


complication, supplies of shrimp from the far east
(mainly China) rose significantly. Reflecting these
market developments, the average shrimp price per
pound fell from $9.48 in 2000 to $7.33 in 2001.
The larger shrimp volume compensated for the
price decline, so the export value of shipments was
$46.7mn, of which $35.7mn represented actual
sales. Some 1.5mn pounds of shrimps went into
inventory abroad for sale at a later date.

As evidence of the gradual recovery of the conch
population after the disruption of Hurricane Mitch,
export volume and value rose by 10.3% to 0.6mn
pounds and 16.4% to $4.6mn. The strength of
demand in the Asian markets has also been
recovering after substantial weakening in the wake
of their financial crises in 1997/98. A 5.6% increase
in prices to $7.39 per pound also encouraged
fishermen to concentrate on increasing their conch
catch.

Lobster exports totalled 0.5mn pounds valued at
$12.4mn, down 25.9% and 27.0% in volume and
value, respectively. The contraction in exports
reflected the destruction of traps and severe
disruption to the fishing grounds caused by
Hurricane Keith.


Like lobster, damage to fishing grounds by the
hurricane reduced the catch of finned fish and,
hence, exports. Also, most fishermen chose to sell
the bulk of their catch to the local market where
quality standards were less stringent and prices just
as remunerative.

Exports of other marine products, namely crab
claws, did not occur in 2001 due to a slowness to
recover from the destruction of fishing traps and
disturbance to sea crabs' habitat, the result of
Hurricane Keith impact in the previous year.

Other Major Exports

The value of garment exports declined by 23.6%
to $30.4mn, principally due to a 23.1% reduction
in export volume to 2.0mn pieces. One of the
largest sewing factories shifted dress styles from
cargo pants, jeans and shorts towinterwear, items
that are more labour intensive to sew This reduced
export volume and value, correspondingly.

Sawn wood exports more than halved to 1.0mn
board feet valued at $2.3mn as 1 .- -i ,- -., affected
by floods from the hurricane, and there was also a
surge in domestic timber demand for hurricane


Table VI.8: Other Major Exports


1g 19920020


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


2.4
39.3

2,063
4.2

9,069
7.5


2.6
39.8

2,393
4.7

12,307
12.8


2.0
30.4

1,030
2.3

14,153
10.3







Foreign Trade and Payments


reconstruction and other construction projects. The
average price per board feet increased from $1.93
to $2.23 as more high valued woods were exported.

Notwithstanding the damage to fields inflicted by
Tropical Storm Chantal in August, papaya export
volume surged from 12.3mn to 14.2mn pounds,
while export value experienced a 19.5% decline to
$10.3mn. The volume increase was due to growth
in the number of export shipments of large papayas,
which producers have been shifting to since it is
more resistant to the mosaic virus, and thus
experiences less quality problems than the small
papaya. Export value fell because of a decline in
the average unit price from $1.04 to $0.73 per
pound. Lower fruit quality (due to the high
incidence of viral diseases in the field), the larger
share of bigpapayas in the export mix (prices for
big papayas are about 30.0% lower than that for
the smaller papayas) and increased competition were
the main factors driving average prices downward.

Non-traditional Exports

During 2001, the value of non-traditional exports
(excluding papayas) rose by 4.2% to $16.4mn. An
increase in the value of beans (red kidney and black
eyed) and other smaller miscellaneous non-
traditionals more than compensated for decreases
in all other products. While the volume of beans
was almost the same as the previous year's, the higher
priced red kidney beans comprised a larger share
of shipments, raising export revenues by 10.3% to
$6.0mn. Exports of orange and grapefruit oil
contracted by 35.5% to $0.3mn because of


declining prices. For the second consecutive year,
there were no exports of honey due to the country's
inability to meet new export certification
requirements in the traditional UK market.
Producers hope to commence exportation in 2002
once the export certification process is satisfactorily
completed.

Re-exports

Buoyed by growth in CFZ activities, re-exports,
including gross CFZ sales, rose by 2.0% to an
estimated $229.9mn in 2001.

CFZ sales rose by a healthy 5.5% to an estimated
$205.5mn as merchants continued to diversify their
product offerings around fuel, the mainstay of the
zone. The majority of CFZ goods were retailed
to Mexicans, the principal target customers, with
the remainder sold in bulk shipments to third
countries.

On the other hand, re-exports from the customs
territory fell from $30.6mn to $24.5mn, continuing
the declining trend that has been evident since 1999.
The reductions were primarily concentrated in food
items and miscellaneous manufactured articles.
Food re-exports were particularly affected by the
Mexican crackdown on food imports from Belize
because of phytosanitary concerns. Additionally,
the expansion of retail activity in the CFZ was
responsible for replacing to a large extent, the bulk
re-export of goods from the customs territory,
especially since a significant share of the traditional
re-export trade was to merchants in Chetumal, the
Mexican border town.








s cIonutal report 2001


Gross Imports


Gross imports (FOB) of goods and electricity as
recorded in the balance of payments fell marginally
from $923.2mn to $921.1mn as a decline in imports
into the customs territory was almost fully offset
by a modest increase in imports for the CFZ.

Most of the contraction in goods imported into
the customs territory was traced to reductions in
fuels, chemicals, manufactured goods and
machinery & transport goods, which outweighed
increased imports of other commodities including
electricity. Imports of fuel declined due to
reductions in average acquisition costs since import
volume actually increased by 7.8% to 56.3mn gallons.
Import volumes of gasoline and diesel, for
example, went up by 0.7mn and 3.4mn gallons,
respectively, while the average unit price of gasoline
fell from $2.40 to $2.02 per gallon and that of diesel
fell from $2.17 to $2.03 per gallon. The fall in the
value of chemical imports reflected lower imports
of PVC pipes and other conduits for construction,
while that for manufactured goods was due to less
building cement and carton boxes. On the other


hand, machinery & transport goods reverted to
normal levels after peaking in 2000 because of the
one-time importation of brewery and other capital
goods.

Direction of Visible Trade

The major markets for exports continued to be the
United States (US) and United Kingdom (UK),
which together accounted for a little over three-
quarters of total exports. Several factors combined
to reduce the share of sales to Europe (including
the UK) from 38.8% to 29.7%. Sales of orange
concentrate juices virtually dried up due to relatively
unattractive prices, and banana shipments came to
a halt after just 40 weeks due to devastation of
plantations by Hurricane Iris. Additionally, for the
second consecutive year, honey was not exported
due to the country's inability to implement the new
certification procedures for the EU. Meanwhile,
the increased market share of the US reflected a
surge in the sales of citrus juices, and the modest
growth in that of CARICOM resulted from an
intensification of regional sale efforts.


Table VI.9: Direction of Visible Trade*
Percentages
Exprt Ig gg port


United Kingdom 29.9
Other EU 12.0
United States 41.9
Mexico 3.6
CARICOM 5.4
Other Countries 7.2
Total 100.0
Source: Central Statistical Office
* Excludes CFZ activities


29.0
9.8
50.5
1.0
4.2
5.5
100.0


23.0
6.7
53.8
1.0
6.4
9.1
100.0


4.1
3.5
51.1
13.0
3.5
24.8
100.0


2.6
4.8
48.9
10.7
3.1
29.9
100.0


2.7
3.8
47.2
11.2
5.0
30.1
100.0


%a








Foreign Trade and Payments


Table VI.10: Balance of Payments Invisible Trade


199 20ll I D


INMISBLE TRADE
Senices
Transportation
Travel
Oner Gbods and Se mces
Gbvt. Goods and Services, N.I.E
Factor Income
Labour incomrre
Investrrnt Incorme
CsUrit Transfers
Gbvemr-rnt
Private
Invisible Trade and Current Transfers


The US was also the primary source for imports,

supplying 47.2% of the total. The intensification
of trade efforts within CARICOM bore fruit with
import growth rising from 3.1% in 2000 to 5.0%

in 2001. Mexico increased its market share

principally because of an increase in electricity
imports.


Invisible Trade


Invisible trade activity created net outflows of
$53.2mn as factor income payments of$130.2mn

outweighed receipts of $77.0mn from services.


Services


Net outflows for transportation services declined
by 2.rciI to $84.9mn, primarily due to the

contraction in international trade as lower export
and import volumes caused payments for

international freight, the largest component of

transportation services, to fall.


Meanwhile, net earnings from travel services rose

by $8.5mn to $163.0mn, reflecting a small increase

in inflows from nonresidents visiting or working in


Belize and a reduction in expenditures by Belizeans/

residents travelling or studying abroad. Total

inflows amounted to .-' 'i'.7mn, of which
$225.9mn was from tourist visitors and $13.8mn

from seasonal / border workers and students.

Average tourist expenditure rose due to the
expansion in more value added services such as tour

operations. Business visitors spent an average of

$278 per day but stayed for a shorter period (3
days),whereas nonbusiness visitors spent an average

of $196 per day but stayed longer (7 days). Total

travel outflows measured $76.6mn, down from
$81.0mn, as reduced spending on leisure and

education overshadowed an increase in business and

health expenditures.


Net outflows for other goods & services were

down by $18.1mn to $31.7mn with payments

declining by $5.4mn to $71.2mn and receipts rising
by $12.7mn to $39.5mn. The major factor causing

the reduction in international payables was

telecommunications, which was affected by a
lowering of international settlement rates. The


316.9
307.3
17.1
211.2
41.3
37.7
9.6
3.7
6.0
81.2
16.7
64.5
398.1


3347
241.7
87.3
724
66.7
15.3
93.0
129
(80.1)
47
22
25
339.4


(17.8)
65.6
(70.2)
138.8
(25.4)
22.4
(83.3)
(9.2)
(74.1)
76.5
14.5
62.0
58.7


337.9
319.6
21.6
235.5
23.8
35.6
1&3
4.1
14.2
120.1
17.0
103.1
458.0


412.2
2849
109.7
81.0
76.6
17.6
127.3
18.9
108.5
27
0.6
21
414.9


(743)
347
(88.1)
154.5
(49.8)
18.0
(109.1)
(14.8)
(94.3)
117.4
16.4
101.0
43.1


371.3
349.1
22.4
239.7
39.5
47.5
222
4.0
18.2
100.9
18.4
82.5
4722


4245
2721
107.4
76.6
71.2
16.9
1524
23.6
128.8
39
0.6
3.2
428.4


(532)
77.0
(84.9)
163.0
(31.7)
30.6
(1302)
(19.6)
(110.6)
97.1
17.8
79.3
43.9







c4nnual Report 2001


growth in income, on the other hand, was from a
combination of miscellaneous business services,
among which were legal and financial services.

Net inflows from government goods & services
rose by $12.6mn to $30.6mn as spending in Belize
by foreign embassies, military units, international and
regional agencies increased concurrently with the
curtailment of expenditures by Belizean overseas
offices.

Factor Income

Net outflows for factor income rose from
$109.1mn to $130.2mn in response to increased
payments of $16.3mn for investment income and
$4.8mn for seasonal and border workers. The latter
reflected an expansion in the wage bill for alien
workers since many new workers were employed
on citrus and banana plantations to replace those
who left for employment elsewhere after benefitting
from the amnesty programme in 2000. On the
other hand, outflows for investment income
increased sharply by 17.3% (from $94.3mn to
$110.6mn) due to higher interest payments onbonds
and loans.

Current Transfers

While net current transfers from foreign
governments increased marginally by $1.4mn over
the year, those from the private sector plunged by
$21.7mn, pushing the level of net current transfers
down by $20.4mn to $97.0mn. Although much
assistance was rendered to the country in the wake
of Hurricane Iris, a significant portion was in kind
rather than cash. Workers' remittances from abroad


to families in Belize plummeted by $10.7mn, more
than likely due to the economic slowdown in the
US, a major immigration haven. Further
exacerbating the decline in private sector inflows
was the relatively smaller size of insurance claims in
2001 arising from Hurricane Iris when compared
to those for Hurricane Keith in 2000.


Capital and Financial Accounts


Net capital inflows totalled $1.8mn, some $1.3mn
lower than that of the previous year, the decline
being principally due to a fall in the level of migrant
transfers.

As in the case of the previous two years, substantial
net inflows on the financial account were recorded.
In 2001, these totalled $287.3mn, representing the
main sources of financing for the $324.2mn current
account deficit. Financial inflows were dominated
by government activities such as foreign
borrowings, privatization and an asset repurchase
agreement involving land and housing. Although
sizeable, net financial inflows in 2001 were
significantly below the $408.4mn received in 2000
from mortgage securitisation, international bond
issues and other transactions.

Privatisation of BWSL as well as expanded
investments into the tourism sub-sector pushed
inflows from direct investment upward from
$38.8mn to $80.5mn. On the other hand, portfolio
investment activity consisted of net outflows of
$35.9mn. The latter reflected redemption of a
portion of the Central Bank Building Bonds and
outward remittances of monies associated with the








Foreign Trade and Payments



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

$mn
199. II.


CAPITAL ACCOUNT
Capital Transfers
FINANCIAL ACCOUNT
Direct InvestmentAbroad
Direct Investmentin Reporting Economy
Portfolio Investment Assets
Portfolio Investment Liabilities
Other Investment Assets
Monetary Authorities
General Government
Banks
Other Sectors
Other Investment Liabilities
MonetaryAuthorities
General Government
Banks
Other Sectors
CHANGES IN RESERVES (Minus = increase)


mortgage securitisation programme. Since there

were no new bond issues or mortgage securitisation,
all financial flows were outbound on this account.


Other investment assets saw debits fall from

$103.Omn to '12 2riIIn for several reasons. In
contrast to 2000, the foreign assets of the

commercial banks declined as they drew down

foreign holdings to facilitate domestic demand for
foreign goods and services. Further, in this line item

is reflected monies placed into a deposit account

(under the USAID 'debt for nature swap') that will


be managed by several non-governmental

organizations for specific conservation projects.
Also reflected is the foreign deposit held at the Royal

Merchant Bank in which the remaining funds for

the repurchase agreement are presently lodged.


Net inflows from other investment liabilities rose

from $246.3mn to $274.8mn as foreign currency

receipts from the repurchase agreement and
drawdowns on new loans by the public and private

sector overshadowed outflows for loan repayments.


5.5
5.5
192.7

99.6

77.0
(29.1)

(11.3)
(12.5)
(5.3)
45.2
(1.1)
35.1
(17.8)
29.1
(54.5)


3.1
3.1
408.4

38.8

226.3
(103.0)

(22.1)
(52.4)
(28.4)
246.3
83.6
113.6
31.0
18.1
(103.3)


1.8
1.8
287.3

80.5

(35.9)
(32.2)

(34.0)
5.0
(3.1)
274.8
(1.2)
244.6
23.3
8.2
21.0








0^nnual reportt 2001o g
^^^^B^^~fa^?^^^^^^^^^^^^^^^^^^^^r.^^^


The net movement in IBC deposits remained close

to that of the previous year and hence, did not
influence financial movements on this account.


Official International Reserves


Central Bank declined by $21.0mn, while holdings

by Central Government remained relatively stable
at $16.2mn. Foreign liabilities rose by $1.2mn to

$2.9mn, causing net official international reserves

to decrease by $22.2mn to $221.7mn.


Gross official reserves fell by $21.0mn to $224.6mn
as reserves were drawn down to partially finance
the deficit on the current account. Holdings by the



Table VI.12: Official International Reserves

$mn

Poito as at Chang6
Dec-9 Dec00 De-01 urin


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


142.3
128.5
2.3
11.8
114.4
13.8
2.1
0.3
1.7
140.2


245.6
229.4
3.1
11.0
215.3
16.3
1.7
0.2
1.4
243.9


224.6
208.4
3.4
10.6
194.4
16.2
2.9
0.6
2.3
221.7


(21.0)
(21.0)
0.3
(0.4)
(20.9)
0.0
1.2
0.4
0.9
(22.2)











Economic Prospects


Two major hurricanes, a tropical storm and severe
disease problems within two consecutive years have
increased the likelihood that the primary sector will
deliver a mixed performance in 2002.

After several years ofproduction decline, sugarcane
output should pick up in 2002 with deliveries
growing by 7.5% to 1.1mn long tons. It is
anticipated that, during the comingyear, sugarcane
fields will fully recover from the damage inflicted
by Hurricane Keith in late 2000 and by the less severe
tropical storm, Chantal, in mid-August, 2001. Yields
should also be ratcheted up further since the
processor has received permission to expand the
amount of acreage under its cultivation. In view
of the expected increase in sugarcane throughput,
sugar production should rise from 103,813 to
115,000 long tons, a 10.8% growth. Output of
molasses should also grow by 4.1%.

With sugar output ::fp -n..ldin- exports are expected
to grow by 17.8% in volume to 106,200 long tons
and by 10.9% in value to $67.2mn. Despite a small
drop in global production, a large overhang of
stocks is expected to keep prices at approximately
the same level as the previous year. A tight supply
situation for molasses is expected to continue into
2002, so prices should remain highly favourable,
garnering $3. lmn from 32,300 long tons, increases
of 42.9% and 3.4% in value and volume,
respectively.

Subsequent to Hurricane Iris' sweeping through the
southern part of the country, blowing maturing fruit
off trees as well as destroying approximately 10%


of trees in the affected area, citrus deliveries for the
2001/2002 season are expected to experience a
steep decline from 7.4mn boxes to 5.7mn boxes.
The harvest damage coupled with micro-climatic
conditions that depressed blossom formation (the
'harvest flush') account for the lower anticipated
yields. In fact, the Citrus Growers' Association
estimates that it will take two years for the industry
to recover completely from hurricane damage.
With fruit deliveries forecasted to fall, output of
citrus juices should decline by 11.2% to 32.8mn
pound solids (ps), comprising 30.1mn ps of the
concentrates and 2.7mn ps of the NFC. The
processing focus remains on the concentrate juices
since the niche market for NFC has been captured
for the most part by Brazil due to its larger quantities
and lower costs. Pulp production should yield 3.7
mn pounds, most of which will be orange since
production of the grapefruit pulp was temporarily
halted due to quality problems.


Meanwhile, with processingvolumes down, exports
of citrus juices are expected to decrease by 4.2% in
volume to 38.5mn ps and 11.1% in value to
$77.3mn. It so happens that the strengthening of
prices for orange juice has occurred at a time when
supplies in the country have tightened, limiting the
benefits to be received from this development.

After the devastation of Hurricane Iris, rapid steps
to replant banana plantations and nurture surviving
plants enabled a return to export shipments in
January, 2002. Export volume should increase by
a modest 3.8% to 50,000 metric tons. On the other







4onnual Report 2001


hand, export value should fall by 2.1% to $41.9mn
since the average price per box has been reduced
from $15.90 to $15.20, a reduction, which the
marketer attributes to increased competitive
pressure from LatinAmerican countries. The Banana
Growers Association estimates that the industry will
take two years to fully recuperate from hurricane
damage.

An increase in the acreage dedicated to cultivation
of large papayas and a shift to more virus-resistant
varieties of small papayas is expected to lead to a
surge in papaya production and exports. Export
volume and value should increase by 14.6% and
39.8%, respectively, to 16.2mn pounds valued at
$14.4mn. An improvement in fruit quality should
also boost unit prices upwards.

In the marine sub-sector, farmed shrimps and
lobster are poised for a strong recovery during
2002. Rebounding from hurricane damage, lobster
exports should amount to 550,000 pounds valued
at $15.9mn, increases of 14.2% and 21.4% in
volume and value, respectively. As a result of past
andprojected expansions, farmed shrimp exports
are expected to grow by more than half, with
volume rising from 6.3mn to 9.6mn pounds and
value leaping from $46.5mn to $69.9mn. The farms
will be implementing management strategies to keep
the losses due to Taura virus at a minimum, while
pond acreage should expand by at least another
205 acres. In contrast, conch exports are forecasted
to dip by 7.5% and 10.9% in volume and value,
respectively, to 575,000 pounds worth $4.1mn due
to a natural trough in their productive cycle.


In the secondary sector, performance will be mixed,
as the small boost in sugar production will be
countered with the decline in citrus juice production.
Construction may hover close to 2001 levels since
housing activities will remain strong and several
construction projects, particularly relating to the
tourism sector, are continuing into orwill commence
in 2002.

In other developments, the services sector should
continue to be the largest contributor to growth.
In particular, the tourist sector is well positioned
for another year of expansion. Significant
investments are scheduled for the year, including
completion of the Belize Tourism Village and
several relatively large-scale hotel projects. The Belize
Tourism Board projects that stay-over tourist
arrivals should grow by 6% to 8%. In the rapidly
growing cruise ship market, port calls should
increase from 47 to 181, leading to a five-fold surge
in cruise ship passengers to over 200,000.

The rate of inflation is expected to remain modestly
positive in 2002, especially as prices for fuel at the
pump remain high and charges for basic
telecommunication services were increased at the
start of the year.

With agriculture on the recovery, construction poised
for another busy year due to hurricane
reconstruction and housing projects, and services
in high gear due to flourishing tourism activity, real
GDP is forecasted to rise by 6.0% for 2002.












ADMINISTRATION


The Board of Directors

The Board of Directors held 11 meetings in 2001
and considered 60 submissions.


transferred to the Accountant General for the
Government of Belize's Consolidated Revenue
Fund.


Overseas Meetings Internal Audit Activities
Overseas Meetmngs


The Governor, Deputy Governors and other staff
represented the country and the Bank at various
meetings during the course of 2001. Some of the
meetings attended are shown in Box 7.

Finance

The Central Bank's financial statements for the year
ended December 31,2001, with comparative figures
for the previous year, are annexed to this report.
During the year, the total assets of the Bank fell by
1.9% to .41' 2 lu with holdings of external assets
down 9.1% to $207.4mn, while domestic assets rose
by 7.3% to l'4.5mn.

At year-end, the net operating surplus amounted to
$4.7mn as compared to $2.0mn in 2000. Gross
earnings totalled $27.6mn including interest income
of $25.9mn and commissions and other income
of $1.7mn. Current expenditure totalled $22.9mn
with staff costs, interest payments and other
operating cost accounting for 17.6 %, 63.0% and
19.4%, respectively.

As provided for under Section 9(1) of the Central
Bank Act, $0.5mn or 10% of the net operating
surplus will be paid into the Central Bank's General
Reserve Fund. The balance of $4.2mn will be


During 2001, the Internal Audit Unit focused its
efforts on reviewing the procedural changes
required upon implementation of the Central Bank's
new financial and money transfer systems. Particular
attention was paid to assessing activities related to
the management of inventory, assets, procurement,
payables and money transfer processes with a view
to determining the adequacy of controls and
whether procedures were being adhered to.

The Unit assisted in the review of the Bank's draft
Financial Rules and Hurricane Plans, providing input
to ensure that these policies were fully incorporated
into the existing infrastructure so as to enhance
management practices and avoid unnecessary costs.

The Internal Audit Unit was also instrumental in
devising improvements to the procedures involved
in the monthly currency notes & coins stocktaking
exercise, the emphasis being on ensuring the
independence and integrity of the entire process.
Subsequent training of the staff members assigned
to these particular duties was also carried out.

Issues raised by external as well as internal auditors
were reviewed after the completion of the year 2000
audit by the Central Bank's Audit Committee. The
Committee also commenced preparation of a
report in response to the Board of Directors' request
for revision of procedures involved in the









cnoonual report 2001




Box 6: Meetings Attended by the Governor and Deputy Governors during 2001

Nam of M[: I i I IConfe! ile Mont Place E JO[liI 1:1illI J*i~ '.[.


Meeting of High Level Consultation on OECD Harmful Tax
Competition Initiative

6th CARICOM Canada Summit

Fact Finding Mission to Central American Bank for Economic
Integration (CABEI)

2nd Meeting of the Caribbean Association of Regulators of
International Business (CARIB)
Annual Meeting of Board of Governors of IDB and IIC
XIII CFATF Plenary Meeting
4th Meeting of Western Hemisphere Finance Ministers
2nd Meeting of the Technical Team Task working on a report titled
"Monetary Union in CARICOM: Some notes on the way forward"

CARICOM Central Bank Governors Meeting

31t Annual Meetina of the Board of Governors of CDB
Conference on Mortgage Securitization in the International
Financial Markets

Bank of England's Central Bank Governors' Meeting

Annual Conference of Information Systems Specialist of
Regional Central Banks

Outreach Program for Development of a set of Guidelines on
Foreign Reserve Management
Meeting of Plan Puebla Panama

8th Meeting of the Regional Capital Markets Committee of
the CARICOM Secretariat

XIV CFATF Plenary Meeting
CARICOM Central Bank Governor's Meeting
VII CFATF Council Meeting
CDBR RBoard of Directors Meetinn


January


Barbados


February Kingston, Jamaica

February Honduras


February Barbados


March
March
March
May


May
May
May


June

June


July


August


Santiago, Chile
Trinidad & Tobago
Toronto, Canada
Trinidad & Tobago


Trinidad & Tobago
St. Lucia, W.I.
Dominican Republic


London, England

Barbados


Mexico City, Mexico


Washington, D.C.


September Grenada, W.I.


October
October
November
Decem ber


Dominican Republic
Trinidad & Tobago
Dominican Republic
Rarbados


authentication of abandoned property claims and

the identification of a reasonable length of time

for the bank to retain custody of such property..

Human Resources


During 2001, the Human Resources Department

continued to focus on enhancing the internal

operational efficiency of the Bankwith one principal

objective being to better familiarize staff with the

roles and functions of each department and unit

within the Bank. This was achieved through a series

of articles published in the Human Resources


newsletter bulletin, The Scoop, and a formal

Employee Orientation programme.


The orientation programme was the first to be

offered by the Bank since 1992. The target group

consequently included all those staff members who

had joined the Bank from 1993 onward. Among

the objectives of the orientation programme were

that of acquainting employees with the Bank's

history, goals and operational structure; to

communicate basic information including policies,

procedures, rules and benefits; and to review the


cnR Rnnrd nf nir,--rtnr,; Meeting







Administration


functions of each department and unit. Staff
feedback indicated that 91% of the participants
strongly agreed that the programme was essential.

The Bank also held its 2nd Employee Recognition
Ceremony early in the year under the theme 4tltitude
DeterminesA/titude". The event was introduced as a
way of recognizing staff for years of service and
to reinforce the positive attitude of those staff
members who have demonstrated high levels of
performance, a strong sense of enthusiasm,
dedication and espritde corps. The Governor selected
Miss Ivy Wright, Senior Secretary in the Banking&
Currency Department as the Choice Performer of
the year.


Staffing

As at December 31, 2001, the staff complement
was 119, comprising 81 permanent employees, 32
contract staff and 6 temporary persons, which
represents 98.0% of the estimated staffing
requirements.

The turnover rate was 11.0%, down 2.0% from
the year 2000. There were twelve separations and
thirteen persons were hired.


Staff Development & Training

During 2001, the Bank's overseas training initiatives
focused on the technical aspects of Central Banking.
Ten members of staff attended a total of thirteen
courses regionally and in the United States.
Domestically, sixteen members of staff had the
opportunity to develop their writing skills and
telephone techniques through courses offered by
the Belize Institute of Management. Also, staff of


the Research Department benefited from a number
of in-house training courses aimed at sharpening
their technical and operational skills. These were
Classification of XCH1 Transactions, Balance of
Payments Credit and Debit Rules and the Western
Union Information Systems Operations. Eleven
staff members from the operational arm of the
Bank trained in the newly procured Fixed Assets
module of the Prophecy Open software. Training
in the revised monthly stocktaking procedures was
also offered to twenty employees who are involved
with this process. Since a decision was taken to
standardize on Microsoft suite, training in the
desktop publishing application, Publisher, was
arranged for staff members who need to use this
application software in the course of their duties.


Labour Relations

The Central Bank and the Christian Workers Union,
which represents the unionized staff, executed its
2nd Collective Agreement during the year. The
agreement was retroactive to January 1, 2000 and
provides for an increase in salary over the four-
year period, 2000 to 2003.

The Union and the Bank pledged to work towards
improving communication between the two parties
in an effort to improve the relationship between
management and staff.


4't Central Banks Intra-Regional
Games

An eleven-member team represented the Bank at
the 4th Central Banks Intra-Regional Games that
was hosted by the ECCB in Bassetterre, St. Kitts.








4 c.ooual Teport 2001


Unfortunately, two members of the contingent
received injuries that caused the team to default from
some of the events. Nonetheless, reports were that
the team played tenaciously against larger and
stronger contingents. The contingent's cultural
performance "Message to our Neighbour", was
also well received by colleagues from the region.

XXXIII Conference of the Regional
Programme of Monetary Studies

In collaboration with the Caribbean Centre for
Monetary Studies (CCMS), the Central Bank of
Belize hosted the thirty-third annual conference of
the Regional Programme of Monetary Studies in
November 2001. The conference provided an
opportunity for regional central banks, universities,
and other organizations to review current monetary
and economic developments and to discuss possible
solutions and recommendations to the challenges
facing the economies of the region.

Staff Club

A new executive of the Bank's Staff Club was
elected and took office in 2001. The new executive
pledged to foster staff unity and to improve the
general well being of staff by promoting social
interaction, healthy lifestyle and community out
reach.

Community Service

During 2001, the Bank continued its Summer
Employment Programme, which is aimed at
developing the skills of Belizean youths at the


secondary and tertiary levels of education while
affording some economic benefits. The programme
also facilitates the Bank's vacation schedule for
auxiliary staff and reduces back-logged clerical
functions. A total of ten students participated in the
programme. In addition, a Belizean student intern
from a US university was also allowed to work at
the Bank for credits towards an undergraduate
programme.

In a demonstration of community spirit, several
members of staff volunteered in response to the
Belize Blood Donor Service's country-wide appeal
to replenish blood supplies that had become
dangerously low Also, for the third time in as many
years, the generosity of the Central Bank's staff was
tested with respect to donations for hurricane
victims. This time around, the donations were for
the victims of Hurricane Iris, which devastated
southern Belize. The Human Resources Department
and the executive committee of the Staff Club
coordinated the relief effort eventually handing over
a total of twenty six double burner kerosene stoves
and eleven boxes of assorted clothing and non
perishable food items to the Belize Red Cross
Society for distribution in the affected area.

Notably, these hurricane relief efforts did not
adversely affect the level of staff donations to the
Salvation Army's annual Christmas Appeal. In
sustaining the tradition of expressing concern for
the less privileged Belizeans by giving to this cause,
staff contributed the second highest amount in this
nine-year tradition.













OPERATIONS


Foreign Exchange Operations


The Central Bank's trade in US dollars, Canadian

dollars and Pound Sterling resulted in net sales of

$20.9mn during 2001. Purchases exceeded sales in

February, March, September, and December with

the highest inflows occurring in March following

the privatization of BWSL. Sales exceeded

purchases during the remaining eight months with

the largest outflows takingplace in June. The trade

in CARICOM currencies (largely Barbados and

Eastern Caribbean dollars) resulted in net sales of

$3.8mn for the year. Sales exceeded purchases

during each month of 2001.


External Assets Ratio


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

1982 requires the Bank to maintain a reserve of

external assets of not less than 40.0% of the


i- -L iK amount of notes and coins in circulation

and the Bank's liabilities to its customers for sight

and time deposits. The ratio fluctuated between a

low of 72.6% in November and a high of 87.7%

in March. External assets were comprised of

foreign notes, deposits with foreign central banks

and correspondent banks abroad, securities of

foreign governments and holdings of Special

Drawing Rights at the International Monetary Fund.


Relations with Commercial Banks


Cash Balances


During 2001, the commercial banks were required

to maintain on deposit with the Central Bank 3.0%

of their average deposit liabilities, not represented

by demand deposits. The actual cash balances held

with the Central Bank fluctuated between 8.2% and

14.4% and averaged approximately 10.4%. This


Table IX.1: Central Bank Dealings in Foreign Exchange 2001

($mn)
Month~~~~~~~~~ US&Cnda0 n KE CRCMCrece


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


11.8
34.1
110.6
16.4
16.3
15.0
19.7
7.6
57.0
12.6
12.7
93.7
407.4


23.8
21.5
32.7
33.3
28.4
67.4
32.7
23.7
44.4
32.2
35.0
53.3
428.3


(12.0)
12.6
77.9
(16.9)
(12.1)
(52.4)
(13.0)
(16.1)
12.7
(19.6)
(22.3)
40.4
(20.9)


0.03
0.00
0.00
0.01
0.00
0.01
0.03
0.08
0.00
0.01
0.00
0.09
0.26


0.08
0.14
0.38
0.09
0.36
1.41
0.23
0.37
0.03
0.48
0.05
0.40
4.04


(0.05)
(0.14)
(0.38)
(0.09)
(0.36)
(1.40)
(0.21)
(0.29)
(0.03)
(0.47)
(0.05)
(0.31)
(3.78)








Anonuald report 2001


Table IX.2: External Assets Ratio 2001


$rn, $r (%)


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


216.2
228.7
306.2
289.3
277.1
224.6
211.8
196.0
208.7
188.9
167.0
207.4


257.4
268.5
349.3
344.1
338.4
284.7
262.6
253.4
271.2
252.9
230.1
273.9


83.99
85.18
87.66
84.07
81.89
78.89
80.65
77.35
76.95
74.69
72.58
75.72


resulted in excess holdings that ranged from a low
of ^42 ,.'i, in January to a high of $84.2mn in
April.


in December, a direct result ofthe Christmas season,
when circulation stood at $125.3mn made up of
$114.2mn in notes and $11.lmn in coins.


Currency in Circulation


Transactions
Government


with Central


Currency in circulation rose by $10.1mn during the
year and displayed the usual seasonal pattern of the
lowest occurring in the first quarter and the highest
in the last quarter. The most notable increase was


Table IX.3: Commercial Bank


Under Section 34 of the Central Bank of Belize
Act, 1982 as amended in 1993, the Bank may extend
advances to Government up to a maximum of



Balances with the Central Bank
($mn)


0,... .._ .-. -. .
Month Average Deposit Required Cash Actual Cash
I Liabilities ReservHl^^^^^^^^Ees Hlings Exce^^ss


917.6
805.9
776.9
948.8
984.4
985.7
973.6
978.1
991.2
981.8
980.5
898.2


32.9
32.9
33.0
34.3
36.0
36.2
35.8
36.1
36.5
35.9
35.8
33.0


74.9
82.0
112.0
118.5
113.8
110.8
104.4
103.0
91.8
82.1
82.6
86.6


42.0
49.1
78.9
84.2
77.8
74.6
68.6
67.0
55.3
46.2
46.8
53.6


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







Operations


Table IX.4: Currency in Circulation 2001


($mn)
S S S S With
Month~~ Noe Con Toa omrilBnSure'


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


96.4
97.6
100.5
102.7
102.4
100.3
101.5
100.5
101.1
101.4
102.3
114.2


10.3
10.4
10.5
10.7
10.8
10.8
10.9
10.9
10.9
10.9
10.9
11.1


106.7
108.0
111.0
113.4
113.2
111.1
112.4
111.4
112.0
112.3
113.2
125.3


17.2
17.1
15.3
14.6
17.6
12.1
17.1
12.9
14.2
17.5
14.0
20.1


89.5
90.9
95.7
98.8
95.6
99.0
95.3
98.5
97.8
94.8
99.2
105.2


20.0% of current revenue collected during the
preceding financial year or a sum of $50.0mn,
whichever is greater.

Twenty percent of the preceding year's current
revenue amounted to $67.7mn, which formed the
upper threshold of the overdraft facility. During


the first quarter, advances to Central Government
averaged approximately '.41.6mn with a low of
^42 -~,,n, in February. Financing rose in the ensuing
months to peak at $66.8mn in October and result
in an average of $65.0mn during the last quarter of
the year.


Table IX.5: Central Bank Credit to Central Government


$mn


January 10.0 2.2 42.8 0.56 12.75
February 10.0 2.2 42.5 0.56 12.67
March 10.0 2.2 45.5 0.56 13.55
April 10.0 2.2 58.6 0.56 17.34
May 10.0 2.2 62.8 0.56 18.56
June 10.0 2.2 63.0 0.56 18.63
July 10.0 2.2 49.7 0.56 14.71
August 1.0 10.0 2.2 57.9 0.61 17.12
September 10.0 2.2 64.1 0.56 18.96
October 10.0 2.2 66.8 0.56 19.76
November 10.0 2.2 62.7 0.56 18.55
December 0.5 0.0 10.0 2.2 65.5 0.58 19.35
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 of the previous fiscal year.
Estimated for fiscal 1999/2000 $335.7mn (Revised) Estimated for fiscal 2000/2001 $338.3mn.

61









I cerfrul jg Ofr T 2001l


Table IX.6: Government of Belize Treasury Bill Issues


,su ,.su Sub s r .A.o, Y M
Nu be Dat $m $m ae(/)(-) Dt I.


1/2001
2/2001
3/2001
4/2001
5/2001
6/2001
7/2001
8/2001
9/2001
10/2001
11/2001
12/2001
13/2001
14/2001
15/2001
16/2001


04/01/01
01/02/01
15/02/01
14/03/01
05/04/01
03/05/01
17/05/01
13/06/01
05/07/01
02/08/01
16/08/01
12/09/01
04/10/01
01/11/01
15/11/01
12/12/01


16.9
17.7
10.2
49.2
23.4
26.4
19.2
56.4
35.6
33.6
21.0
60.4
35.6
36.3
17.0
61.9


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


5.91
5.91
5.91
5.91
5.91
5.91
5.91
5.91
5.91
5.91
5.91
5.91
5.91
5.91
5.91
4.28


5.99
5.99
5.99
5.99
5.99
5.99
5.99
5.99
5.99
5.99
5.99
5.99
5.99
5.99
5.99
4.32


05/04/01
03/05/01
17/05/01
13/06/01
05/07/01
02/08/01
16/08/01
12/09/01
04/10/01
01/11/01
15/11/01
12/12/01
03/01/02
31/02/02
14/02/02
13/03/02


Treasury Bills


As is the normal practice, Treasury Bill operations
were conducted by the Central Bank on behalf of
the Government of Belize in 2001. The market was
once again dominated by the commercial banks,
which are the principal players in the financial system.
In December, Central Government reversed a
decision taken in November 1998 to fix the yield
on Treasury Bills at 6.0%. Subsequent to the
reinstatement of the bidding process, the yield
moved downward to reach 4.3% at year-end. Total
Treasury Bills outstanding at 31 December 2001
remained at the statutory limit of $70.0mn.

Treasury Notes


Under the 1993 amendment to the Treasury Bill
Act, the Government of Belize may issue up to
$25.0mn in Treasury Notes. These notes have a


one-year maturity period and carry a 9.0% rate of
interest. At the end of 2001, total Treasury Notes
outstanding amounted to $25.0mn, all of which
were held by private sector institutions and
individuals.




Supervision of the Financial System

In carrying out its prudential responsibilities under
the Banks and Financial Institutions Act (BFIA), the
Central Bank conducted two on-site commercial
bank examinations during 2001. One of these was
classified as a full scope examination encompassing
the assessment of the safety and soundness of the
bank including its compliance with the requirements
stipulated in the BFIA. The other examination was
more limited in scope with the focus being on asset
quality and a determination of the appropriate levels
of loan loss reserves. The Central Bank also


w


Report 2001


SA annual







Operations


conducted six on-site examinations of commercial
banks in accordance with the Money Laundering
(Prevention) Act, 1996.

General monitoring of commercial and offshore
banks continued through the Central Bank's off-
site surveillance system. Under this system, large
credit concentrations in regards to a borrower or
related borrowers in excess of 25.0% of a
commercial bank's capital and reserves must receive
the prior approval of the Central Bank as specified
by Section 21 (2) of the BFIA. In this regard, the
Bank approved seven applications for large credit
facilities totalling $90.9mn to private sector
borrowers. At the end of 2001, total loans
approved for all commercial banks in Belize under
Section 21(2) of the BFIA stood at $181.4mn. The
Central Bank also prepared annual credit reports
on these specific loans in order to facilitate its
continuous assessment of the repayment capability
of the borrowers in question.

Two applications for offshore banking licenses were
submitted during the year, which are currently being
processed. In addition, the Central Bank completed
the processing of five applications for offshore
banking licenses that had been submitted in the
previous year. Three of these applications were
approved for the granting of an offshore banking
license subject to certain pre-opening terms and
conditions. The other two applications were
denied.


Information Systems Developments

During the first half of the year, the Information
Systems Unit (ISU) continued to oversee testing of
the Accounts Payable module of the Prophecy
Open financial application. This process was
eventually completed enabling the module to go
into production in June 2001. The Unit also
commenced testing of the Assets Management
module in April with the objective of achieving full
implementation in January 2002.

In order to assist collation and analysis of data
related to Central Bank purchases and sales of
foreign exchange, a new "Contracts System" that
interfaces with Prophecy Open was developed. This
makes it possible for Prophecy Open to transfer all
contracts into the Contracts System database for
easy retrieval and economic classification.

In November, ISU oversaw the implementation
of a major upgrade to the money transfer system,
SWIFT (Society for Worldwide Inter-bank Financial
Telecommunication) wherein new message formats
and standards were introduced.

Upgrades to the application servers that host the
financial software and money transfer systems were
also undertaken. The upgrades included the
installation of hardware and software fault tolerance
features to provide the Bankwith additional options
for information recovery in the event of a disaster.








cAnnual Report 2001



STATISTICAL APPENDIX


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

$ mn

Gross Domestic Product 1,043.5 1,055.4 1,177.5 1,318.9 1,363.8
Primary Activities 212.3 207.0 233.6 239.5 228.6
Agriculture 163.3 150.0 164.0 169.8 154.1
Forestry & Logging 17.6 17.0 21.8 8.0 15.1
Fishing 25.1 33.8 40.5 52.7 49.9
Mining 6.4 6.2 7.2 9.0 9.4
Secondary Activities 237.4 239.5 263.4 305.1 323.6
Manufacturing 144.5 142.1 149.7 175.6 183.2
Electricity & Water 31.0 35.9 39.0 43.0 43.6
Construction 61.9 61.5 74.8 86.5 96.8
Services 593.7 608.9 680.6 774.3 811.7
Trade, Restaurant & Hotel 191.1 199.1 240.4 291.1 291.4
Transport & Communications 109.6 109.4 122.4 130.6 143.4
Finance & Insurance 73.3 73.2 76.1 92.4 96.9
Real Estate & Business Services 69.9 69.8 73.3 78.2 83.2
Public Administration 125.4 133.6 143.1 155.3 168.2
Community & Other Services 68.2 68.1 70.7 73.1 76.0
Less imputed bank service charges 43.8 44.2 45.5 46.4 47.5
Source: Central Statistical Office


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


Gross Domestic Product 100.0 100.0 100.0 100.0 100.0
Primary Activities 20.4 19.6 19.8 18.2 16.8
Agriculture 15.6 14.2 13.9 12.9 11.3
Forestry & Logging 1.7 1.6 1.9 0.6 1.1
Fishing 2.5 3.2 3.4 4.0 3.7
Mining 0.6 0.6 0.6 0.7 0.7
Secondary Activities 22.8 22.7 22.4 23.1 23.7
Manufacturing 13.9 13.5 12.7 13.3 13.4
Electricity & Water 3.0 3.4 3.3 3.3 3.2
Construction 5.9 5.8 6.4 6.6 7.1
Services 56.9 57.7 57.8 58.7 59.5
Trade, Restaurant & Hotel 18.3 18.9 20.4 22.1 21.4
Transport & Communications 10.5 10.4 10.4 9.9 10.5
Finance & Insurance 7.0 6.9 6.5 7.0 7.1
Real Estate &Business Services 6.7 6.6 6.2 5.9 6.1
Public Administration 12.0 12.7 12.2 11.8 12.3
Community & Other Services 6.5 6.5 6.0 5.5 5.6
Less imputed bank service charges 4.2 4.2 3.9 3.5 3.5
Source: Central Statistical Office
Figures in Table 1 may not reflect these percentages due to rounding

64







Appendix




Table 3: Real Gross Domestic Product by Industrial Origin at Factor Cost (1984=100)


$ mn
199 1998 19 201010 201
Gross Domestic Product 749.8 763.0 812.8 900.7 941.8
Primary Activities 169.9 167.1 188.0 196.9 220.5
Agriculture 126.1 114.5 125.0 131.1 134.9
Forestry & Logging 14.1 13.7 13.6 9.4 10.9
Fishing 24.7 34.1 44.0 49.7 67.7
Mining 4.9 4.7 5.5 6.8 7.0
Secondary Activities 181.9 179.8 187.5 220.4 228.5
Manufacturing 124.3 120.7 125.4 149.9 152.8
Electricity & Water 16.4 18.6 13.2 14.6 14.7
Construction 41.2 40.5 48.8 56.0 61.1
Services 398.0 416.2 437.3 483.3 492.8
Trade, Restaurant & Hotel 135.6 144.6 149.1 185.0 184.0
Transport & Communications 106.4 109.0 117.9 121.5 126.7
Finance & Insurance 35.0 34.9 38.4 45.6 46.8
Real Estate & Business Services 39.9 43.7 48.0 48.5 49.9
Public Administration 53.4 54.4 55.6 57.8 59.8
Community & Other Services 51.8 53.6 54.7 56.2 57.7
Less imputed bank service charges 24.1 24.0 26.4 31.4 32.2
Source: Central Statistical Office



Table 4: Annual Percent Change In GDP By Sector at Constant 1984 Prices *


Gross Domestic Product 4.3 1.8 6.5 10.8 4.6
Primary Activities 12.5 (1.7) 12.5 4.8 12.0
Agriculture 12.0 (9.2) 9.1 4.9 2.9
Forestry & Logging (2.4) (3.2) (0.6) (30.9) 16.0
Fishing 31.6 37.9 28.8 13.1 36.2
Mining (3.2) (4.4) 15.4 23.9 3.4
Secondary Activities 1.2 (1.1) 4.3 17.6 3.7
Manufacturing 2.7 (2.9) 3.9 19.5 2.0
Electricity & Water 9.7 13.3 (28.8) 9.9 0.7
Construction (5.7) (1.5) 20.5 14.8 9.0
Services 2.4 4.6 5.1 10.5 2.0
Trade, Restaurant & Hotel 8.2 6.6 3.1 24.1 (0.6)
Transport & Communications (2.9) 2.5 8.2 3.0 4.3
Finance & Insurance 1.8 (0.3) 10.1 18.8 2.6
Real Estate &Business Services 7.2 9.4 9.8 1.2 2.9
Public Administration (4.1) 1.9 2.4 3.8 3.5
Community & Other Services 3.6 3.5 2.1 2.7 2.7
Less imputed bank service charges 1.8 (0.3) 10.1 18.8 2.6
Source: Central Statistical Office
Figures in Table 3 may not reflectthese percentages due to rounding








tcAnnual Report 2001


Table 5: GDP by Expenditure in Current Prices


GDP in $mn
GoVt. final consumption expenditure 209.5 219.1 224.5 246.2 263.0
Private final consumption expenditure 821.8 850.0 883.7 1,109.8 1,140.8
Gross capital formation 289.8 305.5 407.3 501.5 512.0
Exports: goods & services 662.6 666.2 834.5 896.6 887.3
Imports: goods & services 749.2 781.6 974.0 1,208.1 1,193.2
Net Exports (86.6) (115.4) (139.5) (311.5) (305.9)
Domestic Savings 203.2 190.1 267.8 190.0 206.1
GDP market prices 1,234.5 1,259.2 1,376.0 1,546.0 1,609.9

Percent Distribution of GDP
GoVt. final consumption expenditure 17.0 17.4 16.3 15.9 16.3
Private final consumption expenditure 66.6 67.5 64.2 71.8 70.9
Gross capital formation 23.5 24.3 29.6 32.4 31.8
Exports: goods & services 53.7 52.9 60.6 58.0 55.1
Imports: goods & services 60.7 62.1 70.8 78.1 74.1
Net Exports (7.0) (9.2) (10.1) (20.1) (19.0)
Domestic Savings 16.5 15.1 19.5 12.3 12.8
GDP market prices 100.0 100.0 100.0 100.0 100.0
Source: Central Statistical Office



Table 6: GDP by Expenditure in Constant 1984 Prices


GDP in $mn
GoVt. final consumption expenditure 147.3 155.2 161.0 175.5 185.4
Private final consumption expenditure 501.5 537.3 473.2 596.7 498.8
Gross capital formation 203.6 216.4 292.1 357.4 361.0
Exports: goods & services 561.3 555.1 722.0 787.2 907.3
Imports: goods & services 526.5 553.7 698.4 861.1 841.3
Net Exports 34.8 1.4 23.6 (73.9) 66.0
Domestic Savings 238.4 217.8 315.6 283.5 427.0
GDP market prices 887.2 910.3 949.8 1,055.7 1,111.3

Percent Distribution of GDP
GoVt. final consumption expenditure 16.6 17.0 16.9 16.6 16.7
Private final consumption expenditure 56.5 59.0 49.8 56.5 44.9
Gross capital formation 22.9 23.8 30.8 33.9 32.5
Exports: goods & services 63.3 61.0 76.0 74.6 81.6
Imports: goods & services 59.3 60.8 73.5 81.6 75.7
Net Exports 3.9 0.2 2.5 (7.0) 5.9
Domestic Savings 26.9 23.9 33.2 26.9 38.4
GDP market prices 100.0 100.0 100.0 100.0 100.0
Source: Central Statistical Office








Appendix




Table 7: Net Domestic Credit

$mn




Total Credit to Central Government 147.9 149.9 166.1 16.2

From Central Bank 67.8 62.7 78.2 15.5
Loans and Advances 42.0 45.0 65.5 20.5
Gov't Securities 25.8 17.7 12.7 (5.0)

From Commercial Banks 80.1 87.2 87.9 0.7
Loans and Advances 2.0 1.0 (1.0)
Gov't Securities 78.1 86.2 87.9 1.7

Less Central Government Deposits 30.4 107.9 39.6 (68.3)
With Central Bank 25.9 91.9 31.5 (60.4)
With Commercial Banks 4.5 16.0 8.1 (7.9)

Net Credit to Central Government 117.5 42.0 126.5 84.5

Plus Credit to Other Public Sector 7.5 94.5 97.0 2.5
From Central Bank 1.0 84.2 84.0 (0.2)
From Commercial Banks 6.5 10.3 13.0 2.7

Plus Credit to the Private Sector 649.4 686.1 778.4 92.3
Loans and Advances 646.8 684.6 775.9 91.3
Securities 2.6 1.5 2.5 1.0

Net Domestic Credit of the Banking System 774.4 822.6 1,001.9 179.3



Table 8: Gross Imports (cif) by SITC Categories

$mn

Food and Live Animals 90.4 99.3 107.1 114.3 121.2
Beverages and Tobacco 18.4 9.8 11.0 7.9 8.5
Crude Materials 2.8 3.8 5.4 7.7 11.1
Fuels and Lubricants 77.6 70.5 125.9 165.8 163.7
Of which electricity 3.8 2.4 7.2 15.0 18.0
Animal and Vegetable Oils 3.8 3.6 3.8 3.9 3.1
Chemicals 62.6 63.3 73.1 91.0 72.0
Manufactured Goods 105.0 113.5 113.1 161.2 148.5
Machinery and Transport Equipment 147.8 152.2 200.4 256.9 249.4
Miscellaneous Manufactured Goods 64.4 75.1 86.5 91.3 99.0
Commodities not classified elsewhere 7.2 3.9 20.2 9.1 24.5
Total 580.0 595.0 746.5 909.1 900.9
CFZ Direct Imports 22.2 25.8 73.8 126.3 132.7
Grand Total 602.2 620.8 819.5 1,035.4 1,033.6
Sources: Central Statistical Office; Central Bank of Belize








4 croual Teport 2001


Table 9: Balance Of Payments Summary

$mn

CURRENT ACCOUNT (146.2) (303.2) (339.0)
Goods: Exports f.o.b. 527.2 576.9 538.2
Goods: Imports f.o.b. (732.3) (923.2) (921.1)
Trade Balance (205.1) (346.4) (382.9)
Services: Credit 307.3 319.6 349.1
Transportation 17.1 21.6 22.4
Travel 211.2 235.5 239.7
Other Goods & Services 41.3 26.8 39.5
GoVt Goods & Services 37.7 35.6 47.5
Services: Debit (241.7) (284.9) (272.1)
Transportation (87.3) (109.7) (107.4)
Travel (72.4) (81.0) (76.6)
Other Goods & Services (66.7) (76.6) (71.2)
GoVt Goods & Services (15.3) (17.6) (16.9)
Balance on Goods & Services (139.4) (311.7) (305.9)
Income: Credit 9.6 18.3 22.2
Compensation of Employees 3.7 4.1 4.0
Investment Income 6.0 14.2 18.2
Income: Debit (93.0) (127.3) (152.4)
Compensation of Employees (12.9) (18.9) (23.6)
Investment Income (80.1) (108.5) (128.8)
Balances on Goods, Services & Income (222.7) (420.7) (436.1)
Current Transfers, n.i.e.: Credit 81.2 120.1 100.9
Current Transfers: Debit (4.7) (2.7) (3.9)
CAPITAL ACCOUNT, n.i.e. 5.5 3.1 1.8
Capital Account, n.i.e.: Credit 9.1 4.5 4.1
Capital Account: Debit (3.6) (1.4) (2.3)
RFINANCIAL ACCOUNT, n.i.e. 192.7 408.4 287.3
Direct Investment Abroad
Direct Investment in Reporting Economy, n.i.e. 99.6 38.8 80.5
Portfolio Investment Assets -
Portfolio Investment Liabilities, n.i.e. 77.0 226.3 (35.9)
Other Investment Assets (29.1) (103.0) (32.2)
Other Investment Liabilities 45.2 246.3 274.8
NET ERRORS & OMISSIONS 2.5 (4.9) 28.9
OVERALL BALANCE 54.5 103.3 (21.0)








Appendix


Table 10: Government of Belize Revenue and Expenditure


200/201 201 0$'000


TOTAL REVENUE & GRANTS (1+2+3)
1).Current revenue
Tax revenue
Income and profits
Taxes on property
Taxes on goods and services
Int'l trade and transactions
Other
Non-Tax Revenue
Property income
Contributions to pension fund
Transfers from NFPE's
Extrabudgetary revenue
Other


2). Capital revenue
3). Grants


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

2). Capital Expenditure
Capital II (local sources)
Capital III (foreign sources)
of which Hurricane ERF
Capital Transfer

CURRENT BALANCE
OVERALL BALANCE
balance excluding Hurricane ERF


FINANCING
Domestic Financing
Central Bank
Net Borrowing
Change in Deposits
Commercial Banks
Net Borrowing
Change in Deposits
Other Domestic Financing
Financing Abroad
Disbursements
Amortization
Sinking Fund & JCF
Other
Sources: Ministry of Finance
Central Bank of Belize


434,273
338,790
296,677
76,320
2,167
101,849
116,341
0
42,113
2,039
445
500
0
39,129

71,641
23,842

529,796
297,371
151,698
17,787
60,756
41,577
25,553

232,425
54,447
177,978
52,896
0

41,419
(95,523)
(42,627)

95,523
(102,971)
(102,113)
(63)
(102,050)
(1,658)
2,346
(4,004)
800
198,858
257,359
(55,702)
(2,799)
(364)


414,722
350,218
309,944
81,505
3,333
101,752
123,354

40,274
7,000
484
500
0
32,290


415,005
327,086
266,541
63,680
1,962
81,560
109,272
10,067
60,545
4,299
391
8,250
1,661
45,944


415,973
349,796
286,576
74,149
2,036
99,863
110,528
0
63,220
2,039
411
5,411
625
54,734


450,852
364,256
322,253
77,626
2,641
107,397
134,589
0
42,003
1,777
105
500
0
39,621


57,000 71,454 49,167 73,833
7,504 16,465 17,010 12,763


452,581
309,552
158,384
20,243
56,497
46,908
27,520


444,088
278,774
146,448
18,648
57,331
28,894
27,453


143,029 165,314
61,548 69,311
78,932 91,249
0
2,549 4,754


40,666
(37,859)
(37,859)


48,312
(29,083)
(29,083)


37,859 29,083
(3,834) (4,226)
(31,606)
(27,189)
(4,417)
26,288
21,722
4,566
1,092
44,568 38,494
71,428 69,240
(33,104) (30,421)
6,244 (325)
(5.185)


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

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

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

139,865
(73,955)
(68,606)
(5,060)
(63,546)
(4,415)
7,004
(11,419)
(934)
213,504
270,842
(54,756)
(2,582)
316


581,132
333,478
162,197
22,594
66,839
53,683
28,166

247,654
83,500
164,154
53,880
0

30,778
(130,280)
(76,400)

130,280
58,452
75,868
15,470
60,398
8,927
756
8,171
(26,343)
72,077
140,366
(54,331)
(13,958)
(249)


. Funds to DFC treated as deposits, and loans for dredging and soya bean assumed by Port and DFC, respectively








An cAonual Report 2001


Table 11: Central Government's Domestic Debt


Oustadn Dibreet Amriain .3~hng Out eA- -- standin
31/12/00 Securities S ecurities Payment Securities 31/12/00
^^^^^^^^^^iiiBS. SB~i


Overdraft
Central Bank
Commercial Banks


Treasury Bills
Central Bank
Commercial Banks
Other

Treasury Notes *
Commercial Banks
Other

Defence Bonds
Central Bank
Commercial Banks
Other

Debentures
Central Bank
Other

Loans
BBL (Land Purchase)
DFC (Debt Restructuring)
BSSB (Housing)
BBL (Cohune Walk)
GOB/US Debt Swap


45,987
45,000
987

70,000
5,495
62,862
1,643

24,000
23,269
731

15,000
10,000
100
4,900

6,200
2,170
4,030

14,846
1,000
9,720
724
3,402


6,441
6,441


- 5,337
- 80
- 4,535
- 722

- 2,160
- 2,094
- 66

- 1,250
- 800
- 9
- 441

- 222
- 217
- S5


17,169





17,169


1,416
1,000
398
3
15


19,516
20,473
(957)


(5,000)
1,713
3,287


65,503
65,473
30

70,000
495
64,575
4,930

24,000
23,269
731

15,000
10,000
100
4,900

6,200
2,170
4,030

30,599

9,322
721
3,387
17,169


TOTAL 176,033 17,169 1,416 16,244 19,516 211,302
R = Revised
P= Provisional
* Since October of 1998 Treasury Notes are being subscribed to in $US and are considered as part of Foreign Liabilities.
However interest is still paid in local currency.









Appendix


Table 12: Public Sector External Debt by Creditors


Disbre Tascion Duin 200 Disbre
Oustadn ItrsOustadn
Debt &S Ote Vauaio Db
31120 Disuemn Amrizto Chre Adutets3/20


CENTRAL GOVERNMENT
Caribbean Development Bank
European Economic Community
Int'l Bank for Reconstruction Dev.
Int'l Fund for Agricultural Dev.
Gov't of United Kingdom
Gov't of Trinidad and Tobago
Gov't of United States of America^
Suppliers Credit
OPEC Fund for International Dev.
Institute Nazionale di Credito
Government of China
Republic of China
Deutsche Bank of Germany
Fondo de Inversiones Venezuela
Inter-American Development Bank
Government of Spain
Government of Kuwait
Citicorp Merchant Bank Ltd.
Citibank of Trinidad
Provident Bank & Trust
Salomon Smith Barney
Royal Merchant Bank
All First Bank of Maryland
International Bank of Miami

REST OF NON-FINANCIAL
PUBLIC SECTOR
Caribbean Development Bank
CIBC Bank & Trust Co.
Government of Kuwait
Amtrade of Georgia
KBC Bank**

FINANCIAL PUBLIC SECTOR
Caribbean Development Bank
European Economic Community
Paine Webber
Gov't of United States of America
Export/Import Bank of Taiwan
Citicorp Merchant Bank Ltd.
Citibank Trinidad & Tobago
International Bank of Miami
Deutsche Bank of Germany
Provident Bank & Trust
CommerzBank/New Holland**
TOTAL


623,763
50,863
15,797
55,280
2,034
26,723
38
31,219
34,453
3,814
3,964
348
123,420
6,525
4,833
32,122
1,413
10,018
20,000
24,000
22,536
52,030
97,853
4,480




39,517
11,592
8,985
10,424
8,516



184,084
45,463
5,747
2,600
3,638

10,000
28,000
64,000
14,636
10,000

847,364


140,366
1,663

11,362
348


6,855
806



24,933



36,571

1,149



472



1,907
54,300



16,706






16,706

62,783
3,222








40,000
11,521

8,040
219,855


54,331
879
253
4,362
241
4,225
3
2,277
6,965
367
3,964
58
5,733
1,305
1,253



1,091
2,857
1,714
341

6,143

10,300


4,701
1,273
1,046
656
1,726


42,074
2,132
125
4,323
87

1
799
2,611
210
209

6,101
392
271
1,030

430
1,978
2,373
2,005
5,384
11,212
401


2,260
356
989
420
346
149


11,309 15,777
1,796 2,236
555 217
100 74
358 106

1,250 840
7,250 2,808
7,992
1,005
499

70,341 60,111


(871)
(7)
(333)
1
(20)
(500)


675,341
36,408
15,211
62,281
2,121
21,998
35
11,773
33,711
4,253

290
142,620
5,220
3,580
68,693
830
10,094
17,143
22,286
22,667
52,030
91,710
6,387
44,000


7 39,604
(10) 5,174
7,939
17 9,785

16,706

(469) 235,089
(6) 46,883
(88) 5,104
2,500
3,280

8,750
20,750
104,000
(375) 25,782
10,000
8,040
1,333) 950,034


its out-


** Loans by KBC Bank (dredging) and CommerzBank/New Holland (soya bean) have been assumed by the Port Authority and DFC, respectively


Effective 31 March 2001, WASA loans were reclassified as private sector debe as a result of its full privatization However,
standing external debt of $28 4mn remains a contingent liability of Central Government
AA USAID Debt for Nature Swap Agreement as at 2 August 2001, was implemented on 30 November 2001, for $17 2mn


(







4c~mrnua Teport 2001


AUDITOR'S REPORT





CENTRAL BANK OF BELIZE

2001 FINANCIAL STATEMENTS

CONTENTS


PAGE


Auditor's Report

Balance Sheet

Statement of Income

Statement of Cash Flows

Notes to the Financial Statements


2-3

4

5-6

7- 17


















Chartered Accountants


www rkprngenaize.cor


Jasmine Court
35A Regent Street
Suite 201
Belize Cty, 3e6ize


-elephe 501-2-76860
501-2 76861
5C -2-76629
-ax 50-2-76072
:-mai mal vck@Otli


Page 1


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


We have audited the accompanying balance sheet of Central Bank of Belize as of 31 December
2001, and the related statements of income and cash flows for the year then ended. These
financial statements are the responsibility of the Bank's management. Our i I-p.i.I'. .Ir, is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of Central Bank of Belize at 31 December 2001, and the results of its
operations and its cash flows for the year then ended in conformity with International
Accounting Standards and the Central Bank of Belize Act.




17 April 2002


IEE ........


sJP iicK FCA















Page 2
CENTRAL BANK OF BELIZE
BALANCE SHEET AS AT 31 DECEMBER 2001

In Belize dollars.

ASSETS NOTES 2001 2000


APPROVED EXTERNAL ASSETS

Balances and deposits with foreign bankers
and Crown Agents 160,592,042 188,194,220
Reserve Tranche and balances with the
International Monetary Fund 5 14,031,965 14,109,668
Other foreign credit instruments 31,940,000 24,399,999
Accrued interest and cash intransit 2e 859,022 1,571,027

4b, c 207,423,029 228,274,914


BELIZE GOVERNMENT SECURITIES 6 1 .r. I l" 17,685,232

BELIZE GOVERNMENT CURRENT ACCOUNT 7 61,274,654 43,223,350

LOANS TO PUBLIC SECTOR 8 84,000,000 84,187,500

BALANCES WITH LOCAL BANKERS AND CASH
ON HAND 109,678 68,699

OTHER ASSETS 9 5,301,665 4,857,085

PROPERTY AND EQUIPMENT 2a, 10 31,134,464 31,237,223

TOTAL ASSETS 401,926,509 409,534,003


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














Page 3


CENTRAL BANK OF BELIZE
BALANCE SHEET AS OF 31 DECEMBER 2001 (CONT'D)

In Belize dollars.

LIABILITIES, CAPITAL AND RESERVES NOTES

DEMAND LIABILITIES
Notes and coins in circulation
Deposits by licensed financial institutions 11
Deposits by and balance due to Government and Public
Sector Entities in Belize
Deposits by international agencies 12


BALANCES DUE TO CARICOM CENTRAL BANKS

OTHER LIABILITIES 13

COMMERCIAL BANK DISCOUNT FUND 14

BELIZE CREDIT FACILITY 15

LOAN PAYABLE TO FOREIGN INSTITUTION 16


CONSTRUCTION BONDS


TOTAL LIABILITIES

REVALUATION ACCOUNT

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


2(c),19


,.r N.i: \i Fr rF 'P\ [ I ri 18


2001


125,280,374
80,718,126

64,942,478
2,315,732


2000


115,175,167
76,341,258

81,018,003
1,449,693


273,256,710 273,984,121
622,197 224,065

3,989,105 4,253,024

1,945,946 1,744,968

6A27,720 5,609,425

81,500,000 84,000,000

12,000,000 18,000,000

379,741,678 387,815,603




10,000,000 10,000,000

12,184,831 11,718,400


1 \I 1 I..P ll ( .Pf- \l. .\i) RESERVES 401,926,50
) GOVERNOR

) DIRECTOR

) DEPUTY GOVERNOR OPERATIONS


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


9


409,534,003















Page 4


CENTRAL BANK OF BELIZE
STATEMENT OF INCOME FOR THE YEAR ENDED 31 DECEMBER 2001

In Belize dollars.
NOTES 200
INCOME
Interest
Approved external assets 12,496,03
Advances to government 6,390,79
Local securities 2d 1,019,75
Loans to statutory bodies 5,949,40


Discounts on local securities
Commission and other income

TOTAL INCOME

LESS: Interest expense

Income from operations

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

Total expenditure


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

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


7
7
55
1


25,855,990
7,474
1,769,522

27,632,986

(14,471,156)

13,161,830


2b,h (1,008,735)

20 (4,032,096)
(796,090)
(2,084,717)

(7,921,638)


5,240,192

(575,882)

4,664,310


18 (466,431)

4,197,879


2000



9,727,945
5,439,823
1,017,000
2,376,961

18,561,729
159,568
2,476,230

21,197,527


(10,075,832)

11,121,695


(929,568)

(3,825,600)
(603,271)
(3,035,099)

(8,393,538)

2,728,157

(754,102)


1,974,055


(197.405)

1,776,650


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















CENTRAL BANK OF BELIZE
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2001

In Belize dollars.


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

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

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

Net cash (used in) provided by financing activities


466,431


796,090


197,406


603,271


(444,582) (583,327)
(263,919) 1,075,474
(92,686)
(1,198)

552,822 1,200,138


(18,051,304)

187,500
(692,132)
398,901
(6.000,000)
(18,000)


(3,296,764)
(83,187,500)

(189,192)
587,090
(6,000,000)
10,000


(24,175,035) (92,076,366)


10,105,207 11,423,892
4,376,868 42,015,595

(16,075,525) 46,687,396
866,039 (298,625)
398,132 (101,889)
200,978 345,345
818,295 881,313
?83,375,000
(2,500,000)

(1,810,006) 184,328,027


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


Page 5














Page 6
CENTRAL BANK OF BELIZE
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2001 (CONT'D)

In Belize dollars.
2001 2000


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

CASH AND CASH EQUIVALENTS, END OF
YEAR


CASH AND CASH EQUIVALENTS COMPRISE
THE FOLLOWING:

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




LOCAL ASSETS:
Cash and bank balances
Government of Belize Treasury Bills


(25,432,219) 93,451,799

222,868,539 129,416,740


197,436,320 222,868,539







160,592,042 188,194,220
31,940,000 24,399,999
859,022 1,571,027
3,440,560 3,119,362


196,831,624 217,284,608


109,677 68,699
495,019 5,515,232

197,436,320 222,868,539


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














Page 7
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS

In Belize dollars.

1. ORGANIZATION

The Central Bank of Belize, (the "Bank"), was established by the Central Bank of Belize
Act 1982 (the Act).

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Following is a summary of the more significant accounting policies adopted by the Bank
in preparing its financial statements which accord with International Accounting
Standards and the Central Bank of Belize Act.

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

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

Depreciation is charged at the following rates:

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

b. Sale of special coins -

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

c. Foreign currency translation and exchange gains and losses -

i. Assets and liabilities

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














Page 8
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS

In Belize dollars.

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

c. Foreign currency translation and exchange gains and losses -

ii. Income and expenses

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

iii. Revaluation

Section 49 of the Act stipulates that gains or losses from any revaluation of the
Bank's net assets or liabilities in gold, special drawings rights (SDR), foreign
exchange or foreign securities as a result of any change in the par value of the
Belize dollar or any change in the par value of the currency unit of any other
country shall be excluded from the computation of the annual profits and losses of
the Bank. All such gains or losses shall be credited in a special account called
Revaluation Account. However, no profits shall first be carried to the General
Reserve Fund or paid to the Government under Section 9 (see Note 19) whenever
the Revaluation Account shows a net loss. Such profits shall first be credited to
the Revaluation Account in an amount sufficient to cover the loss.

d. Valuation of securities -

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

e. Accrued interest and cash intransit -

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

f. Pension -

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














Page 9
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS

In Belize dollars.

g. Taxation -

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


3. INTEREST ON CENTRAL BANK BUILDING CONSTRUCTION BONDS

Interest is payable semi-annually on the Bank's Construction Bonds, and is charged
against the annual earnings of the Bank. (See Note 17).


4. CENTRAL BANK OF BELIZE ACT SECTION 5 COMPLIANCE

Section 5 of the Act stipulates that:

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

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

C. At 31 December 2001 and 2000 total approved external assets approximated 76
percent and 83 percent of such liabilities respectively.


5. INTERNATIONAL MONETARY FUND RESERVE TRANCHE

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

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

At 31 December 2001, Belize's subscriptions to the International Monetary Fund
amounted to SDR 18,800,000 and the Bank's Reserve Tranche amounted to SDR
4,238,690. The Reserve Tranche which earns interest is included in approved external
assets in the financial statements at the exchange rate of BZS2.51124 to SDR 1.0 at 31
December 2001 (2000 BZ$2.60582 to SDR 1.0).















Page 10
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS

In Belize dollars.

6. BELIZE GOVERNMENT SECURITIES

Belize Government securities consist of: 2001 2000

Treasury Bills 495,019 5,515,232
Debentures 2,170,000 2,170,000
Treasury Notes 18,000
Belize Defense Bonds 10,000,000 10,000,000

12,683,019 17,685,232


Section 35(2) of the Act stipulates that the Bank shall not at any time hold Belize
Government securities in an aggregate amount exceeding five times the aggregate
amount at that time of the paid up capital and general reserves of the Bank. At 31
December 2001 and 2000 the Bank's aggregate holding of Belize Government securities
approximated .57 times and .82 times, respectively, the amount of paid up capital and
general reserves of the Bank.


7. BELIZE GOVERNMENT CURRENT ACCOUNT

In accordance with Section 34 of the Act, the Bank may make direct advances to the
Government provided that at any one time the total outstanding amount of direct
advances shall not exceed twenty percent of the current revenues of the Government
collected during the preceding financial year or the sum of fifty million dollars,
whichever is greater. At 31 December 2001 and 2000 advances to Government represent
approximately 90 percent and 64 percent of the authorized limit respectively.














Page 11
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS

In Belize dollars.


8. LOANS TO THE PUBLIC SECTOR

Loans to the public sector comprise the following:

Loans to Reconstruction and Development Corporation to
finance housing construction:-
5% p.a. loan due in 16 consecutive semi-annual
payments commencing 10 July 1993.
5.5% p.a. loan due in 16 consecutive semi-annual
payments commencing 10 July 1993.

Loans to the Development Finance Corporation to
finance specified projects as determined by the
Minister of Finance. (Note 16):-
4% p.a. loan with quarterly payment of interest
commencing 24 March 2000 and a bullet payment of
principal at maturity on 24 March 2007.
11% p.a. loan with semi-annual payment of interest,
and payment of first installment of principal 18
months after 16 August 2000 and every 6 months
thereafter until maturity on 1 November 2005.
Loan to Development Finance Corporation to finance
infrastructure projects required due to damage caused
by Hurricane Keith:
11.9% p.a. loan with semi-annual payment of interest
commencing 1 May 2001 and a bullet payment of
principal at maturity on 1 November 2012.



These loans are guaranteed by the Government of Belize.


2000


31,250


156,250


50,000,000 50,000,000




20,000,000 20,000,000


14,000,000 14,000,000

84,000.000 84,187,500














Page 12


CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS

In Belize dollars.

9. OTHER ASSETS

At 31 December other assets are made up as follows:


Inventory notes and coins (Note 2h)

Prepayments and accrued interest

Accounts receivable


Other


10. PROPERTY AND EQUIPMENT

Property and equipment consist of:

Properties and improvements
Furniture
Equipment
Vehicles


Less: accumulated depreciation


1,631,559 1,966,057

2,232,293 1,315,443

1,322,681 1,504,517


115,132


71,068


5,301,665 4,857,085




2001 2000


29,170,058 28,416,802
865,518 847,444
3,970,013 5,777,095
253,568 283,882

34,259,157 35,325,223
3,124,693 4,088,000

31,134,464 31,237,223


During 2001, computer equipment and software with an original cost of S1,581,750 and
net book value of $1 was written off (2000 nil). Assets purchased during the year
amounted to S692,133 (2000 nil).

11. DEPOSITS BY LICENSED FINANCIAL INSTITUTIONS

Effective April 2000, the cash reserve requirement on time and saving deposits was
revised from 5% to 3% of average deposit liabilities, excluding demand deposits.

Under the revised provisions of Section 13 of the Banks and Financial Institutions Act
1995, licensed financial institutions are required to keep on deposit with the Bank an
amount equivalent to at least 3% of their average deposit liabilities. These deposits are
interest free.




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