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 Front Cover
 Title Page
 Front Matter
 Directors and principals
 Overview of the bank
 Economic review
 Operations
 Administration
 Statistical appendix
 Financial statements














Title: Central Bank of Belize Annual Report
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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: 2004
Copyright Date: 2010
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Volume ID: VID00005
Source Institution: University of Florida
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Table of Contents
    Front Cover
        Front Cover
    Title Page
        Page i
    Front Matter
        Page ii
        Page iii
    Directors and principals
        Page iv
    Overview of the bank
        Page viii
        Page ix
        Page x
        Page xi
        Page xii
    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
    Operations
        Page 52
        Page 53
        Page 54
        Page 55
        Page 56
        Page 57
    Administration
        Page 58
        Page 59
        Page 60
        Page 61
    Statistical appendix
        Page 62
        Page 63
        Page 64
        Page 65
        Page 66
        Page 67
        Page 68
        Page 69
    Financial statements
        Page 70
        Page 71
        Page A-1
        Page A-1a
        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







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CENTRAL BANK
OF
BELIZE


Twenty-third Annual Report
&
Statement of Accounts


For the Year Ending 31 December 2004










CENTRAL BANK OF BELIZE
A


Abbreviations and Conventions used in this Report


Abbreviations:


ACP African, Caribbean and Pacific
APR Annual Percentage Rate
BEL Belize Electricity Limited
BFIA Banks and Financial Institutions
Acts, 1995
BGA Banana Growers Association
BIS Bank for International Settlements
BSI Belize Sugar Industries Limited
BSSB Belize Social Security Board
BTB Belize Tourism Board
BTL Belize Telecommunications Limited
BWSL Belize Water Services Limited
CARICOM Caribbean Community and Common
Market
CABEI Central American Bank for Economic
Integration
CARTAC Caribbean Regional Technical
Assistance Centre
CMFS Capital Market Financial Services
CCMS Caribbean Centre for Monetary Studies
CDB Caribbean Development Bank
CET Common External Tariff
CFATF Caribbean Financial Action Task Force
CFZ Commercial Free Zone
C GA Citrus Growers Association
CIF Cost Insurance and Freight
CPI Consumer Price Index
CSO Central Statistical Office
DFC Development Finance Corporation
ECCB Eastern Caribbean Central Bank
ECLAC Economic Commission for Latin
America and the Caribbean
EDF European Development Fund
EIB European Investment Bank
EPZ Export Processing Zone


EU /EEC
FOB
FY
GDP
GOB
IBC
IC C
IBRD


IDB
IFS
IMF
INTELCO


NICH


NFC
OECD


OECS


PGIA
ps
RECONDEV


RMB
ROC
SIF
TIBoM
UK
U S/U SA
SAID


WTO
WASA


European Union
Free on Board
Fiscal Year
Gross Domestic Product
Government of Belize
International Business Company
Innovative Communication Company
International Bank for Reconstruction
and Development
Inter-American Development Bank
International Financial Statistics
International Monetary Fund
International Telecommunications
Company
National Institute of Culture and
History
N ot-From-C concentrate
Organisation for Economic
Cooperation and Development
Organisation of Eastern Caribbean
States
Phillip Goldson International Airport
pound solid
Reconstruction and Development
C corporation
Royal Merchant Bank
Republic of China, Taiwan
Social Investment Fund
International Bank ofMiami
United Kingdom
United States of America
United States Agency for
International Development
World Trade Organisation
Water and Sewerage Authority


Notes and Conventions:


--$ refers to the Belize dollar unless otherwise stated
--mn denotes million
--bn denotes billion
--The figures for 2004 in this report are provisional, and the figures for 2003 have been revised.
--Since May of 1976 the Belize dollar has been fixed 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.


ANNUAL REPORT 2004







CENTRAL BANK OF BELIZE


April 29, 2005


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


Dear Prime Minister :

In accordance with Section 58 of the Central Bank of Belize Act, 1982, I have the honour
of submitting to you, in your capacity as Minister of Finance, the Report on the Central
Bank of Belize's operations for the period January 1 to December 31, 2004, together with
a copy of the Bank's Statement of Accounts, as certified by the External Auditors.

Yours sincerely,



Sydney J. Campbell
Governor


ANNUAL REPORT 2004








CENTRAL BANK OF BELIZE
A


ANNUAL REPORT 2004


DIRECTORS AND PRINCIPALS

At December 31, 2004

BOARD OF DIRECTORS

SYDNEY CAMPBELL
Governor/Vice Chairman

MARION PALACIO
Deputy Governor

DAVID FONSECA

JAIME BRICENO

ROBERT SWIFT

Dr. CARLA BARNETT
Financial Secretary
PRINCIPAL OFFICERS

SYDNEY CAMPBELL
Governor

MARION PALACIO
Deputy Governor

YVETTE ALVAREZ
Deputy Governor, Operations

CAROL HYDE
Manager, Human Resources & Administration

HOLLIS PARHAM
Manager, Finance

MARILYN GARDINER
Manager, Banking & Currency

NERI MATUS
Manager, Financial Sector Supervision

CHRISTINE VELLOS
Manager, Research

KENT HAYLOCK
Chief of Security









OVERVIEW OF THE BANK


Mission, Goals and Objectives



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

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

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

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

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


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

Objectives
Promote monetary stability.
SRegulate the issue and availability of money and its international exchange.
SRegulate and monitor the financial environment.








CENTRAL BANK OF BELIZE


Organization And Functions

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

Office of the Governor


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


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


Administration


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


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


Human Resources


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


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


ANNUAL REPORT 2004








CENTRAL BANK OF BELIZE
A


ANNUAL REPORT 2004


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


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


Research


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


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


Other Operations


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


* Maintaining the Bank's plant and
equipment.










CENTRAL BANK OF BELIZE


Table L1: Major Economic Indicators


POPULATION AND EMPLOYMENT
Population (Thousands)
Employed Labour Force (Thousands)
Unemployment Rate (%)
INCOME
GDP at Current Market Prices ($mn)
Per Capita GDP ($, Current Mkt. Prices)
Real GDP Growth (%)
Sectoral Distribution of Constant 2000 GDP (%)
Primary Activities
Secondary Activities
Services
MONEY AND PRICES ($mn)
Inflation (Annual average percentage change)
Currencyand Demand deposits (M1)
Quasi-Money (Savings and Time deposits)
MoneySupply(M2)
Ratio of M2 to GDP (%)
CREDIT ($mn)
Commercial Bank Loans and Advances
Public Sector
Private Sector
INTEREST RATE (%)
Weighted Average Lending Rate (WALR)
Weighted Average Deposit Rate
Weighted Average Interest Rate Spread
CENTRAL GOVERNMENT FINANCES ($mn)
Current Revenue
Current Expenditure
Current Account Surplus (+)/Deficit(-)
Capital Expenditure
Overall Surplus (+)/Deficit(-)
Ratio of Budget Deficitto GDP at m kt. Prices (%)
Domestic Financing (Net)
External Financing (Net)
BALANCE OF PAYMENTS (US $mn)
Merchandise Exports (f.o.b.)1
Merchandise Imports (f.o.b.)2
Trade Balance
Remittances (Inflows)
Tourism (inflows)
Services (Net)
Current Account Balance
Capital and Financial Flows
Gross Change in Official International Reserves 3
Gross Official International Reserves
Im port Cover of Reserves (in months)
PUBLIC SECTOR DEBT
Disbursed Outstanding External Debt (US $m n)4
Ratio of Outstanding Debt to GDP at Mkt. Prices (%)
External Debt Service Payments (US $mn)
External Debt Service Ratio (%)5
Disbursed Outstanding Domestic Debt ($ m n)
Domestic DebtService Payments ($ mn)


Sources Ministry of Finance, Central Statistical Office, & the
Includes CFZ gross sales in 1999 to 2001
2 Includes CFZ direct imports in 1999 to 2001
3 Minus = increase
4 Excludes guaranteed debts
S= amounts related to refinancing were excluded


243.0 249.8 257.3 265.2 273.7 282.6
77.8 83.7 85.9 84.7 89.2 95.9
12.8 11.1 9.1 10.0 12.9 11.6

1,464.7 1,664.7 1,737.6 1,853.0 1,962.3 2,085.9
6,028 6,664 6,753 6,987 7,170 7,381
8.7 13.0 3.9 3.9 9.1 4.2

15.3 15.2 14.6 14.1 17.7 18.6
16.4 18.1 17.4 17.1 15.1 15.6
68.3 66.7 68.0 68.8 67.2 65.8

-1.2 0.6 1.1 2.2 2.6 3.1
255.1 310.2 364.8 358.1 361.1 406.7
585.1 655.7 676.0 705.3 740.0 841.6
840.2 965.9 1,040.8 1,063.4 1,101.1 1,248.3
57.4 58.0 59.9 57.4 56.1 59.8

654.5 695.4 788.5 904.5 1,041.7 1,176.6
8.4 11.1 12.9 15.9 26.2 46.4
646.1 684.3 775.6 888.6 1,015.5 1,130.2


16.3 15.8 15.4 14.5
5.7 5.0 4.3 4.5
10.6 10.8 11.1 10.0


327.1 349.8 372.1 425.8 422.2 462.0
278.8 308.4 333.7 333.4 393.0 468.0
48.3 41.4 38.4 92.3 29.1 -6.0
165.3 247.5 267.4 260.3 273.9 180.9
-29.1 -139.9 -142.4 -68.8 -213.6 -125.3
-2.0 -8.4 -8.2 -3.7 -10.9 -6.0
-8.6 -74.0 72.7 -220.9 -62.4 -39.4
38.5 213.5 69.8 278.3 276.7 164.9

261.5 281.8 269.1 309.7 315.5 307.0
375.8 478.4 477.7 496.9 522.3 480.8
-114.3 -196.6 -208.7 -187.2 -206.8 -173.9
33.5 52.6 41.8 38.1 45.0 40.6
105.8 116.2 102.9 102.9 117.2 133.0
47.1 33.7 36.4 26.4 39.6 53.5
-67.8 -156.0 -189.9 -182.6 -207.4 -182.4
100.4 202.9 173.5 151.7 185.9 133.9
-27.2 -51.7 2.7 5.4 30.1 31.3
71.1 122.8 120.1 114.7 84.6 53.3
2.1 3.2 3.2 3.2 2.1 1.3

252.5 433.7 486.6 574.5 752.9 841.0
34.5 52.1 56.0 62.0 76.7 80.6
33.7 43.1 68.0 75.2 72.0 91.4
8.1 9.8 15.3 15.2 13.6 18.1
171.5 176.0 210.8 174.2 257.8 280.9
12.2 22.6 17.7 19.2 13.7 18.8
Central Bank of Belize


ANNUAL REPORT 2004










Belize Currency Notes


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ECONOMIC OVERVIEW


Buoyancy in tourism, productivity gains in the
primary sector, a resurgence in construction and
manufacturing, as well as increases in real estate/
business and financial services generated GDP
growth of 4.6% in 2004. Notwithstanding a 5.9%
increase in the labour force, the unemployment rate
fell from 12.9% to 11.6% largely due to greater
activity in the export sector. On the other hand,
consumer prices rose by 3.1% with upward pressure
being exerted by an increase in the sales tax and
higher costs for fuel and other imports.

The external current account deficit declined by
12.9% to ^' ,4.9mn (17.6" .. of GDP) as a reduction
in the visible trade deficit and higher inflows from
tourism and grants outweighed increased outflows
for profits and interest payments. The deficit was
financed by foreign direct investment inflows
(principally for telecommunications, electricity and
tourism) and net withdrawals of $62.7mn from
the international reserves. At year-end, gross official
international reserves stood at $106.5mn, equivalent
to 1.3 months of imports.

Boosted by the proceeds of the Social Security
Board's sale of telephone company shares to a
foreign investor and a 20.7% expansion in net
domestic credit, growth in the broad money supply
accelerated to 13.4% with narrow and quasi-money
increasingly 12.6% and 13.7%, respectively. The
expansion in net credit was shared almost equally
between the public and private sectors with funding


for transactions involving real estate, the private
utilities, construction and the government
dominating commercial bank lending. Public sector
financing needs were also largely met by the Central
Bank, which accounted for 76.4% of the rise in net
credit to Central Government as well as 87.2% of
new loans to statutory bodies. The robust growth
in credit, together with a slow down in financial
inflows and higher debt service payments
contributed to a 36.1" '. contraction in the net foreign
assets of the banking system.

With official reserves under pressure from strong
credit growth plus existing external commitments
and the pocket of commercial bank excess statutory
liquidity increasing, the Central Bank intervened in
the beginning of December by raising commercial
bank cash and liquid asset reserve ratios from 6.0%
to 7.0% and from 19.0% to 20.0%, respectively.
This measure was however subsequently neutralized
by monetization of the fiscal deficit and at year-
end, excess liquidity stood at $86.3mn, an annual
increase of 68.5%. In developments earlier in the
year, the Central Bank took steps to improve the
transparency of the liquidity calculation by removing
residential mortgages from the list of approved
liquid assets and simultaneously lowering the
statutory reserve requirement from 24.0% to 19.0%
effective 1 April to ensure that actual liquidity was
not affected. The issue of public sector loans that
are also classified as approved liquid assets was left
to be addressed at a later date.








CENTRAL BANK OF BELIZE


Even with substantial levels of excess statutory
liquidity, the weighted average spread of the
commercial banks narrowed by 60 basis points to
8.8% during the year. While the weighted average
lending rate was down by 20 basis points to 14.5%,
the deposit rate was bid upward by 30 basis points
to 5.2% reflecting the increase in competitive
behaviour among the banks that had begun three
years earlier with the addition of the fifth commercial
bank.

In its fiscal operations during the calendar year,
Central Government generated an overall deficit
of $125.3mn, a 40.6% improvement as tax
revenues rose by 13.3%, boosted by a 1.0% increase
in the sale tax and a five-fold increase in grant
inflows, while expenditure declined by 2.7% due
to lower capital outlays. Financing came mostly
from external sources. Additional, significant
amounts were used for external debt servicing and
the re-profiling of some $320.0mn in foreign loans
and securitization liabilities.

Greater use of overdraft financing combined with
commercial bank loan disbursements caused an
8.5% increase in the Government's domestic debt
to $280.9mn (13.6% of GDP). Amortization and
interest payments amounted to $1.9mn and
$16.8mn, respectively. Meanwhile, the public sector's
disbursed outstanding external debt grew by


approximately $175.8mn to $1,680.9mn (81.2% of
GDP). Disbursements and upward valuation
adjustments totaled .4 1.4mn and $3.5mn,
respectively, while principal and interest payments
(excluding amounts used on loan re-profiling)
amounted to $177.7mn.

The 2005 outlook is for growth of around 3.0%
as monetary and fiscal policies are tightened and
consumption slackens. Except for sugar, all major
export crops are forecasted to expand, while output
of livestock and basic grains should remain stable.
Particularly strong growth is expected in citrus agro-
processing, which will overshadow the contraction
in sugar. Much activity is not expected from the
utilities while construction will be subject to the
offsetting effects of large externally funded projects
such as the US Embassy, Chalillo dam and the
Carnival port facility and the government's austerity
measures. The services sector should see moderate
growth in view of the 5% and 10% projected
increases in stay over and cruise tourists even as
Government activity slackens with the
implementation of measures to hold the fiscal deficit
at 2.8% of GDP The one-off impact of new
taxes is likely to push the rate of inflation to over
4.0% while unemployment should remain stable in
view of the offsetting developments in agriculture,
construction and services.


ANNUAL REPORT 2004










INTERNATIONAL AND REGIONAL DEVELOPMENTS


The world economy accelerated from 2.8% in 2003
to an estimated 4.'" .. during 2004 with every region
except South Asia and the Commonwealth of
Independent States (CIS) improving. The
widespread growth of the developing countries was
attributed to the rapid growth of trade in
manufactures, increased prices for oil and most non-
oil commodities and calmer conditions in
international financial markets. Among the
developed countries, growth was strong in North
America, moderate in Japan and weak in Europe.

The main engines of global growth were the United
States and China. With a burgeoning trade deficit in
excess of 5.0% of GDP, the US positively
influenced trade in manufactured goods, while
China's demand for raw materials in its ongoing
industrialisation boosted prices for non-oil
commodities. While oil prices rose by over 50.0%
during the first half of the year, the price push came
from increased demand, and not from supply
reductions orchestrated by producers.

Notwithstanding oil price increases, inflation was
moderate and higher non-oil commodity prices
counteracted much of the negative impact of
increased i -n t-- costs in developing countries.
However, growth in employment remained
weak, especially in the developed countries, while
high rates of unemployment and under-
employment persisted in developing countries.
International capital markets were calm and
foreign direct investment and development


assistance flows to developing countries increased.
While developing countries reported net financial
outflows to developed countries, some of this was
for positive reasons such as to boost foreign reserves
and pay down external debt.

Developments in Select OECD and Newly
Industrialized Countries


Even with higher.. i prices and damages from
four major hurricanes in the Southeast United
States, GDP growth accelerated from 2.8% in
2003 to an estimated 4.4% in response to good
corporate performance, strong consumer
confidence and government deficit spending,
especially on defense and homeland security.
Increased spending (by government and
households) and improvements in business capital
formation contributed to a 3.8% boost in
industrial production and partly explained the
persistently large external current account
deficit. Budget and trade deficits along with a
slowdown in the flow of private capital into the
U.S. further weakened the U.S. dollar, which
declined for the third consecutive year. Five
successive hikes in interest rates by the Federal
Reserve during the year slightly dampened
growth to avoid economic overheating and
contributed to a moderate inflation of 2.7%,
while slower than expected improvement in the
labor market reduced employment by only 0.3
percentage points to 5.4%.









CENTRAL BANK OF BELIZE


Growth in Britain is estimated at 3.2% in 2004,
fuelled by public sector spending, strong
investment, growing consumption and declines in
long-term interest rates. As a net oil exporter and
the least oil dependent of the G-7 countries, the
economy did not falter with the surge in oil prices.
Nonetheless, the increase in. i. _* costs did affect
the manufacturing sector and industrial production
contracted by 1.9%. While the housing market
weakened, retail spending was up and
unemployment further declined to 4.6% with real
incomes rising as inflation was held under control
at 1.5%.


Growth in Japan is estimated at 3.2% for 2004,
even in the presence of persistent deflation that
measured negative 0.1%. The corporate sector
appears to have emerged more streamlined and
profitable as labor flexibility and capital investment
increased. The economic expansion was boosted
by growth in consumer spending and buoyancy in
the export sector arising from the boom in China's
import demand. In an attempt to break the
deflationary lock hold on the economy, interest rates
were maintained at zero and the government


continued to run a deficit. At 4.8%, unemployment
was at its lowest level in years.


Following on the heels of a desultory export
performance in 2003, resurgence in exports was
the main contributor to the 2.8% growth in
Canada's GDP in 2004. The strengthening of
global demand and concern for supply disruption
drove oil prices well above expectation, resulting in
favorable increases in net exports and the
appreciation of the Canadian dollar. Vigorous
household spending and a substantial rise in business
investment further supported the economic
expansion as the Bank of Canada lowered the target
for the overnight interest rate to 2.0% early in the
year to stimulate domestic demand. With the
economy operating close to full capacity, this
monetary stimulus was reined back in the latter half
of the year through several small interest rate hikes,
and inflation was held within the 2.0% target. While
industrial production was up by 3.7%,
unemployment edged downward from 7.4% to
7.3%.


Export led growth and swelling consumer demand


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


United States 2.8 4.4
Canada 1.8 2.8
Taiwan 3.3 5.9
United Kingdom 1.9 3.2
Japan 2.4 3.2


3.8
3.7
14.4
-1.9
-1.1


Sources: Economist, Bloomberg,


ANNUAL REPORT 2004


International Financial Statistics








INTERNATIONAL AND REGIONAL DEVELOPMENTS


resulted in Taiwan's economy growing by 5.9%
during 2004. A booming global economy,
particularly in China, increased demand for
manufactured goods and pushed up Taiwan's
exports by 21.3%. Strong confidence in the
economy boosted private consumption that further
fuelled growth. Meanwhile, rising demand for
imported raw materials and capital equipment (for
private investment projects) coupled with mounting
prices of crude oil and raw materials drove up
imports by 29.4%. Although the trade surplus
contracted to one of its lowest levels in years, the
current account of the balance of payments yielded
a surplus with the foreign reserves up 12.1% over
the first eight months of 2004. With the export
boom ratchetingup industrial production by 14 4" ..
up to August 2004, unemployment fell from 5.0%
to 4.4% over the same period.

Development in Selected Regional
Economies


The Caribbean

Economic activity in the Caribbean was
significantly undermined by natural disasters in
the latter part of 2004. Hurricanes Ivan, Jeanne,
and Frances affected the Bahamas, Grenada,
Jamaica, the Dominican Republic, St. Vincent and
the Grenadines and St. Lucia, while an earthquake
ravaged Dominica in November of 2004. ECLAC
estimated the overall damage caused by the social
and economic impacts of the hurricanes to be
US$5.6bn, of which 48.0% occurred in the social
sectors, 33.0% in the production of goods and


services, particularly tourism, 16.0% in
infrastructure, utilities and transport, and 1.4% in
direct environmental impact.

During the first nine months of 2004, the
Barbadian economy expanded by 3.1%, mostly
due to a bumper tourist season with arrivals of
stay-over and cruise visitors up 6.2% and 32.5%,
respectively. Output in the trade sector rose 3.6%
as the stellar performance of tourism eclipsed poor
performances in agriculture and manufacturing.
Performance of the non-trade sector also rose 2.9%,
drawing on positive activity in transportation,
storage and communications, merchandising and
business services. The surge in overall activities drove
unemployment down to 9.9%. However,
notwithstanding higher receipts from tourism and
exports, a rising import bill coupled with lower net
financial inflows caused net international reserves
to decline by US$155.7mn to US$595.9mn,
equivalent to 27.6 weeks of import cover. At 0.8%,
inflation remained modest as the government did
not pass the full impact of higher fuel prices onto
consumers. Higher tax revenues coupled with
reduced capital expenditure enabled a 40.0%
reduction in the fiscal deficit to US$69.3mn.


Damage caused by hurricanes Ivan and Charley
especially to export crops such as banana, coffee,
citrus and cocoaweakened Jamaica's growth from
2.3% in the previous year to an estimated 1.5%.
Growth was driven by heightened activities in
construction, manufacturing and distributive trade.
The estimated unemployment rate at the end of
October 2004 was 12.8%, while inflation stood at









CENTRAL BANK OF BELIZE


13.7%, down by 0.4% percentage points from
2003. For the first nine months of the fiscal year
(April to December 2004), the overall fiscal deficit

was 5.5% of GDP as expenditures increased to
facilitate relief and reconstruction efforts while

revenue targets were revised downwards.
Notwithstanding the dampening of agricultural
exports, net international reserves increased by
US$693.6mn to US$1.8bn due to increased
international borrowing and the receipt of grant
funds.


Robust output in the energy sector facilitated by
hikes in international fuel prices spurred an estimated

6.2% expansion in Trinidad & Tobago during
2004. Adding to the buoyancy was strong
performance in such non-e. i areas as finance,
insurance, real estate, manufacturing, transport,

storage and communication. The expansion drove
unemployment down from 10.5% in 2003 to 8.6%

at the end of September. Inflation measured 3.7%,
with much of the cost push exerted by rising food

prices. Third quarter estimates showed central
government with a fiscal surplus of US$437.lmn


or 0.6% of GDP, while the current surplus on the
balance of payments was estimated at US$1.4bn.
Consequently, net official reserves rose 32.8% to
US$2.9bn at year-end. The economic boom and
strong fiscal position prompted Standard and Poor's
to upgrade the country's credit ratings from BBB
to BBB+.


After contracting by 0.6% in 2003, Guyana's

economy recovered slightly with a 1.5% rise in
GDP. Growth was constrained by the country's

political climate and spiralling wage pressures.

The debt burden also remained high despite relief
under the Highly Indebted Poor Countries
(HIPC) Initiative. Net International Reserves
continued its three-year decline since 2002,
moving from US$176.2mn in December of 2003

to US$162.8mn in October 2004. Throughout
2004, the government focused its attention on
restructuring the state-owned sugar and bauxite
industries and strengthening the regulatory
framework of its banking system. Inflation
continued to decline in consonance with the

relatively low economic activity, despite the rise


Table 11.2: Selected Indicators for Some Caribbean Countries


Barbados 2.2 3.1
Jamaica 2.3 1.5
Trinidad & Tobago 4.2 6.2
Guyana -0.6 1.5
OECS n.a. 3.0


0.8
13.7
3.7
4.5
n.a.


11.1
13.1
10.5
n.a.
n.a.


9.9
12.8
8.6
n.a.
n.a.


751.6
1,106.4
2,197.0
176.2
536.7


595.9
1,800.0
2,900.0
162.8
556.0


Sources: UN Economic Commission for Latin America and the Caribbean, IMF, Bank of Jamaica,
Bank of Guyana, Central Bank of Trinidad & Tobago, ECCB, Central Bank of Barbados
n.a. = not available


ANNUAL REPORT 2004








INTERNATIONAL AND REGIONAL DEVELOPMENTS


in international oil prices and ended the year at
4.5%, compared to 5.0% in 2003.

OECS

Notwithstanding damage from hurricanes and

other natural disasters, the Eastern Caribbean region
grew by an estimated 3.0%. The improved
performance was attributable to an increase in visitor
arrivals, higher agricultural production, particularly
in banana, and construction. The spread of
improved activity in the tourism sector ranged from
1.7% in Montserrat to 90.3% in Dominica, while
St. Vincent and the Grenadines registered the largest
expansion in banana production with a 27.3%
increase over the same period in 2003. Although
the individual performance of countries within the
currency union was mixed, the overall fiscal deficit
for the first three-quarters of the year declined from
US$102.5mn to US$98.4mn in response to
increases in grant receipts and current revenue.
The rise in international oil prices pushed up
consumer prices in all countries and higher
merchandise imports and debt service payments
also contributed to a widening of the external


current account deficit. As at September 2004, net
international reserves stood at US$556.0mn, a 3.6%
increase over the December 2003 position.


Mexico


After sluggish growth of 1.2% in 2003, Mexico's
economy accelerated to an estimated 4.1% in
2004 with the country benefiting from a revenue
windfall as fuel prices peaked. The pick up in
exports, renewed business confidence and strong
foreign direct investment inflows contributed
to a broad based economic recovery. High oil
prices swelled fiscal revenues, while increased US
demand stimulated a revival of the maquiladora
sector and pushed the production index up 7.7%
over the comparative period of 2003. Under
pressure from higher oil and commodity prices,
inflation rose from 4.0% in December 2003 to
5.1% in September 2004 even though Banco de
Mexico tightened monetary policy seven times
during the year. Strong PEMEX receipts
boosted net international reserves to US$58.0bn
in August 2004, up US$10.0bn from 2003.


Chart 1.1: Real GDP Growth for Selected Caribbean Countries


Barbados Jamaica Trinidad &
Tobago


7
6
5
S4
p 3
a_ 2 -
1-
0
-1


SI


S2003

S2004


Guyana


OECS








CENTRAL BANK OF BELIZE


However, notwithstanding increased economic
activity, the unemployment rate rose from 3.0% in
December 2003 to 3.8% in November.



Central America


As in 2003, economic activity in Central America
grew by an average of 3.2%. The Panamanian
economy was the most dynamic with growth in
the region of 6.0%, while El Salvador lagged behind
at 1.8%. Throughout the region, governments
implemented measures to improve tax and public
administration. The overall fiscal deficit is therefore
expected to improve from 3.0% in 2003 to 2.0%.
A slight increase was seen in the external current
account deficit (from 7.5% of GDP in 2003 to
7.7% in 2004). Affected by rising international prices
for petrol, inflation rose to 9.3% compared to 6.3%
in 2003 and ranged from 13.5% in Costa Rica to
5.5% in El Salvador.


A slowdown in exports, particularly in computer
parts, caused the Costa Rican economy to
decelerate from 6.5% in 2003 to 3.9% in 2004. Even
though the trade deficit widened, the external current
account deficit narrowed from 5.5% of GDP in
2003 to 5.0% due to the dynamic performance
of tourism. Progress on fiscal reform was slower
than expected, while expenditure continue to
outpace revenue. As a result, the overall deficit grew
from 2.8% of GDP in 2003 to 3.5% in 2004.
Higher oil prices directly contributed to an inflation
rate of 13.5%, up from 9.9% in 2003. The


increased import bill (largely due to rising oil prices)
resulted in a decline in international reserves from
US$1,836mn in 2003 (2.9 months of imports) to
US$1,636mn in 2004 (2.4 months of imports).


Economic activity in Nicaragua strengthened in
2004 with growth of 3.7%. Fuelling the expansion
was a surge in exports, increased investment and
good performances in financial services, mining,
construction, trade and the utilities. The external
current account deficit improved only slightly to
18.5% of GDP notwithstanding increased exports
and inflows from family remittances. Under the
IMF's Poverty Reduction and Growth (PRGF)
arrangement, Nicaragua implemented structural
reforms to improve fiscal management and the
financial system's stability. The result was a 2.5%
reduction in the overall fiscal deficit before
grants to 4.3% of GDP, and a surplus of 0.4%
after accounting for grants. Commendable
performance in the PRGF also qualified
Nicaragua for debt relief under the Heavily
Indebted Poor Countries (HIPC) Initiative in
January 2004. All of this contributed to a
L '.'-'.0mn rise in net international reserves to
US$400.0mn (approximately 2.3 months of
imports) in 2004. Meanwhile, higher prices for
fuel, food, and rent pushed inflation up from
6.5% in 2003 to 10.0% in 2004.


In Panama, GDP growth for 2004 was
estimated at 6.0%, up from 4.7% in 2003. The
expansion was attributable to increased activity in
the export-oriented transport, communication and


ANNUAL REPORT 2004









\INTERNATIONAL AND REGIONAL DEVELOPMENTS


tourism sectors, as well as a booming construction
industry that was encouraged by tax incentives. The
fiscal deficit remained stable at 2.0% of GDP,
especially as fiscal policy continue to be guided by a
fiscal responsibility law that was enacted in May 2002
and which limited the non-financial public sector
deficit to at most 2.0% of GDP.


Growth was once again lethargic for El Salvador,
continuing at 1.8% as investment stagnated and the
external sector improved only slightly due to a 4.6%
decline in maquiladora exports that offset increases
in coffee and non-traditional exports.
Notwithstanding a surge in fuel costs, a significant
expansion in family remittances figured prominently
in reducing the external current account deficit from
5.0% of GDP in 2003 to an estimated 4.7% in
2004. Even so, net international reserves declined
from US$1,906.0mn (4 months of import cover)
in 2003 to US$1,871.0mn (3.6 months of import


cover) and the external debt continued to climb,
growing by 3.7% in 2004. Tightened controls
on government spending coupled with reforms
aimed at reducing tax evasion and contraband
trade are expected to reduce the fiscal deficit
from 2.3% of GDP to 1.7%. Rising. c e i -.- costs
were the main cause of a hike in inflation from
2.5% in 2003 to an estimated 5.5% in 2004.


The Honduran economy grew by an estimated
4.' r" during the year, the expansion being associated

with improved export performance, heightened
activityinthl e andtelecommunications sectors
and increased private investment and consumption.
The boisterous pace of economic activity, especially
in the ,ci -n -- and telecommunications sectors,
and rising fuel costs drove up imports.
Consequently, the external current account
deficit increased from 3.7% to 6.2% of GDP,
even with higher family remittances and
maquiladora exports. The latter two, along with


Table 11.3: Selected Indicators for Mexico and Central America


Mexico 1.2 4.1
Costa Rica 6.5 3.9
Nicaragua 2.3 3.7
Panama 4.7 6.0
El Salvador 1.8 1.8
Honduras 3.2 4.0
Guatemala 2.1 2.7


5.1
13.5
10.0
n.a.
5.5
9.5
9.2


58.0
1.6
0.4
n.a.
1.9
1.3
3.5


Sources: ECLAC, IMF, Banco Central be Honduras, Banco Central de Ncaragua,
Banco Central de Costa Rica, CABEL, Banco de Mexico
n.a. not available








CENTRAL BANK OF BELIZE


debt relief (under the HIPC initiative) and
disbursements from official sources, nevertheless,
boosted net international reserves by 7.8% to
US$1.3bn, equivalent to 4.2 months of imports.
Under an IMF program, the government
continued the implementation of fiscal reforms
that were expected to reduce the fiscal deficit
from 5.4% (in 2003) to 3.5% of GDP. Like other
countries in the region, rising oil prices pushed
inflation upward from 6.8% in 2003 to 9.5%.


The Guatemalan economy grew by an estimated
2.7% driven by a dynamic export performance,
private investment and consumption as well as
increased activity in basic services, the agricultural


sector and trade. A surge in family remittances
(that contributed largely to reducing the external
current account deficit from 4.5% to 4.1% of
GDP) and the placement of an international
bond were mainly responsible for increasing net
international reserves from US$2.9bn in 2003
to US$3.5bn (equivalent to more than 5 months
of imports) in 2004. While monetary and fiscal
discipline improved the overall fiscal deficit to
1.9% from 2.3% in 2003, higher oil prices drove
inflation up from 5.9% to 9.2%. During the
year, the government demonstrated its
commitment to the structural adjustment process
by commencing the negotiation of a new IMF
standby program for 2005.


Chart 11.2: Real GDP Growth for Mexico and Central America


Mexico Costa Rica Nicaragua Panama El Salvador Honduras Guatemala


* 2003
* 2004


ANNUAL REPORT 2004











DOMESTIC PRODUCTION, PRICES AND EMPLOYMENT


Production


GDP growth decelerated to 4.6% in 2004, reflecting

a return to steady growth based more on

productivity gains in contrast with the previous year,
which featured substantial investment to expand

the productive capacity of the primary sector. The

latter led economic activity for the second

consecutive year with a 9.1% increase in output while
the secondary sector and services grew by 7.3%

and 3.3%, respectively. Increased output led to a
decline in the unemployment rate (from 12.9% to
11.6" ., with the largest growth in jobs occurring in

the primary and service sectors.


Notwithstanding a drought induced reduction in
grain output, agriculture expanded by 11.9%

reflecting strong growth in the major export crops

of sugarcane, citrus and banana. Higher output of
farmed shrimp as well as wild capture of lobster

and conch accounted for a 4.8% growth in fishing.


Private sector projects that included two new casinos

at the northern border, the Chalillo Dam and

various hotels and buildings spurred growth in

construction. Combined with an upturn in
manufacturing (largely agro-processing), this

overshadowed a fall-off in output by the utilities
during the year.


Table III.1: Annual Percent Change in Selected Indicators


GDP at Current Market Prices
Real GDP (2000 prices)

Primary Activities
of which: Agriculture
Fishing
Forestry

Secondary Activities
of which: Construction
Manufacturing

Services
of which: Restaurant & Hotel


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


6.6
4.7

0.3
2.5
-7.1
17.0

2.3
3.7
1.5

7.3
2.5
4.0
3.9
7.1
26.4


2.2
3.2


5.9
9.2

37.6
16.8
110.5
-5.2

-3.6
-17.9
-0.4

7.9
14.5
1.4
5.6
8.1
31.5


2.6
2.3


5.6
4.6

9.1
12.1
4.8
8.1

7.3
4.6
12.1

3.3
15.5
-0.4
0.6
5.9
3.7


3.1
3.0








CENTRAL BANK OF BELIZE


/


ANNUAL REPORT 2004


In the services sector, hotel and restaurant activity
grew by a substantial 15.5% in response to increases
in stay-over tourists and cruise visitors. The impact
of the latter also contributed to a 5.9% rise in
transportation and communications. Other growth
areas were in real estate/business services and
financial intermediation which grew by 5.1% and
3.7%, respectively. On the other hand, activity in
the wholesale and retail sector contracted by 0.4%
as deceleration in investment spending underpinned
a decline in imports.

The rate of inflation as measured by the Consumer
Price Index (CPI) rose by 3.1% during the year,
influenced largely by increases in i costs, sales
tax and higher import costs.

Agriculture


Sugarcane

The 2003/2004 crop benefited from favourable
harvest weather, greater efforts by farmers to
maximize deliveries and faster milling rates due
to improvements at the factory level. Sugarcane
deliveries consequently increased by 7.1% to
1,149,475 long tons. For the third year in a row,
bona fide farmers were allowed to deliver as much


produce as possible, which undermined the
arbitrage gained by middlemen who market
sugarcane licenses. The BSI cane-growing project
yielded 54,138 long tons while the company's
research division produced 13,060 long tons.
With approximately 2,253 acres under
cultivation, the BSI cane-growing project
demonstrated the benefits of good agricultural
practices by achieving yields of 24.1 tons of
sugarcane per acre as compared to the industry
average of 17.0 to 18.0 tons per acre. While the
crop's sugar content was lower (11.95%
compared to 12.25% for the 2002/2003 crop),
cane purity remained almost stable at 85.09%.

The estimated average final price per long ton
of sugarcane rose by $1.98 to $46.07 as the
industry was able to sell all its sugar into
preferential or more high-valued regional and
niche markets and avoid the very depressed and
unstable world market.

Citrus


After two consecutive years of decline following
hurricane damage in late 2001, citrus production
rebounded during the 2003/2004 crop year with
a 25.5% increase over the previous crop.


Table III.2: Sugarcane Deliveries


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


1,150,656 1,073,339 1,149,475








-< DOMESTIC PRODUCTION, PRICES AND EMPLOYMENT


Box 1: Sugar Industry Update




Faced with a 37.0"(. price cut for EU sugar exports looming in the next two years, Belize's sugar industry
must accelerate its sugar adjustment strategies to survive in the new market environment, particularly as
it relates to the implementation of the provisions of the Sugar Industry Act 2001.

For the past three years, farmers have had an open delivery system based on their production capacities
rather than deliveries based on licensed amounts. Of the 8,475 registered license holders, an estimated
3,000 were not bona fide farmers and made a profit on the buying of sugarcane or sale of licenses to
farmers with production in excess of their licenses. The objective of the open delivery system was to
provide genuine farmers with the opportunity to maximize their production and remove the middleman.
This move formed part of the scheme to increase farm efficiencies and allow licenses to be granted
based on actual production.

Another effort to increase efficiency focused on improving the quality of the sugarcane entering the
factory. Long delivery times caused the sucrose content in the cut sugarcane to deteriorate and so the
industry implemented a 24-hour delivery system for the 21 114/' 2' 1 crop. This move will also support
the proposed shift to a payment system based on the sugar content of the delivered sugarcane. The
Sugarcane Quality Authority (SCQA), an autonomous body whose main function is to implement the
payment by quality system, was established. This body proposes to begin testing a core sampler during
the 21 1 4/, 2'11 crop and then fully implement the new payment system during the 2005/ 2 '"11 crop.

A key component of the survival strategy is to maximize the industry's value added through co-generation.
On 1 December 2" 4, Belize Co-generation Limited (Belcogen) and the Belize Electricity Limited
(BEL) signed a power purchase agreement in which Belcogen is to supply BEL with 13.5 megawatts of
power starting the end of 2007. Plans are underway to finalise project financing early in 2005 so that
construction can commence.

While some progress has been made in addressing some of the inefficiencies in the production chain,
areas with bloated costs such as transportation to the factory, ship handling costs and persistently low
average field productivity remain to be tackled to achieve a meaningful transformation of the industry.








CENTRAL BANK OF BELIZE


Approximately 95.0% was processed, 2.5% went
into fresh fruit exports and 2.5% was rejected at
the factory.


Notwithstanding a higher rejection rate (2.5%
versus 1.7% in 2002/2003), citrus deliveries
surged to 6.4mn boxes. Deliveries of orange
were up by 22.3% to 4.9mn boxes while
grapefruit deliveries grew by a healthy 37.2% to
1.5mn boxes. The good outturn was attributable
to favourable weather as well as improved usage
of field inputs. The Mexican fruit fly control
programme, which involved 48 growers, is also
believed to have been a major factor in boosting
grapefruit yields.

Citrus juice prices weakened substantially during
the year in response to large, global inventories
and good harvests in key producing countries
such as Brazil and the United States. The final
price payable for orange consequently declined
by 13.6% to $0.88 per pound solid (ps),
equivalent to a box price of $5.03 as compared
to the industry average of $5.90 in the previous
year. However, growers actually received $0.94
per ps, the $0.057 overpayment being originally


/


ANNUAL REPORT 2004


treated as a prepayment against deliveries for the
2004/2005 crop. In a later move, it was agreed
that deductions of this prepayment will be
converted to shares in Citrus Products of Belize
Limited, enabling growers to be individual
shareholders in addition to their interests as
members of the Citrus Growers Association and
its investment company. The bearish market for
citrus juices also led to a 16.2% decline in the
grapefruit price to $3.84 per box.



Banana

After a sluggish start caused by heavy rains and
low temperatures in the early part of the year,
banana output rebounded with favourable
weather and productivity improvements that
were facilitated by EU grant assistance. Output
totalled 4.3mn boxes, compared to the 4.0mn
boxes achieved in 2003.

In January, 5,728.7 acres were under production,
another 393.4 acres contained plantilla (trees too
young for h i- -'i2, 10 acres were ready to be
planted and an additional 26 acres were
earmarked for expansion. In December, total


Table III.3: Citrus Fruit Deliveries


Deliveries ('000 boxes) 5,350 5,124 6,426
Oranges 4,119 4,046 4,947
Grapefruits 1,231 1,078 1,479
Source: Citrus Grow ers Association









DOMESTIC PRODUCTION, PRICES AND EMPLOYMENT


acreage under banana cultivation was 6,135.8 acres,
including 5,707.6 acres under full production and
428.2 acres under plantilla.


With higher price incentives during the first half of
the year, growers shifted 52.0% of annual
production to this period, compared to 45.8%
during the first half of 2003. Average yields also
improved from 707 boxes per acre to 761 boxes
per acre, influenced in part by better field
practices as well as greater marketing flexibility
with shipping volumes.


Papaya


Despite facing stiff competition from other
major producers such as Mexico and Brazil,
Belizean papayas remained competitive due to
superior fruit quality and the country's
proximity to the US market.


During 2004, output of papaya surged as the area
under cultivation rose to 1,300 acres, almost double
the harvestable acreage of the previous year.
Production remained centred in the Corozal
District with the Cayo District accounting for
only 44 acres. Approximately, 1,056 acres were
under large papaya, which have now become the
mainstay of the industry. The remaining acreage
was devoted to the small solo papaya with
continuing efforts being made to identify a
variety that is of high quality and has a longer
shelf life.


Other Agricultural Production


Except for a few crops, production of basic grains,
vegetables and fruits contracted in response to
adverse weather conditions (prolonged drought


Chart III.1: Banana Acreage


January 2004


To be
Plantilla T
393 Planted
393 acres
10 acres


SProducing
5,729 acres


December 2004


Plantilla
428 acres


Producing
5,708 acres








CENTRAL BANK OF BELIZE


/


ANNUAL REPORT 2004


during the growing season and excessive rain during
the harvest period), proliferation of diseases/pests
and deficiencies in land preparation.

Despite a 9.9% increase in acreage, corn output was
down by 11.0% to 74.8mn pounds. Sorghum also
fell by 11.0% to 18.0mn pounds even though the
acreage harvested expanded by 50.8% (from 5,977
acres to 9,016 acres). A decline in yields and acreage
planted combined to reduce rice output by 16.0%
to 23.5mn pounds and declines in the production
of various beans ranged from 14.0% to 31.0%.
Reports are that the soybean crop was severely
affected by drought and pests to the point where
harvested acreage shrank by 77.0% (from 2,602
acres in 2003 to 600 acres in 2004) and output
plummeted by 80.0% to only 0.7mn pounds.

Most of the positive harvest growth in vegetables
came from crops specifically targeted for
expansion to meet domestic demand such as Irish
potatoes, celery, broccoli and cauliflower.
Except for Irish potatoes and ginger, all root
crop production declined. On the other hand,
the ready availability of a market for pineapple
with the resumption of pineapple juice
processing and the continued commercialization
of cashew helped to boost output of these two
crops.

Livestock performance was mixed. Cattle
dressed weights increased by 20.0% to 5.9mn
pounds and sale of live cattle to Guatemala more
than doubled to 2,804 heads. Milk production also
rose by 5.0% to 8.0mn pounds and eggproduction


increased by 7.0%. On the down side, dressed
weights of pigs and poultry declined by 25.0% and
4.0%, respectively. Honey yields also decreased by
29.0% to 0.08mn pounds.

Marine Products

Bolstered by higher output of white-farmed
shrimp, lobster and conch, fisheries production
rose by 2.8mn pounds to 26.4mn pounds.

While output of white-farmed shrimp grew by
12.3% to 25.0mn pounds, the sea shrimp harvest
fell slightly to 0.1mn pounds. Production of
conch increased by 18.5% to 0.6mn pounds and
lobster production was also up by 2.2% to 0.6mn
pounds. Whole fish production remained stable
at 0.02mn, while fish fillet gained significance as
large scale tilapia production came on stream.


Forestry, Mining and Construction

A long dry season and the continuation of small
scale operations fp ii .i.ul. 1!- in the southern part
of the country) to retrieve logs from trees
damaged by Hurricane Iris in 2001 boosted
output from forestry by 8.1% during 2004.

At 4.6%, growth in construction was strong, spurred
on by various projects among which were the
marine parade boulevard, the Chalillo hydroelectric
dam, two new casinos at the northern border as
well as various other residential and commercial
buildings.








DOMESTIC PRODUCTION, PRICES AND EMPLOYMENT


With demand for quarrying and mining materials
driven by construction projects, the mining sub-
sector expanded by 4.9%. While royalties (charged
on the mining of more than 16,000 cubic yards of
material per annum) collected from mining
operations decreased, the amount of applications
for permits (required for the extraction of less than
16,000 cubic yards per annum) went up.


Manufacturing

Sugar and Molasses

Factory operations commenced on December
1st and closed on June 28th after 214 harvest days.
With sugarcane deliveries up 7.1%, sugar
production grew by a healthy 11.6% to 116,515
long tons. Notwithstanding a lower sugar
content in the crop and persistently high
incidence of mud in deliveries, adjustments in
factory procedures (such as an improved
maintenance schedule) pushed up the sugar
extraction rate from 91.2% in 2003 to 94.6% in
2004. With the factory generally performing
more efficiently, the cane/sugar ratio improved
by 4.0%, moving from 10.28 to 9.87 tons of
sugarcane to produce one ton of sugar. Factory


time efficiency, on the other hand, fell by 1.0%,
due to a brief factory close-down caused by staff
industrial action that was speedily resolved.

Storage capacity was expanded to accommodate
a higher production of'. 1,.- .. sugar targeted to
the CARICOM market. In other developments,
the improvements in mill extraction and sugar
recovery rates reduced losses of sucrose to the
factory's by-products and as a consequence
molasses output fell by 4.3% to 41,117 long tons.

Citrus Juices and Pulp

A 25.4% surge in fruit deliveries pushed juice
production up by 24.0% to 35.2mn pound solids
for the 2003/2004 crop year. The slightly lower
proportional increase in juice out-turn was
attributable to lower average pound solids per
box of fruit with orange declining from 5.78ps
to 5.73ps and grapefruit yielding 3.87ps
compared to the 3.96ps realized in the previous
crop.


Most deliveries went into the production of
orange and grapefruit concentrate, which remained
the industry's mainstay. Orange concentrate


Table III.4: Sugar and Molasses Production


Sugar Processed (long tons) 111,312 104,433 116,515
Molasses Processed (long tons) 40,947 42,944 41,117
Performance
Factory Time Efficiency 93.28 93.11 92.27
Cane Purity (%) 85.08 85.08 85.09
Cane/Sugar Ratio 10.34 10.28 9.87
Source: Belize Sugar Industries Ltd.








CENTRAL BANK OF BELIZE


Table III.5: Production


/


of Citrus Juices and Pulp


Production ('000 ps) 27,482 28,381 35,202
Orange Concentrate 22,506 23,067 27,902
Grapefruit Concentrate 4,348 3,728 5,432
Not-from-concentrate (NFC) 627 1,586 1,868
Production ('000 pounds)
Pulp 459 366 626
Sources: Citrus Products of Belize Ltd.


production increased by 21.0% to 27.9mn ps while
that of grapefruit expanded by an even more
substantial 45.7% to 5.4mn ps as fruit volumes
increased with the success in controlling the Mexican
fruit fly. Production of freeze concentrate
continued, albeit on a much smaller scale than in
previous years. Output of not-from-concentrate
(NFC) juices also increased 17.8% to 1.9mn ps
(0.5mn ps of orange and 1.4mn ps of grapefruit).


Pulp production, most of which was orange,
amounted to only 0.6mn pounds as demand
slackened in the European market and the

processor continued to deal with quality issues.


Other Manufacturing Production


Output of beer, cigarettes and fertilizer fell while
that of rum and soft drinks expanded during
the year. The overall decline in crop production,
particularly grains, for the domestic market affected
fertilizer demand and contributed to the 15.8% fall
in output to 22,283 metric tons. While beer and
cigarette production decreased by 6.7% to 1.8mn


gallons and 3.1% to 167,425 pounds, respectively,
rum output grew by an impressive 38.1% to 23.5mn
gallons as the market expandedwith the larger influx
of tourists. Soft drink output also continued its
steady yearly increase, growingby 1.2% to 19.7mn
liters, a growth more influenced by population
increases than the tourist market.



Tourism



After three years of stagnant growth,
international tourism rebounded in 2004 with
the majority of tourist destinations reporting
positive results and quite a few registering record
high arrivals. The recovery of the world
economy, and in particular the US and major
European tourist markets, together with the
strengthening of Asian economies, contributed
to a very good year for global tourism.



Reflecting these worldwide trends, tourism activity
in Belize maintained an upward trend as arrivals of
stay-over visitors and cruise ship passengers rose
by 5.0% to 219,657 and 49.7% to 766,292,
respectively.


ANNUAL REPORT 2004








DOMESTIC PRODUCTION, PRICES AND EMPLOYMENT


Burgeoning demand led to an increase in air flights
to the country and accounted for almost all the
increase in overnight visitors. Air seat capacity
expanded with the inauguration of Delta Airline
flights from Atlanta and Tikal Jets flights from
Guatemala City The 6.8% and 0.8% increase in air
and land arrivals, respectively, more than
compensated for a 3.8% decline in sea arrivals.

The US remained the major market, accounting for
62.7% of all tourists and for virtually all the growth
in overnight visitors. While the EU remained the
second largest market for Belize's tourism product
with 14.1% of all visitors, arrivals from this source
fell by 2.6% possibly due to high oil prices and
slower growth in the euro zone economies.
The strong growth in cruise ship tourists continued
with disembarkations rising 49.7% to 766,292, as
the number of port calls increased markedly from
315 in 2003 to 406 in 2004.


Prices

Various factors combined to raise the cost of
living during the year. Political instability in
key oil producing countries such as Nigeria,
Saudi Arabia and Iraq pushed petroleum prices
up to historically high levels and raised i. n
costs overall. Another cost push came from an
increase in taxation, principal among which was
a 1.0% increase in the sales tax. Also contributing
to the upward pressure on prices was a 3.8%
increase in the cost of imported goods as proxied
by the US export price index (up to November
2004) and higher freight rates. Belize continues
to get approximately half of its imports from
the USA and so its inflation rate closely parallels
that of the USA. The cumulative effect was a
3.1% rise in inflation during the year with average
prices in all categories of goods rising except for
'PersonalCare' where prices fell by 0.9%.


Table III.6: Bonafide Tourism Arrivals & Expenditure


Stayover Arrivals 177,120 209,179 219,657
Air 127,305 153,637 164,073
Land 41,793 47,100 47,463
Sea 8,416 8,442 8,121

Cruise Ship Arrivals 271,737 511,924 766,292
Expenditure by stay-overs ($mn) $173.4 $182.1 $191.2
Expenditure by cruise visitors ($mn) $24.2 $43.4 $65.0
Sources: Immigration Department, Belize Tourism Board, Central Bank of Belize








CENTRAL BANK OF BELIZE


/


ANNUAL REPORT 2004


Box 2: Tourism Developments and Prospects


Developments in 2004

In line with the positive turnaround in global tourism, Belize's tourism industry performed well
during 2I 4. Continued marketing focus on the US, the country's major market, capitalised on its
strengthening economy and contributed substantially to boosting stay-over arrivals by 5.(0" ,, while
cruise arrivals continued to surge as the number of port calls increased.


During 2I 4, attention was focused on further developing the tourism product through infra-
structural and human resource enhancements. While the Tourism Development Project that aimed to
improve thirteen Mayan sites came to an end, work continued with NICH funding to construct on-
site facilities such as bathrooms, gift-shops and parking lots at the various archaeological sites. The
terminal at the Phillip Goldson International Airport was expanded to accommodate two new airlines
servicing the country. Another major milestone was the completion of the Marine Parade Boulevard
in Belize City to relieve the congestion caused by tour buses servicing the Tourism Village. The
government also constructed a docking facility in San Pedro, paved the entrance road to Altun Ha
and started the resurfacing of the Caye Caulker airstrip. Although the training project that was
funded by the IDB ended during the year, the programme was continued under the auspices of the
Belize Tourism Board (BTB).

The year also saw an increase in the air lift capacity to Belize with the additions of more flights
by existing airlines as well as two new entrants. As of December, Delta airlines started to operate a
weekly flight to Belize from its Atlanta hub. In October, Tikal Jets, a Guatemalan carrier, started to
provide two weekly flights between Guatemala City and Belize, a move that could facilitate easier
European access.

A welcome addition to the attractions available to tourist and locals was the re-opening of the
Bliss Centre for the Performing Arts in March 21 '4 and the inauguration of a Garifuna museum
in Dangriga.

Prospects:

During 2005, major developments in the tourism industry are expected to include:
a) Increased outreach to Europe and focus on Central American markets
b) Completion of the paving of the Caye Caulker airstrip
c) Start of the paving of the Placencia road
d) Commencement of works at the Carnival/Port of Belize project
e) The expansion of the runway and apron at the Phillip Goldson International Airport
f) The opening of two casinos at the Mexican border
g) Passage of legislation specifically for the cruise industry and to regulate the time-share market
h) Revision of tour operators/tour guides legislation
i) Construction of new hotels
Source: Belize Tourism Borad









DOMESTIC PRODUCTION, PRICES AND EMPLOYMENT


The largest increase was in 'Transport and
Communication', which rose by 5.5% mostly
due to an increase in the price of fuel at the pump
that pushed up transportation costs, higher fees
for drivers' licenses and airfares. Rent, Water, Fuel
and Power'rose by 5.2% mostly due to higher water
rates (the utility company implemented an average
17.0% increase in water rates in April, 2004) and
an escalation in butane/cooking oil costs.
Another important factor was the doubling of the
business tax (from 1.5% to 3.11".. on rental of

properties costing more than $800 per month.

The next largest increases were in 'Food, Beverage
and Tobacco' (2.5%), 'Recreation, Education and
Culture' (1.V'.. and '.W Care' (1."


Employment


The labour force increased by 5.9% to 108,491
individuals during the year, while the employed


labour force increased by 7.5% to 95,911. The rate
of unemployment consequently declined from
12.9% to 11.6%. The largest growth in jobs was in
the primary and service sectors. In the primary
sector, the surge in agricultural export production,
particularly sugar, citrus and banana, accounted for
some 15.5% of the new jobs created. Agriculture
therefore maintained its position as the largest source
of employment, accommodating some 18.9% of
the employed labour force.


Within the secondary sector, a 13.1% increase in
manufacturing jobs occasioned in part by the spurt
in export manufacturing was offset by declines in
the utility and construction sub-sectors. In contrast,
all tertiary activities recorded growth except for
'GeneralGovernmentServices. The boom in the tourist
industry led to the greatest increase in new job
opportunities, making it the fourth largest employer
and directly accounting for one out of every nine


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


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


346.6 0.8 0.6 1.1 0.8 2.5
92.0 1.1 0.1 -0.4 -0.3 0.4
167.0 1.7 0.1 0.3 1.2 5.2
85.3 0.2 0.4 -0.2 -0.2 0.1
20.1 -0.4 1.5 -0.1 0.2 1.0
170.1 1.2 2.6 1.8 0.1 5.5
80.4 0.4 0.1 0.6 0.0 1.3
37.9 -0.5 -0.1 0.1 0.2 -0.9
1000.0 0.9 0.8 0.8 0.5 3.1









CENTRAL BANK OF BELIZE


workers. 'Wholesale, retail trade and repair'was the
second largest job market (after agriculture) with
16.9% of the employed population and second in
line after tourism for new job creation. With
Government reducing employment by not filling
vacancies created through natural attrition, the civil
service contracted by 8.7% to 9,885 persons. In
contrast, employment in "Community, Social and
Personal Services" expanded by 25.0%, more than


/


ANNUAL REPORT 2004


With the size of the labour force growing at almost
the same rate as the working-age population, the
labour force participation rate remained virtually
unchanged at 60.3% between April 2003 and April
2004.


compensating for the aforementioned reduction.









Table III.8: Employed Labour Force by Industrial Group




Agriculture nec 18,533 17,120 18,156
Forestry, logging, saw milling 778 864 1,010
Fishing and fish processing 1,195 2,120 2,555
Mining and Quarrying 211 360 401
Manufacturing 6,220 6,724 7,607
Electricity, gas & w ater 648 778 768
Construction 7,698 7,489 6,595
Wholesale, retail, repair 14,073 14,716 16,226
Tourism (Hotels & Restaurants) 9,259 9,400 11,062
Transport and Communication 3,037 3,298 3,683
Financial intermediation 1,545 1,518 1,939
Real Estate, renting 1,457 1,741 2,123
General Government Services 8,981 10,309 9,885
Community, Social & Personal Services 11,426 10,822 13,532
Work Abroad* 0 1,676 157
Activities not classified elsew here 169 287 212
Total, All Sectors 85,230 89,222 95,911
Source: Central Statistical Office
Covers w ork abroad and in 2003, w workers in commercial free zone as w ell.










MONETARY AND FINANCIAL DEVELOPMENTS


Growth in the broad money supply (M2)
accelerated from 3.5% to 13.4%, the increase being
largely driven by a 20.7% expansion in net domestic
credit. The latter included an 11.1% increase in
private sector loans and a more than doubling in
net credit to Central Government and loans to
statutory bodies. Also contributing to the monetary
expansion were BSSB deposits of some '-4.Omn
received from its sale of BTL shares to a foreign
investor and a partial shift of EPZ funds back
onshore subsequent to the amendment of the EPZ
legislation. Even so, net foreign assets shrank by
36.1% ($48.1mn) as the upward surge in credit
(mostly for non-export oriented activity) coincided
with increased outflows for profit repatriation
and external debt payments. The Central Bank


consequently took action in the beginning of
December to relieve the pressure on the external
reserves by raising commercial bank primary and
secondary reserve requirements by 1.0% in
consonance with Central Government initiatives to
tighten its fiscal stance.

Money Supply

Following a marginal increase in 2003, narrow
money expanded robustly with currency held by
the public and demand deposits up 11.6% and
13.0%, respectively. Isolated to the first and fourth
quarters, the expansion in demand deposits was
largely concentrated in holdings of individuals and
business enterprises. The upward movement partly
reflected the reclassification of some $17.0mn from


Table IV.1: Factors Responsible for Money Supply Movements


$mn


Net Foreign Assets 256.3 133.3 85.1 -48.1
Central Bank 223.3 163.4 103.7 -59.7
Commercial Bank 33.0 -30.1 -18.6 11.6


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


Central Bank Foreign Liabilities (Long-term)


Other Items (net)

Money Supply M2


951.2
30.4
29.5
891.3

18.5

125.6


1,130.0
90.7
21.2
1,018.1


1,353.5
175.3
47.0
1,131.2


223.6
84.6
25.8
113.2


7.5 2.5 -5.0


154.7


187.8


1,063.4 1,101.1 1,248.3


33.5

147.0









CENTRAL BANK OF BELIZE A


Chart IV.1: Ratio of M2 to GDP


1M4 1B6 1eB 2DO
NM CPCWoBSff-- 9C1ap


savings to demand deposits early in the year and an
$8.4mn increase in foreign currency deposits held
by residents.


Growth in quasi-money also accelerated (from 4.9%
to 13.7"'., reflecting a 20.3% expansion in time
deposits. More than half of this occurred during


Chart IV.2: Annual Change in Net
Foreign Assets of Commercial Banks &
Central Bank


0
97 S CO 01 C 2
-33^ooc~


the second and third quarters when proceeds from
the BSSB sale of shares were received. The 3.5%
decline in savings deposits was due to commercial
bank reclassifications after adding the checking
account feature to a number of existing savings
accounts.


Table IV.2: Money Supply


($mn)


Money Supply (M2) 1,063.4 1,101.1 1,248.3 147.0


Money Supply (M1) 358.1 361.1 406.7 45.6
Currency with the Public 106.8 103.3 115.3 12.0
Demand Deposits 251.3 257.8 291.4 33.6


Quasi-Money 705.3
Savings Deposits 216.8
Time Deposits 488.5
*Includes Non-Residents Foreign Currency Time Deposits of $36.0mn


740.0
205.5
534.5


841.6
198.3
643.3


101.4
-7.3
108.7


ANNUAL REPORT 2004








MONETARY AND FINANcIAL DEVELOPMENTS


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


$mn


Net Foreign Assets 256.3 133.3 85.1 48.1

Central Bank 223.3 163.4 103.7 -59.7
Foreign Assets 229.3 169.2 106.5 -62.7
Foreign Liabilities(Demand)* 6.0 5.8 2.8 -3.0


Commercial Banks 33.0 -30.1 -18.6 11.6
Foreign Assets 113.5 119.5 129.3 10.6
Foreign Liab. (Short-Term) ** 80.5 149.6 147.9 -1.0
* Does not include Central Bank Long-term Foreign Liabilities of $2.5mn
** Does not include Non-residents Foreign Currency Time Deposits of $36.0mn held with Commercial Banks.


Net Foreign Assets

With financial inflows slowing somewhat, the net
foreign assets of the banking system contracted by
$48.1mn to a ten-year low of $85.1mn. By year-
end, net holdings of the Central Bank had fallen by
36.6% to $103.7mn while the commercial banks'
position improved from negative $30.1mn to
negative $18.6mn.


The downward shift in Central Bank foreign asset
holdings reflected inflows and outflows of
$363.2mn and $426.0mn, respectively. Loans
accounted for 32.2% of the former, notable among
which were disbursements from the International
Bank of Miami and ROC/Taiwan. Sugar export
proceeds accounted for $67.9mn (19.2".. and
$59.1mn (16.7".. was purchased from the local


Table IV.4: Net Domestic Credit


($mn)


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


126.8 220.5 246.8 26.3
63.8 165.5 165.3 -0.2
63.0 55.0 81.5 26.5

96.4 129.8 71.5 -58.3


30.4
29.5
891.3
951.2


90.7
21.2
1,018.1
1,135.1


175.3
47.0
1,131.2
1,353.5


84.6
25.8
113.1
223.5


v .








CENTRAL BANK OF BELIZE A


commercial banks. Receipts from BSSB sale of its
investment accounted for 15.3% while the
remainder consisted of grants, revaluation gains and
interest earnings. Outflows were again dominated
by sales of some $288.7mn to Central Government
and statutory bodies, the bulk of which were for
external debt payments. Sales to the commercial
banks amounted to $103.1mn, a 27.3% decline,
while BEL received $28.3mn for debt servicing and
fuel purchases. Short-term foreign liabilities fell by
slightly over 50.0% principally due to deposit
withdrawals from the EU Banana Support
Programme and a reduction in the CARICOM
Bilateral Clearings account balance.

With the external current account narrowing
somewhat, the commercial banks were able to
record an $11.6mn improvement in net foreign
asset holdings although remaining in an overall
negative position at the end of the year. After
expanding by 85.0% in 2003, the banks' short-term
foreign liabilities declined slightly as a $13.0mn
expansion in IBC demand deposits was more than
offset by loan repayments to foreign affiliates and

head offices.


Net Domestic Credit


Funding for transactions involving real estate, the
private utilities, construction and the government
dominated commercial bank lending in 2004. Over
56% of net commercial bank loan disbursements
were for tertiary sector activities led by real estate
with $33.1mn and tourism with $11.9mn. The


Chart IV.3: Sectoral Distribution of Out-
standing Commercial Banks Loans


a30
253

o
|1W
"100

0-
9)
-


L I I .1111I
S.a a. C -7
oX .= 5 : 0
CU ('0 0
22 0


secondary sector accounted for 40.2% of net loan
disbursements. The latter included $33.0mn for the
private utilities, which have been significantly
increasing their use of local funding over a three
year period, and $18.7mn that targeted commercial,
residential and infrastructural construction projects,
in that order. At $9.4mn (7.(" ;I, the primary sector
accounted for the smallest share with loans being
mainly allocated for banana cultivation and mining
& exploration activity while net repayments were
made by citrus growers and producers of forestry
and marine products.

With external debt servicing requirements taking
centre stage, net credit to Central Government more
than doubled to $175.3mn. The Central Bank
accounted for $64.6mn or some 76.4% of the total
increase that largely consisted of Government's
withdrawals from deposit holdings and, to a lesser
extent, an increase in the overdraft balance. Net
financing from commercial banks rose by $20.0mn


ANNUAL REPORT 2004








MONETARY AND FINANCIAL DEVELOPMENTS


Chart IV.4 : Quarterly Change in Excess
Liquidity







O



4,



aQ-'C2 Cg'C C' QC V QI-'CB C(-'C3 C'CB QV
S5B6ElqJdars

with new disbursements and an $11.0mn increase
in Treasury Bills purchased in the secondary market
beingpartly offset by a $6.6mn increase in deposits.

With Central Bank loans to DFC accounting for
about 90.0% of the increase, loans to statutory
bodies rose by $25.8mn in contrast to the $8.3mn
decline in the previous year.


Chart IV.5 : Quarterly Change in Excess
Cash Reserves


C22M3 CBM QV3 Q=4 C2204 o B
IF Brscah ma3r]


Liquidity


After a modest $5.5mn increase in the first quarter,
excess liquidity received a sharp upward boost,
peaking at $107.3mn as funds from the BSSB sale
of shares were injected into the system in May/

June. Taking advantage of this, the commercial
banks sharply increased credit in the third quarter


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


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


304.2
27.4
64.8
91.7
33.1
87.2
243.4
60.8
64.4
60.8
3.6


303.4
29.8
79.6
74.0
19.8
100.2
252.2
51.2
79.9
63.1
16.8


324.2
33.7
81.7
102.9
25.9
80.0
237.9
86.3
84.7
83.3
1.4


20.9
3.8
2.1
28.9
6.2
-20.1
-14.3
35.2
4.8
20.2
-15.4








CENTRAL BANK OF BELIZE A


Box 3: Statutory Liquidity


eliciting a $32.5mn contraction in their net liquidity.
The downward trend was shortlived, however, with
statutory liquidity rising in each of the last three
months of the year fueled by Central Bank financing
of the fiscal deficit and the practice of classifying
loans to the government as approved liquid assets.
In the beginning of December, the Central Bank
therefore raised the liquid asset and cash reserve
ratios from 19% to 21 '.. and from 6% to 7%,
respectively, to prevent a further growth spurt in
lending and maintain stability in the foreign exchange
market. By year-end, excess statutory liquidity stood
at $86.3mn, a year on year increase of 68.5%, with
commercial bank holdings of approved liquid assets
rising by $20.9mn relative to a $14.3mn fall in
required holdings. Meanwhile, excess cash reserves
subsided to $1.4mn after rising to $16.8mn in the
last quarter of 2003 in tandem with the build-up in
funds payable to external creditors. The clearing
of these commitments brought primary reserves
back down to a level that is more typical ofbalances
held by the commercial banks. Developments
included a $4.8mn rise in daily average holdings


while the required level of cash reserves rose by
$20.2mn, the bulk of the latter occurring in
December when the cash reserve requirement was
increased.

Interest Rates

A more competitive environment and the decision
ofEPZ's to continue holding substantial deposits
offshore caused a further narrowing of the
weighted average interest rate spread by 60 basis
points to 8.8%, the third consecutive year in which
the spread has narrowed. The latter follows a 15-
year period in which the spread had been on a
generally upward trend. While the weighted average
deposit rate rose by 30 basis points (from 4.9% to
5.2" .. over the year, competition among the banks
and favourable rates on loans to the public sector
pushed rates downward by a further 20 basis points
to 14.0%. The downward movement was however
not reflected in commercial and residential
construction loans which saw rate increases of 10
and 20 basis points, respectively, over the year.


Among the assets that commercial banks may hold to satisfy the statutory reserve requirement are several that
do not meet the acid test of quick and easy convertibility and which therefore dilute the measurement of the
banking system's true liquidity. With a view to increasing the transparency and accuracy of the liquidity
measurement, the Central Bank removed some $50.0mn in residential mortgage loans from the list of approved
assets inApril 2004. The reserve requirement was simultaneously lowered by 5% (from 24% to 19% of average
deposit liabilities) to ensure that the effect on actual liquidity was neutral. Several commercial bank loans to the
Government have and continue to qualify for inclusion. When these are removed from the list the effect would
be an additional $40.5mn reduction in the excess liquidity of the banks.


ANNUAL REPORT 2004









MONETARY AND FINANcIAL DEVELOPMENTS


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

12 7


86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04



Box 4: Chronology of Recent Statutory Developments


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

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

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

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











CENTRAL GOVERNMENT OPERATIONS & PUBLIC DEBT


Central Government Operations


A marked reduction in the fiscal deficit occurred in

the 2004 calendar year as revenues rebounded and

capital expenditure was curtailed. With total revenue

and grants rising by 15.5% to $523.6mn while

expenditure contracted by 2.7% to .4.'-. )mn, the

overall deficit declined by nearly 41.4% to$125.3mn

(6.0% of GDP). Converesly, there was a worsening

of the current balance as strong growth in current

expenditure continued to outpace the increase in

current revenues. Financing for the fiscal deficit

came mainly from the domestic banking system as


a significant proportion of the funds received from

external sources was used for re-profiling and

servicing of the external debt.


After a marginal decline in 2003, current revenue

rose by 9.4% to $462.0mn (22.3% of GDP) as a

series of tax 'rebalancing' measures were

implemented in January. The strongest growth

(some 22.7" ..; occurred in tax revenues from goods
and services, a substantial portion of which was

the result of a 1.0% increase in the sales tax. Robust
growth also occurred in revenues derived from

taxes on'income and profits' and, to a lesser extent,

on international trade. Capital revenue rose


Table V.1: Government of Belize Revenue and Expenditure


Current Kevenue
Tax Revenue
Non-Tax Revenue
Current Expenditure
CURRENT BALANCE
Capital Revenue
Capital Expenditure (Capital II local sources)
OPERATING SURPLUS
Total Grants & Debt Service Receipts
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


-3.7 -10.9 -6.0 4.3


42b.B
354.0
71.7
333.4
92.3
67.5
108.8
51.1
31.7
524.9
260.3
26.0
593.8
-68.8
-42.8
68.8
-220.9
278.3
11.4


422.2
370.2
52.0
393.0
29.1
24.8
89.6
-35.7
6.4
453.4
273.9
2.5
667.0
-213.6
-211.1
213.6
-62.4
276.7
-0.7


4b2.U
419.3
42.7
468.0
-6.0
26.5
59.7
-39.2
35.2
523.6
180.9
0.0
648.9
-125.3
-125.3
125.3
-39.4
164.9
-0.3


39.8
49.1
-9.3
74.9
-35.1
1.6
-30.0
-3.5
28.8
70.2
-93.0
-2.5
-18.1
88.3
85.9
-88.3
23.0
-111.9
0.5








CENTRAL GOVERNMENT OPERATIONS & PUBLIC DEBT


Chart V.1: Central Government's Development Expenditure

100%
90%
80% -
70%
60%
50%
40%
30% Z
20%
10%


2001 2002 2003 2004
SCapital II Capital III


modestly by $1.6mn to $26.5mn while a more than
five-fold increase was recorded in grants (from
$6.4mn to 4.1mn) due to a significant rise in
official transfers from ROC/Taiwan.

At $468.0mn, current expenditure was 19.1%
higher on a year on year basis with all major
categories of current outlays increasing. The most
notable growth was in interest payments on the
public debt, which rose by $44.1mn (56.9%) to
$121.5mn while outlays on salaries and pensions
were up by 11.4% and subsidies by 15.8%.


During the year, capital expenditures were sharply
rolled back in the effort to bring the fiscal deficit to
a more sustainable level. The result was a 34.0%
reduction that brought the total to $180.9mn (8.7%
of GDP). Some 24.4% of these outlays were
allocated to work on infrastructure projects such as
the Orange Walk By-pass, the Mussel Creek/Willows
Bank road, the Marine Parade Boulevard, the
Southern Highway, municipal roads/drainage
projects and land development and acquisitions.


Roughly another 16.0% was devoted to the
University of Belize, strengthening of vocational &
technical training, the Social Investment Fund (SIF),
prison custodial services and payments to early
retirees from the civil service. The balance covered
a multiplicity of small projects ranging from tertiary
level scholarships to rehabilitation of highways.


Financing for the fiscal deficit came largely from
foreign sources as external loan disbursements
totalled .4 2.9mn during the year with $248.1mn
being applied to amortization. In addition, $130.0mn
was paid to clear DFC's Caribbean mortgage
securitization liabilities.



Central Government's Domestic Debt


Central Government's domestic debt rose by 8.5%,
reflecting a $15.1mn rise in overdraft financing
($8.4mn from the Central Bank and $6.7mn from
commercial banks) and $9.0mn in commercial bank
term loan disbursements while amortization









CENTRAL BANK OF BELIZE
A


ANNUAL REPORT 2004


Table V.2: Central Government's Domestic Debt


$mn

Loans & Advances 35.2 119.8 141.9
Treasury Bills 100.0 100.0 100.0
Treasury Notes 24.0 24.0 24.0
Defence Bonds 15.0 15.0 15.0
Debentures
Total 174.2 258.8 280.9


payments totalled $1.9mn. These increases pushed
up the domestic debt to GDP ratio from 13.6% to
13.6%.


The largest principal payments were in respect of
the GOB/US debt for nature swap agreement
($1.lmn) and to the DFC ($0.5mn). Other
repayments were to the Belize Bank Limited and
to the BSSB for housing loans.


In secondary trading, the commercial banks
purchased $11.0mn worth of Treasury Bills,


including $8.8mn sold by the Central Bank and
$2.2mn from other institutions.


Interest payments summed to $16.8mn with
$8.6mn being paid on the overdraft balance with
the Central Bank and a total of $6.1mn going to
holders of government securities. The latter
included $2.6mn for Treasury Bills, $2.2mn for
Treasury Notes and $1.3mn for Defense Bonds.
The balance was shared among DFC, the Belize
Bank and the GOB/US debt for nature swap
account.


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


180.0
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0


Central Bank Corrnercial Social Security Other
Banks


S2002 2003 2004








CENTRAL GOVERNMENT OPERATIONS & PUBLIC DEBT


Table V.3: Public Sector External Debt by Source


iiaterai L-t+t.4 00 i zO. o.z i.z zoo.zL
Multilateral 354.5 45.4 19.9 12.7 2.4 382.4
Commercial Banks 897.7 353.8 214.2 86.4 0.0 1,037.3
Suppliers Credit 8.8 0.0 2.7 0.6 0.0 6.1
Total 1,505.8 433.4 260.7 112.9 3.5 1,682.0


External Public Sector Debt

In 2004, the public sector's disbursed outstanding
debt rose by $176.2mn (11.7".., to $1,682.0mn
(81.2% of GDP). Disbursements (almost all of
which were to Central Government) summed to
.411.4mn. Principal payments amounted to
$260.7mn of which $190.7mn was assigned for
loan reprofiling. When the latter is excluded, debt
service payments amount to $182.9mn, raising the
external debt service ratio from 13.6% to 18.1%.


Approximately 82.0% of disbursements to Central
Government were from commercial creditors.
Included among these were $157.9mn from CMFS
for the re-profiling of TIBoM loans, $139.2mn
from the Royal Merchant Bank to refinance the
Caribbean securitization liabilities of the DFC
and $56.7mn from TIBoM for general government
financing. Bilateral lenders (principally ROC/
Taiwan) extended ^4. lmn for budget support and
infrastructural activities. Disbursements from
multilateral creditors totalled $41.9mn with CDB
providing $26.0mn to finance various projects,
among which were the Caribbean Court ofJustice
and the Orange Walk By-pass, and the IDB lending
$15.1mn for hurricane rehabilitation and


tourism development projects. CDB loans to the
financial public sector tapered off further to $0.5mn
during the year.


Central Government amortization payments totalled
$248.1mn with $209.1mn (85.5%) going to
commercial creditors. The latter included TIBoM,
which received $192.7mn, a substantial part of
which was used for debt reprofiling. Bilateral and
multilateral creditors received $22.8mn and
$14.5mn, respectively, and $1.6mn went to
commercial suppliers. Payments of $10.5mn by the
financial public sector were shared among
commercial (59.0%), multilateral (37.1'..; in.
bilateral ,i .'- .. lenders. Meanwhile, some $2.2mn
in non-financial public sector loan amortization was
in respect of loans from Kuwait and CIBC Bank
& Trust Company.


Interest and other payments on the external debt
rose by 35.2% to $112.9mn. Some 97.0%
($109.5mn) consisted of Central Government
payments, of which $86.2mn went to commercial
creditors that included such notables as Bear Steams,
TIBoM, Royal Merchant Bank,and Salomon Smith
Barney. These four received the combined sum of
$74.2mn. Bilateral and multilateral creditors









CENTRAL BANK OF BELIZE
A


ANNUAL REPORT 2004


Chart V.3: Sources of Public Sector External Debt


2002


2003


* Bilateral U Multilateral
0 Comrerdal Banks Suppliers Credt


received $12.8mn and $10.1mn, respectively. Interest
payments by the financial and non-financial public
sector summed to $2.4mn and $1.0mn, respectively.


The appreciation of the euro, sterling and dinar
against the US dollar caused the value of the external
debt to be increased by $3.5mn, including upward
adjustments of $2.3mn and $1.lmn for euro and
sterling-denominated loans, respectively.











FOREIGN TRADE AND PAYMENTS


During 2004, the external current account deficit

contracted by 12.1% to ^ '.4.7mn (17.6% of GDP)

as a reduction in the visible trade deficit, increased

inflows from tourism and current transfers eclipsed

rising payments for freight, profit remittances and

debt servicing. The deficit was largely financed by

net capital and financial inflows of $267.7mn that

consisted of foreign direct investments in the

telecommunication, electricity and tourism sectors

and additional loan disbursements. Financingwas also

provided through withdrawals of $62.7mn from

the official reserves, which at year end stood at

$106.5mn, the equivalent of 1.3 months of imports.


Merchandise Trade


A more substantial decline in imports relative to

exports caused a 16.0% contraction in the

merchandise trade deficit to $347.7mn (16.8% of

GDP) during the year. Total exports declined from

$631.0mn to $613.9mn as a reduction in Commercial

Free Zone (CFZ) sales overshadowed increased

earnings from domestic exports that were achieved

in the face of depressed international prices. Gross

imports declined by $83.2mn to $961.5mn with

imports for domestic consumption and the CFZ

down 6.7% and 14.7%, respectively. The latter was

induced by the fall off in cross border trade


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


5mmn


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


-a0O.z -4 I 4.V
-374.4 -413.7
53.0 79.2
-137.8 -171.0
94.1 90.6
22.9 3.0
280.7 368.7
50.9 -17.0
-10.9 -60.1
10.9 60.1


3.2
-19.7


2.1
-21.2


-347.7
107.0
-228.2
104.2
8.5
259.2
34.3
-62.7
62.7

1.3
-17.6









CENTRAL BANK OF BELIZE


Table VI.2: Balance of Payments MerchandiseTrade
($mn)

Goods Exports, f.o.b. 619.4 631.0 613.9 -2.7%
of which: Domestic Exports 316.7 381.4 408.3 7.1%
CFZ sales 298.6 236.8 218.9 -7.6%
Goods Imports, f.o.b. 993.8 1,044.7 961.5 -8.0%
of which: Free Circulating Area 789.2 877.7 819.0 -6.7%
CFZ 204.6 167.0 142.5 -14.7%
Merchandise Trade Balance -374.4 -413.7 -347.7 -16.0%


associated with the tightening of Mexican customs'

control and competitive gasoline prices in the

Mexican border town of Chetumal.


Domestic Exports


Even with price declines in key commodities that

restrained revenue growth for much of the year,

more sales to preferential or high valued markets

combined with increased volume drove up the

value of domestic exports by 7.1% to $408.3mn

by year-end.


Except for molasses and sawn woods, all export

commodities expanded with the largest increases

coming from sugar, garments, papayas and non-

traditional exports. Sugar receipts benefited from

an appreciation in the Euro to US dollar exchange

rate, a pre-shipment of EU Protocol sugar and the

successful marketing of increased volumes outside

the volatile world market. Earnings were up for

banana, garments and papayas as higher volumes

compensated for lower prices while both volume

and price improvements pushed up revenues from

citrus oils, pepper sauces and other miscellaneous


Table VI.3: Domestic Exports


Traditional Exports 302.3
Sugar 66.0
Citrus Juices* 81.8
Citrus Concentrate 67.2
Not-from-Concentrate 14.6
Molasses* 2.7
Bananas 33.5
Marine 69.8
Garments 30.6
Sawn Wood 2.6
Papayas 15.3
Non-traditional Exports 14.4
Total Exports 316.7
Source: Central Statistical Office
* Value of export shipment and not sales.


ANNUAL REPORT 2004


367.6
71.2
79.9
78.0
1.9
2.5
52.6
110.2
30.9
3.5
16.8
13.8
381.4


388.1
79.7
83.3
79.3
4.0
1.8
53.0
107.4
37.1
3.0
22.8
20.2
408.3












non-traditional exports. In other developments,

earnings of marine products declined as lower

shrimp prices overshadowed both an increase in

shrimp volume and higher prices for lobster and

conch. Revenue from sawn wood continued to be

depressed due to the increased share of lower

valued woods in the export mix.


Sugar and Molasses


Rebounding to 2000 levels, sugar exports rose by

8.7% to 107,102 long tons while earnings increased

by 11.9% to $79.7mn. Much of the revenue gain

was due to an 8.2% improvement in the US to

Euro exchange rate, a pre-shipment of Protocol

sugar to the EU and increased sales to the

CARICOM market. No sale of sugar to the

volatile, depressed world market occurred, a

milestone achievement for 2004.


The bulk (88.1".. of sales was to the EU and

CARICOM markets. Shipments of EU Protocol

sugar increased 12.4% due to the pre-shipment of


\FOREIGN TRADE AND PAYMENTS


some 5,886 long tons of the 2005 quota. On the

other hand, sales of Special Preferential Sugar (SPS)

declined sharply as nearly 3,000 long tons of the

SPS allocation was deferred to 2005. Consequently,

total EU exports rose by 3.5% to 47,965 long tons

while earnings increased by 4.8% to "4-.3mn. With

a larger proportion of the higher priced Protocol

sugar in the export mix, the final price per pound

ended at L 'I1 2, up by LU I I 12 over the previous

year.


Notwithstanding a slightly higher US quota of

10,917 long tons, earnings from this market fell by

14.3% to $8.4mn mostly due to increased shipping

costs and high US sugar inventories that pushed the

average price per pound down from L I 21I to

US$0.17.


Sales to CARICOM more than quadrupled in

volume to 46,367 long tons valued at $22.7mn as

regional production contracted with the erosion of

market preferences. An improvement in product

quality and expansion in'. i _- ;I capacity boosted


Table VI.4: Exports of Sugar and Molasses


augar (long Tonsy) iuzL,040 ot1.
E.U. (Quota long tons) 48,929 43.7
USA(Quota long tons) 11,014 9.6
CARICOM (long tons) 5,808 3.4
Other (long tons) 36,794 10.6

Molasses (long tons) ** 36,482 2.8
Source: Belize Sugar Industries, CSO
* Reflects value of export shipments.
** Relect actual sales as reported by the processor.


U0,oo0

46,356
10,888
13,645
27,679

37,753


/ 1 .Z

45.1
9.8
7.3
9.1

2.8


l1U/,1 UZ

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

32,706


I .1

47.3
8.4
22.7
1.3

2.6









CENTRAL BANK OF BELIZE


Box 5: EU Sugar Market Update



The EU market accounts for slightly less than half of the country's total sugar exports. This market faces several
challenges (such as the Everything But Arms (EBA) Initiative, the Common Agricultural Policy (CAP) reform and
the World Trade Organization (WTO) ruling against the EU) which threaten the survival of the domestic industry.

In March 2001, the EU implemented the EBA Initiative which grants duty-free access to all products without any
quantitative restrictions, except for arms and ammunitions, from the world's Least Developed Countries (LDCs).
In the case of sugar, full liberalization was not immediate; duty-free quotas were granted in 2002 based on the best
LDC exports to the EU during the 1990s. These quotas were subject to an annual growth rate of 15.0% until 2009,
after which market access would be completely unrestricted. The accompanying out-of-quota tariff was to be
eliminated between 2006 and 2009, with a 20.0% reduction in July 2006, followed by 50.0% in 2007, 80.0% in 2008,
and complete removal by 2009. As the EBA sugar exports grew, exports of the Special Preferential Sugar (SPS)
from ACP producers declined. Since the introduction of the EBA Initiative, Belize's sugar export volume under the
SPS agreement halved in two years, falling from 8,467 long tons in 2001 to 4,275 long tons in 2003. These exports
should reduce to zero by 2006.

On October 2004, the WTO Panel released its final report against the EU sugar regime based on a challenge
mounted by Australia, Brazil, and Thailand. The panel found that the EU exports up to four times more sugar than
it is entitled to and that the sugar is unfairly subsidized. These EU exports included amounts equivalent to the
volume of sugar imported fromACP countries under preferential arrangements. Although the EU plans to appeal
the ruling, very little hope exists that the decision will be changed. Meanwhile, the WTO ruling has provided the
EU with another compelling reason to reform the sugar program as part of the reform of its Common Agricultural
Policy (CAP). The support payments made under the CAP to European farmers are unsustainably expensive and
becoming more so with the expansion of the EU.

The premise of the sugar market reform is to reduce subsidies paid to EU farmers for sugar production and
consequently reduce the volume of EU production. With a reduction in the EU intervention price, ACP producers
will also see a reduction in the price received for their exports to the EU. The EU had initially proposed to begin
the price cuts in July 2005 but has deferred the price cut until July 2006, at which time the reductions will be
phased in over a two year period to allow ACP sugar producers a bit more time to make necessary adjustments to
cope with the lower prices. For Belize's raw sugar, the proposed change will amount to a reduction of the
institutional support price from 523 to 329 per tonne, equivalent to a 37.0% price cut. While the EU proposes
to compensate its sugar beet farmers by up to 60.0% of income losses through payments decoupled from
production, the EU is looking to assist ACP producers to adapt to new market conditions through the introduction
of specific programmes under the European Development Fund. The EU sees the new Economic Partnership
Agreements as a tool that ACP countries can use to maintain access to the EU market. For ACP producers, this
is of scant comfort as the economies face the reality of sharp cuts in prices within a time span that many claim is
too short for meaningful adjustment policies.


ANNUAL REPORT 2004













the sale of bulk and bagged sugar to Trinidad &

Tobago, Antigua and Jamaica. The average price

per pound, however, declined from L 11 12 to

US$0.11, mostly due to higher freight costs.


Exports to other markets totalled 1,854 long tons

($1.3mn) and consisted of '. ,- -..l sugar sold to

Canada and Curacao at an average of US$0.16 per

pound, more than double world market prices.


While exports of molasses declined 13.4% to 32,706

long tons, the earnings loss was less than

proportionate (5.1% to $2.6mn) as prices rose by
9.6% to $80.87 per long ton due to a contraction in

Asian supplies and a surge in Indian demand.


\ FOREIGN TRADE AND PAYMENTS



Citrus Juices and Pulp


The market for citrus juices was very depressed as

good global harvests, large juice inventories and

uncertainties associated with the progress of global

trade talks contributed to its destabilisation and

resulted in prices for orange juices plummeting to

record low levels during most of the year.

Consequently, even though intensive marketing

efforts increased sale volume by 4.1% to 28.0mn

ps, revenues declined precipitously by 19.4% to

$46.9mn. At 27.7mn ps and .4 S.6mn, concentrate

juices made up the bulk of exports.


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


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


25,285
22,194
3,091
54.3
46.2
8.1


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


27,716
22,688
5,028
45.6
33.2
12.4


Not-from-concentrate Exports ('000 ps) 640 644 296
Orange 263 329 67
Grapefruit 377 315 229
Not-from-concentrate Value ($mn) 3.3 3.1 1.3
Orange 1.1 1.4 0.3
Grapefruit 2.2 1.7 1.0

Pulp Export ('000 pounds) 703 481 326
Pulp Value ($mn) 0.4 0.3 0.2
Source: Citrus Products of Belize Ltd
* Reflects actual sales as reported by the processor and not the value of export shipments
as reported by the CSO. Export shipments go to inventory for sale at a later point in time.








CENTRAL BANK OF BELIZE


With good harvests causing a reduction in Caribbean
demand, a higher share (79.3% compared to 62.0%
in 2003) of orange concentrates went to the US
where prices were very depressed as a result of
large inventories and a resurgence ofpopular weight
loss diets that contributed to a declining trend in
per capital juice consumption. Even after the
hurricanes that damaged Florida citrus groves, the
expected hike in orange juice prices was very weak.
A 34.4% increase in sale volume to the US was
consequently not enough to offset a $0.53 decline
in the average price per pound solid to $1.27 and
earnings declined by 5.2% to $22.8mn. Sales of
orange concentrate to the Caribbean, on the other
hand, contracted by 32.3% in volume and 32.6% in
value. Sales of orange freeze concentrate were
minimal, amounting to 0.2mn ps valued at $0.6mn.
For a second consecutive year, no orange
concentrate was sold to Europe, a market
dominated by Brazil.

Unlike orange, hurricane damage to Florida
grapefruit groves caused a significant price rally that
offset lower prices in the first part of the year and
enabled the average prices for grapefruit juices to
regain and even supercede its 2003 level. However,
the industry was unable to take full advantage of
this due to existing sale commitments. At year end,
exports of grapefruit concentrate saw volume
and value increases of 7.9% and 7.8%,


respectively. Europe, the major grapefruit juice
market, accounted for 83.7% of exports, while
Caribbean market share shrank from 22.9% in
2003 to a mere 5.9%. Exports of grapefruit
freeze concentrate revived somewhat during the

year, amounting to 0.5mn ps valued at $1.9mn.


Sales of NFC, (77.4% of which was grapefruit),
more than halved to 0.3mn ps valued at $1.3mn.
The decline was partly attributable to the focus on
concentrates as the main export product to
traditional markets. The volatility of the juice market
also affected pulp exports, which declined by 32.3%
in volume and 22.3% in value.


Banana


Higher yields and some flexibility in the marketing
agreement led to an 8.8% volume increase in banana
exports to 79,428 metric tons. Revenues, on the
other hand, rose by a marginal 0.8% to $53.0mn
because of the negotiated reduction in the average
box price (from US$6.50 to L -'. 2 1) and marked
increase in the shipment of second-class bananas.


While prices during the year averaged to
L "'. 211, the marketing agreement provided for
a price of US$6.93 for the first 26 weeks of the
year, and thereafter, a gradual reduction over
five weeks to end at US$5.34 for the rest of the


Table VI.6: Exports of Bananas


Volume (metric tons) 41,737 73,016 79,428
Value ($mn) 33.5 52.6 53.0
Source: Central Statistical Office


ANNUAL REPORT 2004












year. To encourage consistency in export supply, a
"dead freight" penalty was applicable if shipments
fell below 70,000 boxes per week although this was
waived if alternative products used the available
space.


Unlike the previous year when the industry had to
pay for additional import licenses to accommodate
all its export volume, the marketer waived the license
cost. In return, Fyffes demanded a larger quantity
of second class fruit some 12.0% (9,632 metric
tons) of total volume compared to only 2.6% (1,914
metric tons) in 2003. Second-class bananas normally
sell at US$2.50 per box, less than half the price of
the first-class bananas. In the latter half of the year,
a higher price (about US$1.00 more) was paid on
second-class bananas on the condition that first class
fruit was used in the packs. While no dead freight
penalties were incurred during the year, the stringent


\FOREIGN TRADE AND PAYMENTS


quality standards cut returns by some US$0.06 per
box. At the end of the year, the industry price
averaged $11.93 per box, down $0.76 from the
$12.69 netted in 2003.


Marine Products
Marine products maintained its position as lead
export earner with farmed shrimp as the number
one revenue earner. Higher sales of all marine
commodities pushed the total upward by 7.7%
to 18.4mn pounds, but revenues fell by 2.5% to
$107.4mn as lower earnings from shrimp
outweighed increased receipts from lobster,
conch, whole/fillet fish and others.


Shrimp exports continued to grow with volume
rising by 5.9% to 17.0mn pounds. However,
revenues declined by 8.2% to $85.2mn as the US
market was flooded by supplies from low cost


Box 6: EU Banana Market Update


The successful challenge to the EU banana import regime led to an EU commitment to bring its regime into
conformity with WTO principles by 1 January 2006, through the implementation of a tariff only regime.

Under the current quota system, Latin American banana suppliers can export up to 2.7mn tonnes of banana per
year at a tariff of 75 per ton. Any amount above the quota attracts a tariff of 680 per ton. Under the proposed
new system, all quotas would be disbanded and a tariff would be levied on non-ACP banana that would be
specifically set to maintain market shares and market access for ACP producers. On 27 October 2004, the EU
Trade Commissioner finally announced the long awaited decision to impose a duty of 230 (US$300) per ton
starting in 2006.

This has fuelled further controversy with Latin American banana exporters declaring that they prefer a tariff rate
of 75 per ton and vociferously decrying the proposed tariff. On the other hand, the ACP countries including
CARIFORUM banana exporters maintain that the tariff is too low with the Caribbean countries pushing for a
tariff of 275 per ton. The situation remains unsettled and it is unknown if a challenge to the proposed tariff level
would be successful.









CENTRAL BANK OF BELIZE


producers in Asia and Latin America and the
average price fell from $5.78 to $5.01 per pound.
The price down-turn squeezed profit margins,
prompting local producers to undertake
exploratory export forays into the European
market where prices were generally higher and
to concentrate more seriously on value added
products. Some exports to Mexico also occurred
during the year.


Wild capture of lobster remained stable with
exports amounting to 0.5mn pounds while revenues
rose by 11.4% to $15.1mn due to an upturn in the
US dining out market that translated into a 10.9%
price improvement to $28.14 per pound.


Increasing for the third consecutive year, conch
exports rose to 0.6mn pounds with earnings up
by 55.3% to $5.8mn. Revenues were boosted by
higher volume as well as an increase in prices
resulting from a US moratorium on conch
imports from Honduras, Haiti, and the
Dominican Republic. The latter caused prices
to rise from $8.31 per pound in 2003 to $9.75 in
2004.


The whole/fillet fish category saw the '1 .-' ,
percentage increase during the year with the
export launch of fresh tilapia fish fillet. Some
0.3mn pounds of whole/fillet fish were sold, a
15-fold increase over the previous year, while
receipts rose from $0.03mn to $1.2mn. With the
US market for fresh tilapia growing at double
digit rates (30.0% in 2004), Belize is well
positioned in proximity to develop a strong and
viable 'niche hold'.


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


Other Major Exports


Garment exports totalled 3.9mn pounds valued
at $37.1mn, increases of 21.9% in volume and
20.1% in value when compared to the previous
year.


Exports of sawn wood remained relatively stable
at 1.1mn board feet. However, a larger quantity
of lower valued woods in the export mix caused
export proceeds to decline by 16.7% to $3.0mn.


Table VI.7: Exports of Marine Products


LUUoSb I all 400 10,0/0
Lobster Head 43 311
Shrimp* 6,631 52,658
Conch 419 3,054
Whole/Fillet Fish 38 125
Other 0 0
Total 7,617 69,821
Source: Central Statistical Office
* Reflects value of export shipments, not sales.


Z I 10,011 DUO I 4,0U
15 87 33 162
16,052 92,762 16,999 85,153
450 3,741 596 5,810
24 30 251 1,228
1 26 3 38
17,063 110,157 18,387 107,371


ANNUAL REPORT 2004








-\--4-


Box 7: Anti-dumping Duty Investigation of U.S. Shrimp Imports


The placement of mahogany on the endangered
species list of the Convention on International Trade
in Endangered Species of\\ i. Il Fauna and Flora
(CITES) in late 2003 has slowed exports of this
premium wood since mahogany can only be
exported from forests that have been certified as
managed in a sustainable manner.

Holding its own against stiff competition from
Mexico and Brazil, Belize's papaya industry
expanded during the year and boosted export
volume to the US by 52.3% to a record high
55.6mn pounds that garnered some $22.8mn.
This growth was facilitated by declining
production from Hawaii and growing US
consumer demand. High export availability,


especially with oversupply from Mexico, managed
to drive down prices even further this year so that
the recorded average price per pound fell by 10.9%
to $0.41 in 2004. While competition has intensified,
Belize was able to maintain its market because of
its consistent supply of high quality papayas and
increased sales and marketing efforts.

Non-traditional Exports

Non-traditional exports expanded by 45.9% to
$20.2mn, as exports of citrus oils, pepper sauces
and a medley of miscellaneous, non-traditional
products increased robustly. \A -_ i -e marketing
of citrus oils to increase the revenue potential of
the citrus industry drove up sales substantially from


FOREIGN TRADE AND PAYMENTS


After several years of declining shrimp prices in the wake of a flood of low cost shrimp imports from Asia (India,
China, Thailand and Vietnam) and South America (Brazil and Ecuador), several shrimp producer groups in the
US banded together to file petitions with the U.S. International Trade Commission (ITC) and the U.S. Department
of Commerce (DOC) to investigate whether these imports were being sold below fair market value or were
benefiting from government subsidies in their home countries. As preliminary investigations did reveal that
injury was caused to the US domestic industry, preliminary anti-dumping margins for shrimp exporting companies
in the six countries that accounted for 73.0% of imported shrimps in 2003 were released. These duties ranged
from 0.07% to 112.81% for China, 4.13%to 25.76% for Vietnam, 9.69%to 67.80% forBrazil, 2.35%to 4.48% for
Ecuador, 5.02% to 13.42% for India, and 5.79% to 6.82% for Thailand. The DOC and ITC will release its amended
final dumping margins in January 2005. As the anti-dumping duties are levied on individual companies, the
amendments mostly relate to the success of some suppliers in obtaining their own company rate which is
usually lower than the rate set for the country.

The investigation covered frozen and canned products from warm water shrimp species and excluded shrimp
suppliers from Mexico, Bangladesh and Indonesia. While the ruling has raised the import cost of shrimp from
some companies, it is unlikely that shrimp prices will return to the very high levels of the previous years when
prices were above US$5 per pound. The viability of the Belize shrimp industry will therefore depend on the
producers' ability to reduce costs and increase margins through more creative value added products.


\









CENTRAL BANK OF BELIZE


Table VI.8: Other Major Exports


Garments
Volume (mn Ibs) 3.3 3.2 3.9
Value ($mn) 30.6 30.9 37.1
Sawn Wood
Volume ('000 bd ft.) 1,087 1,053 1,052
Value ($mn) 2.6 3.5 3.0
Papayas
Volume ('000 Ibs) 24,133 36,522 55,607
Value ($mn) 15.3 16.8 22.8
Source: Central Statistical Office


$0.9mn in 2003 to $3.7mn. Sales of fresh citrus
fruit also increased 43.3% in volume to 15.1mn
pounds. Revenues, however, declined by 12.2% to
$2.1mn because of a $0.09 drop in the average
price per pound to $0.14. Benefitting from a surge
in demand attributable to cruise tourists, exports


of pepper sauces expanded 63.0% in volume to
0.7mn pounds and 84.9% in value to $1.1mn. On
the down side, a decline in sales of black-eye peas
outweighed a small increase in exports of red kidney
beans so that the value of total bean exports
contracted modestly.


Box 8: U.S. Country-of-Origin Labeling Legislation


In a move clearly designed to encourage U.S. consumers to buy food items that are domestically produced, the
U.S. government passed the 2002 Farm Bill, which requires that the U.S. Department of Agriculture develop
regulations mandating that U.S. retailers provide country-of-origin labels (COOL) for red meats (beef, lamb and
pork), fish and shellfish, fresh and frozen fruits and vegetables, and peanuts. On January 2004, the Consolidated
Appropriations Act delayed the implementation of the mandatory COOL until September 30,2006, for all covered
commodities, except wild and farm-raised fish and shellfish. The interim final rules for the implementation of the
regulation for fish and shellfish were published on October 2004, and will go into effect on April 4, 2005. Under
the interim final rules, fish and shellfish, which include fillets, lobster and shrimps, must be labeled at retail to
indicate their country of origin and method of production, that is, if the commodity is either wild or farm raised.

The COOL requirement will affect retail businesses, such as supermarkets, and their suppliers, from fish farmers
and harvesters through processors and wholesalers. Since retailers are those defined under the Perishable
Agricultural Commodities Act, most fish markets would be exempt. The regulation also exempts food service
establishments (such as restaurants, food stands etc.) and seafood used in processed food. Processed food is
defined as seafood items that have changed in character through processing or has been combined with
another covered commodity or other substantive food components.

While it is unknown how the labeling will affect the demand for Belizean seafood products, the regulation will
increase record keeping, labeling and operating costs for many suppliers of the affected commodities.


ANNUAL REPORT 2004








FOREIGN TRADE AND PAYMENTS


Re-exports

Re-exports declined by 10.7% to "' '2 4mn
reflecting reductions in sales from the CFZ and the
customs' territory of 7.6% and 42.6%, respectively.
Cross border sales at the CFZ fell as customs'
regulations at the northern border further tightened
and fuel prices in the Mexican border town of
Chetumal remained lower than that in the CFZ.
The fall in re-exports from the customs' territory
was largely due to an $11.lmn contraction in
'Machinery and Transport Equipment'. The latter
had been unusually high in 2003 due to the re-
exportation of generators rented by the electricity
company. Other smaller declines were recorded in
'Food and Live Animals' and 'Mineral Fuel and
Lubricants' but these were partly offset by a $1.2mn
increase in'Manufactured Goods' such as household
tools, building structures and razors.

Gross Imports

Gross imports (fo.b.) contracted by $83.2mn, with
respective declines of $58.7mn and $24.5mn for
goods imported into the customs' territory and the
CFZ. Imports of all categories of goods fell except
"Beverage and Tobacco", "Crude Materials",
"Minerals, Fuels and Lubricants" and
"Manufactured Goods". The largest reduction
was in "Machinery and Transport Equipment"
($28.3mn), as imports of large capital items (such
as electric generators, airplanes and heavy
construction machinery) that occurred in 2003 were
not repeated in 2004. Similarly, imports by the
Export Processing Zones were lower ($17.2mn) in


contrast to the previous year when major outlays
were made for telecommunication infrastructure
and factory expansion. CFZ imports also
contracted as cross border sales plummeted. On
the other hand, a substantial increase in the acquisition
costs of fuel products boosted payments for 'Fuels
and Lubricants' by $19.1mn while an increase in
outlays for steel and cement were largely responsible
for a $7.3mn increase in 'Manufactured Goods'.


Direction of Visible Trade

The UK and the US remained Belize's main
trading partners, accounting for 74.8% of total
export proceeds. While a greater volume of
products were shipped to the US, its market share
declined slightly to 55.1% due to depressed prices
for raw sugar, citrus juices and farmed shrimp.
The proportion of sales to Europe remained
stable at 29.8% but earnings from the UK
narrowed by 4.8% to 19.7% while proceeds from
other European countries expanded by 4.7% to
10.1% due to a shift in banana shipments from
the UK to Ireland. The share of exports to
CARICOM continued its steady yearly increase,
moving from 8.4% to 11.4% as sales of sugar to
this market more than tripled with the move
away from the depressed world market.

Although the US continued to be the principal
source of imports, its market share declined from
42.5% to 38.7%, largely due to lower imports of
construction, electrical and transportation
equipment and books. Modest declines were
recorded in imports from the UK, Other EU


-\.4










CENTRAL BANK OF BELIZE


Table VI.9: Direction of Visible Trade


Percentage


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


Z1 .b
8.5
56.3
1.6
6.5
1.4
0.7
3.4
100.0


Source: Central Statistical Office
* excludes CFZ sales


and CARICOM. In contrast, Central America's share

rose from 16.6% to 19.1% reflecting greater

expenditure on steel, cement and mineral water

while large diesel oil purchases from Mexico, and

to a lesser extent, increased payments for

aluminium zinc, pushed its share upwards from

7.9% to 10.3%.


Services


Bouyant activity in the tourism sector

underpinned a 35.1% rise in net receipts from

services during the year. Tourism earnings were


up by 13.6% with the surge in cruise ship and

moderate growth in over-night arrivals pushing

net inflows from travel services upward by 25.8%

to $183.6mn while travel outlays fell by 6.8%

due to a modest decline in the number of

residents travelling abroad. At $33.7mn, the net

outflow for transportation was virtually

unchanged as a substantial hike in ocean freight costs

was offset by increased earnings of shipping agents

who provided services to cruise ships that increased

their port calls to Belize by 28.9%. Financial fees

associated with public debt refinancing pushed net


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


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


5.4
55.5
1.5
8.4
1.1
0.2
3.4
100.0


1 9./
10.1
55.1
1.4
11.4
0.4
0.2
1.7
100.0


j.1
5.0
42.2
7.8
3.1
16.6
1.6
20.5
100.0


j.1
5.1
42.5
7.9
2.7
16.6
1.2
21.3
100.0


2.3
3.9
38.7
10.3
2.6
19.1
1.2
21.9
100.0


313.9
36.2
205.8
41.6
30.2
7.9
3.8
4.1
98.2
21.9
76.2


260.9
74.9
85.1
83.2
17.8
145.7
8.4
137.3
4.1
0.4
3.7


53.0
-38.7
120.7
-41.6
12.4
-137.8
-4.6
-133.2
94.1
21.5
72.5


357.3
44.3
234.3
46.5
32.2
8.4
5.0
3.4
95.5
5.5
89.9


278.1
78.6
88.3
92.9
18.3
179.4
10.9
168.5
4.9
0.2
4.7


79.2
-34.3
146.0
-46.4
13.9
-171.0
-5.9
-165.1
90.6
5.3
85.2


398.3
54.8
265.9
53.9
23.8
7.9
4.9
3.0
108.6
27.4
81.2


291.3
88.5
82.3
104.1
16.3
236.1
12.4
223.7
4.4
0.2
4.2


107.0
-33.7
183.6
-50.2
7.5
-228.2
-7.5
-220.7
104.2
27.2
77.0


*Payments to non-resident workers were revised from 1999 to 2004 based on a field survey of non-resident seasonal
and border workers conducted in 2004.


ANNUAL REPORT 2004








FOREIGN TRADE AND PAYMENTS


outflows for other goods and services up by 8.2%
to $50.2mn while net receipts for government
goods and services declined by almost half to
$7.5mn as inflows to foreign embassies and
international and regional organizations were cut

back by more than 50.0%.


Income

Net outlays for non-resident labour and capital
increased by 33.5% to $228.2mn as an expansion
in agricultural production drove up the demand for
foreign workers, while increases in profit
remittances, reinvested earnings and interest
drove up capital costs. Meanwhile, interest
earned on the official reserves declined further
due to lower deposit holdings abroad and
depressed international interest rates.

Current Transfers


Net receipts from current transfers rose by
$13.6mn to $104.2mn as a $21.4mn increase in
official grants to Government overshadowed an
$8.2mn contraction in private remittances.
Grants from the ROC / Taiwan pushed
government receipts up more than four fold to
$27.4mn while inflows to other sectors dropped
by 9.7% to $81.2mn with a fall in donations in kind.
Cash transfers, however, rose due to increases in
insurance claims, western union settlements and
charitable donations to religious and non profit
organizations.


Capital and Financial Accounts

The surplus on the capital account more than
doubled to $8.5mn as Belize benefited from debt
forgiveness programs. A total of $7.4mn was
forgiven under the British Government's
Commonwealth Debt Initiative program and the
2001 USAID Debt for Nature Swap Agreement.

Foreign direct investment and public sector debt
restructuring featured prominently in the
$259.2mn received in net financial inflows. With
loan disbursements almost matched by debt
repayments, financial inflows were mostly
attributable to strong investor activity. Major
transactions included the sale of Belize
Telecommunication Limited (BTL) shares,
construction of a new casino adjacent to the
Mexican border, the development of numerous
hotel and restaurant establishments, real estate
and property development, the sale of BSSB's
remaining 5.0% share interest in Belize Electric
Company Limited to Fortis Ltd., the
construction of the Chalillo Dam and the
acquisition of Intelco's assets. This contrasted
with the previous year when Carlisle Holdings
Limited divested its shares in BTL and reduced
investments to a net outflow of $2.7mn.

Debt activities of significance included the issuance
of new bonds and notes, the proceeds of which
were used to refinance three loans from the
International Bank of Miami and the Caribbean
mortgage securitisations. A slowdown in private
sector borrowing coupled with an increase in


-\.4










CENTRAL BANK OF BELIZE


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


$mn


General Government
Other Sectors
FINANCIAL ACCOUNT
Direct Investm ent Abroad
Direct investment in Belize
Portfolio Investment Assets
Portfolio Investment Liabilities
Financial Derivatives Assets
Financial Derivatives Liabilities
Other Investment Assets
Monetary Authorities
General Government
Banks
Other Sectors
Other Investment Liabilities
Monetary Authorities
General Government
Banks
Other Sectors
CHANGES IN RESERVES (Minus = Increase)


amortisation payments led to a net financing outflow,

in contrast to the previous year when a surge in

loan disbursements for projects such as

telecommunication and factory expansion led to a


net inflow. Similarly, net borrowing by the

commercial banks also resulted in an outflow of

funds as the banks reduced their external

borrowings and made amortisation payments for


Table VI.12: Official International Reserves


$mn


Gross Official International Reserves 229.3 169.2 106.5 -62.7
Central Bank of Belize 212.5 152.4 79.6 -72.9
Holdings ofSDRs 4 4.6 5.1 0.5
IMF Reserve Tranche 11.4 12.5 13.1 0.6
Other 197.1 135.3 61.4 -73.9
Central Government 16.8 16.8 27.0 10.2
Foreign Liabilities 6 5.8 2.8 -3.0
CARICOM 1.5 0.8 0.1 -0.7
Other 4.5 5 2.7 -2.3
Net Official International Reserves 223.3 163.4 103.7 -59.7


5.9
17.0
280.7
0.0
48.5
0.0
253.2
1.7
0.0
6.7
0.0
-8.0
20.3
-5.6
-29.4
-66.0
-22.2
-2.8
61.6
10.9


1.5
1.6
368.7
-0.7
-2.7
-0.3
151.1
1.4
0.0
-26.6
0.0
-6.0
-6.0
-14.6
246.6
-5.2
104.6
60.4
86.7
60.1


7.4
1.1
259.2
-0.1
255.1
-0.5
151.3
1.1
0.0
-14.8
0.0
-6.0
-10.6
1.8
-132.9
-8.0
-106.0
1.2
-20.2
62.7


ANNUAL REPORT 2004








FOREIGN TRADE AND PAYMENTS


loans contracted in the previous year.

Official International Reserves


$10.2mn. After deducting $2.8mn to cover demand
foreign liabilities, the net official reserves stood at
$103.7mn.


Gross official reserves declined by $62.7mn to
$106.5mn during the year as reserves were drawn
down to facilitate external debt servicing. Central
Bank's holdings of foreign assets fell by $72.9mn
while central government's position rose by








Chart VI.3: Gross Official International Reserves


100 -

50 -

0

9


sb p8 99 g~ gb~ 8 0 0~gb
99~( 'V9'000


-\--4-










ECONOMIC PROSPECTS


Growth in the economy is not expected to exceed
3.0% in 2005 as monetary and fiscal policies are
tightened to restrain excessive growth in domestic
demand and bring further improvements to the
external current account position. The government
is presently projecting an overall deficit of
approximately 2.8% of GDP for fiscal 2005/2006.
Targeted tax hikes combined with further tightening
of commercial bank reserve requirements to
decelerate money supply growth and facilitate the
buildup of official reserves should therefore exercise
a general dampening effect on consumption.

The outlook for export agriculture is more upbeat.
After experiencing a challenging year when prices
for key commodities declined sharply, freight rates
soared and domestic costs increased, the export
sector has focused on becoming more streamlined
and developing strategies to improve value added
and competitiveness. This is expected to boost
domestic export earnings by approximately 10.0%
in 2005.

Except for sugarcane, all major export crops are
forecasted to expand, while output of livestock and
basic grains should remain stable. Because of
drought during the growing season, sugarcane
deliveries are expected to decline by 4.3% to 1.1mn
long tons, which should yield some 110,000 long
tons of sugar and 40,400 long tons of molasses.
Consequently, even with all sales once again going
to preferential or niche premium markets and a
temporary stay in the EU's sugar support price cuts,


sugar exports is likely to contract by 6.4% in volume
to 97,800 long tons and by 9.0% in value to
$73.0mn. Exports of molasses should remain
relatively steady at 36,630 long tons valued at
$3.0mn.


Improved management and greater input usage was
expected to boost citrus production by at least
another 1.0% to 6.8mn boxes for 2004/2005.
However, based on deliveries to the end of 2004,
indications are that this figure could be as high as
7.5mn boxes, which would be an all-time record
breaker. Production of citrus juices should increase
by 4.4% to 36.4mn pound solids (ps), while pulp
cell and oil output should more than quadruple to
7.3mn pounds. The resurgence in grapefruit juice
prices (due to hurricane destruction of the Florida
groves) and a small rally in orange juice prices along
with I - i- marketing should therefore ratchet
up juice exports by 29.8% in volume to 36.6mn ps
and by an ambitious 71.0% in value to $80.3mn.
Sales of pulp cells and oils, a large part of which is
already contracted, are expected to yield another
$8.3mn. In addition, the industry plans to launch an
array of juice mixtures during the year targeted at
export as well as domestic markets.


With continued EU assistance to improve
productivity and the more uniform supply of high
quality banana throughout the year, banana exports
should rise by 3.5% to 81,640 metric tons, the
highest volume to date. However, a US$0.20








ECONOMIC PROSPECTS


reduction in the average box price to US$6.00 is
expected to keep revenue stable at $52.0mn. Papaya
export is poised for an 8.0% increase to 60.0mn
pounds and $25.0mn as demand in the US continues
to grow.


Marine commodities are once again expected to
lead the export thrust, with shrimp export volume
expected to expand by 9.7% to 18.7mn pounds
and revenues rising by 18.4% to $100.9mn as
producers gradually move into more value added
products and explore more lucrative markets
regionally and in Europe. After surmounting
teething problems, export of fresh tilapia fillets
should swing into full production during the year
and more than double to 0.6mn pounds valued at
$3.5mn. While the anticipatedwild capture ofconch
should decline by 13.6% to 0.5mn pounds, revenue
will be up 15.2% as prices rise due to a shortage
of supply from other exporting countries. On the
other hand, the volume of lobster exports should
remain stable at 0.5mn pounds but a moderate price
increase should raise revenue by 7.9% to $16.3mn
as the dining out market strengthens.


With increases in citrus agro-processing being
offset by a contraction in sugar, the performance
of the secondary sector is likely to be mixed .


Although the utilities are presently agitating for
further rate increases, activity in the sector
should remain largely stable while construction
activities will face both expansionary and
contractional forces. While the deceleration
associated with the government's austerity
measures should have a negative impact, several
large construction projects mostly financed from
external sources, such as the US Embassy, the
Chalillo dam construction and the Carnival port
facility, will come on stream or continue in 2005.


Growth in services is expected to slow considerably,
even with a projected 10.0% increase in cruise ship
arrivals and 5.0% growth in stay-over tourists.
Slower credit growth aimed at reining in the balance
of payments deficit will directly impact the
merchandising sub-sector, while fiscal restraintwill
be seen in a lower level of government activity.


The one-off effect of the increase in taxes
(environmental, sales and 'sin' taxes) that the
government will be implementing should push the
inflation rate above 4.0% during the year. With
respect to levels of employment, no significant
change appears likely given offsetting prospects for
agricultural output, construction and services.


-\.4











OPERATIONS


Foreign Exchange Operations


In 2004, the Central Bank's trade in US dollars,

Canadian dollars, and Pound Sterling resulted

in net sales of$72.7mn. Sales exceeded purchases

in seven months of the year with an average net

monthly outflow of $26.5mn during this period.

Purchases were highest in April because of ICC

payments to BSSB for its BTL shares, while the

largest sales occurred in December due to

government debt reprofiling. Trade in CARICOM

currencies (largely in Barbadian and Eastern

Caribbean dollars) resulted in net sales of$1.5mn

during the year.


External Assets Ratio


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

1982 requires the Bank to maintain external assets

reserves of not less than 40.0% of the 1 --1, ifl

amount of notes and coins in circulation and

the Bank's demand and time deposit liabilities. The

ratio peaked in May at 60.5% following inflows

from the sale of BTL shares and bottomed out at

32.3% in December as a result of debt servicing

and reprofiling. Cash and fixed deposits comprised

some 67.8% of the Bank's external assets at the

end of December. Foreign securities and holdings


Table IX.1: Central Bank Dealings in Foreign Exchange 2004


ou. /
11.2
47.6
76.3
11.8
11.8
24.6
16.8
14.5
6.1
32.0
49.4
352.6


24.0
62.0
29.5
33.9
26.2
50.1
24.0
40.9
25.4
13.2
6.4
89.2
425.3


-50.8
18.1
42.3
-14.4
-38.3
0.6
-24.1
-10.9
-7.2
25.7
-39.8
-72.7


U.uu
0.00
0.00
0.00
0.00
0.00
0.21
0.01
0.02
0.00
0.00
0.00
0.25


U. z12
0.25
0.11
0.15
0.25
0.37
0.03
0.09
0.12
0.21
0.02
0.04
1.76


January
February
March
April
May
June
July
August
Septem ber
October
Novem ber
December
Total


-u. I -
-0.25
-0.11
-0.14
-0.25
-0.37
0.18
-0.08
-0.10
-0.21
-0.01
-0.04
-1.51


tmn













Table IX.2: External Assets Ratio 2004



January 175.4 284.9
February 123.6 256.4
March 147.0 265.7
April 186.8 320.2
May 170.9 282.4
June 133.4 230.4
July 133.1 230.4
August 113.8 229.6
September 105.1 231.5
October 95.9 217.4
November 119.9 215.5
December 79.0 244.8
Does not include Central Government Foreign Assets


of Special Drawing Rights with the International

Monetary Fund accounted for 25.7% and 6.5%,

respectively.


Relations with Commercial Banks


Cash Balances



During the first half of the year, commercial banks

held a consolidated average of $71.3mn with the

Central Bank, averaging some $6.7mn in excess of


the legal requirement. While average holdings held

steady up to November, excess reserves shrank to

an average of $1.7mn over the July-November

period as monetary growth was driven upward by

a surge in credit. In the beginning of December,

the Central Bank increased the cash reserve

requirement from 6.0% to 7.'' ". of average deposit

liabilities to reduce demand for foreign exchange

and shore up reserves. At year end, cash balances

held with the Central Bank consequently rose to

$84.7mn.


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


Tmn


I ,UJ-- .u
1,063.7
1,075.8
1,072.7
1,076.9
1,100.4
1,133.6
1,158.3
1,159.0
1,168.3
1,170.4
1,189.6


63.82
64.55
64.36
64.62
66.02
68.02
69.50
69.54
70.10
70.22
83.27


I I -
77.54
67.15
65.47
70.17
71.45
68.11
69.98
72.06
76.22
69.55
84.74


I I.Oj
13.71
2.60
1.11
5.55
5.43
0.09
0.48
2.53
6.12
-0.67
1.47


OPERATIONS


61.57
48.21
55.33
58.34
60.52
57.90
57.77
49.56
45.40
44.11
55.64
32.27


Sai lua I y
February
March
April
May
June
July
August
September
October
November
December









CENTRAL BANK OF BELIZE


Table IX.4: Currency in Circulation 2004


%rmn


SaiIuaI y
February
March
April
May
June
July
August
September
October
November
December


I U .U
110.2
111.8
109.8
111.3
114.8
118.2
118.1
116.0
117.4
119.9
128.3


123.0
124.7
122.8
124.4
128.0
131.4
131.5
129.4
130.7
133.3
141.9


I1.1
16.3
22.2
17.3
19.8
21.2
20.1
25.0
23.3
20.1
23.6
26.6


I U/ .U
106.7
102.5
105.5
104.6
106.8
111.3
106.4
106.1
110.6
109.7
115.3


Currency in circulation totaled $141.9mn at the end

of December, some $14.3mn more than the

previous year that included increases of$12.1mn

in currency held by the public and $2.2mn in

commercial banks' vault cash. As in previous

years, currency in circulation was lowest in

January and peaked in December.


Transactions with Central

Government


Current legislation permits the Central Bank to

extend advances to the Government up to a

maximum of 21" .. of current revenue collected

during the preceding financial year or a sum of $50.0

million, whichever is greater. With twenty percent


Table IX.5: Central Bank Credit to Central Government


January 01.0 u.u Iu.u I .ou -.uL lo.u I
February 86.4 0.0 10.0 81.73 4.22 18.23
March 86.9 0.0 10.0 74.52 4.24 16.62
April 98.4 0.0 10.0 77.47 4.74 18.13
May 69.4 0.0 10.0 80.30 3.47 16.53
June 51.2 0.0 10.0 80.26 2.68 17.19
July 59.7 0.0 10.0 71.46 3.05 17.81
August 71.2 0.0 10.0 79.26 3.55 17.80
September 76.2 0.0 10.0 83.84 3.77 15.85
October 70.7 0.0 10.0 83.22 3.53 17.58
November 60.7 0.0 10.0 63.17 3.09 18.60
December 73.2 0.2 10.0 82.50 3.65 18.46
A: Holdings of Government Securities as a multiple of Central Bank's paid up Capital and Reserves
B: Advance to Government as a percentage of Government's estimated recurrent revenue fiscal year
Estimates for Fiscal 2003/2004 $448,431,659 (January March)
Estimates for Fiscal 2004/2005 $450,823,871 (April December)


ANNUAL REPORT 2004









OPERATIONS


Table IX.6: Government of Belize Treasury Bill Issues


U I/ I I/UJ
28/01/04
12/02/04
09/03/04
31/03/04
28/04/04
13/05/04
08/06/04
30/06/04
28/07/04
12/08/04
07/09/04
29/09/04
27/10/04
11/11/04
07/12/04


U IIUUIU-L
28/04/04
13/05/04
09/06/04
30/06/04
28/07/04
12/08/04
07/09/04
29/09/04
27/10/04
11/11/04
07/12/04
29/12/04
26/01/05
10/02/05
08/03/05


'H"U .'H"
13.2
5.8
35.6
45.4
13.2
5.8
35.6
45.4
13.2
5.8
35.6
45.4
13.2
5.8
35.6


U .2
3.22
3.22
3.22
3.22
3.22
3.22
3.22
3.22
3.22
3.22
3.22
3.22
3.22
3.22
3.22


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


of the preceding year's current revenue amounting

to $84.1 million, advances to Central Government

approached this limit on several occasions, reaching

a high of $83.8 million during September and falling

to $82.5mn at year-end.


Treasury Bills


The Central Bank continued to conduct

Treasury Bill operations on behalf of the

Government during the year. After reinstating

the bidding process in December 2001,

government increased the Treasury Bill issue by

$30.0mn to $100.0mn in October 2002. Total

Treasury Bills outstanding as at 31 December,

2004, stood at the statutory limit. During the

year, the Central Bank was dominant in the

Treasury Bill market with its holdings peaking

at $98.4mn in April and ending the year at

$73.2mn.


Treasury Notes


Under the 1993 amendment to the Treasury Bill

Act, the Government may issue up to $25.0mn

in Treasury Notes. These notes have a one-year

maturity period at 9.0 0 interest. At the end of 2004,

total Treasury Notes outstanding amounted to

$25.0mn and were all held by a domestic

commercial bank.


Supervision of Banks and Financial

Institutions


The Financial Sector Supervision Department

(FSSD) conducted two limited scope, five full-scope

and two follow-up examinations of domestic and

international banks in 2004.


In addition to carrying out assessments using the

Capital Adequacy, Asset Quality, Management,

Earnings and Liquidity (CAMEL) method, the


I /U, -
2/04
3/04
4/04
5/04
6/04
7/04
8/04
9/04
10/04
11/04
12/04
13/04
14/04
15/04
16/04








CENTRAL BANK OF BELIZE


Table IX.7: List of Financial Institutions


Alliance Bank of Belize Ltd. Atlantic International Bank Ltd. Belize Unit Trust Corp. Ltd.
Atlantic Bank Ltd. Caye International Bank Ltd.
Belize Bank Ltd. Handels Bank & Trust Company Ltd.
FCIB (Barbados) Investment and Commerce Bank Ltd.
Scotiabank (Belize) Ltd. Market Street Bank Ltd.
Provident Bank & Trust of Belize Ltd.
The Oxxy Bank Ltd


Bank adopted a more risk-focused approach in
conducting inspections. The latter approach zeroes
in on the links between inherent risks of institutions
such as credit, market, liquidity, reputational,
operational and legal risk, and compliance with the
banking laws. An examination of banks'
performance with respect to due diligence, Know-
Your-Customer policies and implementation of
appropriate procedures under the Money
Laundering (Prevention) Act were also a focus of
the technique.

Twenty-one applications by commercial banks to
grant large credit facilities to the private sector were
processed. These included eleven applications from
the domestic banks under Section 21(2) of the Banks
and Financial Institution Act (BFIA) and ten from
international banks under Section 21(b) of the
International Banking Act (IBA). Of these, twelve
applications were approved for facilities totaling
$71.6 million. Approximately $32.2mn consisted of
facilities extended by domestic commercial banks,
a significant reduction from the previous year.

Following a feasibility study on the Coordination/
Integration of Financial Supervisory Authorities
conducted by CARTAC, the government began to
take steps to bring credit unions under Central Bank


supervision. The Central Bank is subsequently
proposing that several amendments to the Credit
Union Act be made with a view to ensuring a well
regulated financial sector through a single integrated
regulator. The Financial Sector Supervision
Department is also in the process of training its
examiners to effectively carry out supervision in this
area.

During the year, the Bank benefited from a
Technical Cooperation Grant Agreement for
Banking and Non-Banking Supervision that had
been signed in the previous year by the Government
and IADB The funds (US$0.8mn) were to be used
to strengthen the legal framework for banks and
financial institutions, train and develop staff, and
upgrade the information system. Grant funds were
used to arrange training for eight bank examiners
and to purchase the AREMOS software which will
be used to establish a database for all reports
submitted by banks and financial institutions.
Assisted by the Canadian Office of the
Superintendent of Financial Institutions (OSFC), the
Central Bank also began the process of reviewing
and amending the Banks and Financial Institutions
Act and the International Banking Act to ensure
compliance with Basle Core Principles.


ANNUAL REPORT 2004








OPERATIONS


Information Systems Unit


Overview

During 2004, the Information Systems Unit (ISU)
sought to improve the security of the Bank's internal
networks while implementing scheduled upgrades
of its major information systems.

Network Security

Network security policies were continuously revised
in response to the ever increasing security threats.
Among the measures taken were:
(a) The upgrade of the Windows 2000 domain to
native mode after the last Windows NT 4.0 domain
controller was removed from the network;
(b) The upgrade of the firewall hardware and the
proxy firewall;
(c) Installation of an anti-virus and email scanner
on the email relay server; and
(d) Upgrade of all anti-virus licenses to the latest
versions.

Upgrade of Major Application Software
Packages

1)The mandatory replacement of the
connectivity system for the SWIFT application,
from X.25 to the new architecture based on the
IP protocol, was initiated in December 2003 and
fully activated in September 2004.

2)The organization and payroll modules of the
human resources information system (HRIS) that
was initiated late in 2003 went live in July 2004.
Other HR modules have been running in parallel


with older systems and are shortly to be placed
into production. Several customization patches
were applied during the testing phase to meet
the country's tax and social security regulations.

3)The Commonwealth Secretariat's debt
management system CS-DRMS version 1.0 was
upgraded to the new version CS-DRMS 1.1 in
July. After several months of parallel runs with the
SCO Unix version, the Bank has now moved to
the Windows version of this application.

New Applications

The AREMOS software package, which is used
to develop and manage time series based databases
was acquired and is now being tested. A
representative from the ECCB provided
additional training and insights on how to
configure and implement the system.

Application Maintenance

Additional Fixed Asset Depreciation Schedule
reports were added to the Fixed Assets module
of Prophecy Open, as required by the external
auditors. The facility to print Delinquent
Exporter letters in the Export Proceeds system
was enhanced in order to improve the efficiency
of this tool. A new interface was developed to
load and process Western Union data received
in electronic form and modifications and
enhancements were made to the Export
Proceeds, Receipts, Transfers, and Tourist
Survey systems.










ADMINISTRATION


The Board of Directors

The Board of Directors held 10 meetings in 2004
and considered 85 submissions.


Overseas Meetings

As executive officers to the Bank and advisors to
Government, the Governor & Deputy Governor
attended several meetings during the course of 2004,
some of which are shown in Box 9.


Finance

The Central Bank's financial statements for the
year ended December 31, 2004, with comparative
figures for the previous year, are annexed to this
report. During the year, the assets of the Bank
decreased by 15.0% to $314.8mn. External assets
recorded a decline of 47.8% to $79.6mn, while
domestic assets increased by 8.04% to $235.3mn.


At year-end, the net operating surplus amounted
to $5.9mn, up from $3.5mn in 2003. Gross
earnings totaled $19.5mn including interest
income of $17.4mn and commissions and other
income of $2.1mn. Current expenditure totaled
$13.6mn with staff costs, interest payments and
other operating costs accounting for 37.9%, 27.8%,
and 34.3%, respectively.


As provided for under Section 9(1) of the
Central Bank Act, $0.6mn or 10% of the net
operating surplus will be paid into the Central
Bank's General Reserve Fund and the balance
of $5.3mn will be transferred to the Accountant
General for the Government of Belize's
Consolidated Revenue Fund.


Internal Audit

In 2004, the Internal Audit Unit obtained approval
for its Charter that outlines its purpose, authority
and responsibility. During this period the Unit
focused on operational reviews aimed at improving
procedural efficiency and staff proficiency.

Reviews were consequently conducted of the
accounts payable process, the check payments
system, the books/periodical procurement process
and the procedures and policies of the security unit
with a view to evaluating the adequacy of internal
controls and transparency of operations within
established and documented parameters. The Unit
also routinely monitored stocktaking exercises, the
currency destruction procedure and implementation
of the vacation leave policy.

The Bank's year-end compilation process was
audited with specific focus on risk management.
Other audits were conducted of the Pension
Scheme Fund, petty cash and mutilated notes.









N


ADMINISTRATION


Box 9: Meetings Attended by the Governor and Deputy Governors during 2004


Name of Meeting/Conference

Central America & Caribbean Conference

Annual Meeting of the Board of Governors of
of the Inter-American Development Bank and the
Inter-American Investment Corporation

Forty-Fourth Annual Meeting of the Assembly of
Governors of the Central American Bank for
Economic Integration (CABEI)

Thirty Fourth Annual Meeting of the Board of
Governors of the Caribbean Development Bank

CARICOM Central Bank Governors Meeting

Caribbean Capital Markets Investors' Forum 21 ,4


During December, the Audit Committee

(comprised of representatives of the Central
Bank Board of Directors with the Chief Internal
Auditor acting as Secretary) reviewed the
Internal Audit Unit's report of work done
during the year. The Committee also reviewed
the annual audited financial statements and
management letter prepared by the external
auditors in order to ensure that adequate
disclosures were being made by management
and that the financial statements were an accurate
representation of Central Bank transactions
during the year.


Month

January

March



April


May


May

September


Place

Florida

Lima, Peru



Guatemala


Tobago, West Indies


Basseterre, St Kitts

Florida


Human Resources



In 2004, the human resources initiative focused on
upgrading the information technology
infrastructure. The implementation of a web
enabled, integrated human resources information
system (HRIS) and payroll system began early in
the year and the project has already resulted in
efficiencies that affect the operations of the
Human Resources Unit in terms of time and
quality. Among the HRIS modules completed
were the organization structure, position control
and employee vital information, payroll, benefits
administration and recruitment.








CENTRAL BANK OF BELIZE


The fifth Central Bank of Belize's Employee
Recognition Ceremony was held under the theme
"With ordinary talent and extraordinary
perseverance, all things are attainable". The
previous year's strategy of recognizing and
reinforcing positive attitude and performance
standards was expanded to include the objective
of encouraging commitment to the
organizations' long term goals. Awards for ten,
fifteen and twenty years of service were
presented to qualifying staff. However, the focal
point of the ceremony was the introduction of
the 'Governor's Choice' award redefined in the
form of a scholarship to the University of Belize
to encourage and assist the employee who had
demonstrated significant commitment to the
Bank by longevity and quest for higher learning
in a discipline that is relevant to the Bank. The first
such Awardee was Mr. Elston Pollard, a senior
clerical officer in the Research Department who
joined the Bank in 1991.

In August of2004, the Bank hosted the VII Annual
Conference of Human Resources Managers of
Caribbean Central Banks with the theme "Human
Resource Management Linking Efficiency &
Effectiveness". The focus was on specific issues
that affect employees' performance and influence
their ability to contribute positively to organizational
goals and objectives.

During the last quarter of 2004, the Central Bank
committed to establishing an HIV/AIDS
sensitive workplace behaviour communication


strategy in support of the HIV/AIDS Workers
Education Project that was launched by the
Government of Belize, in collaboration with the
International Labor Organization (ILO) and the
United States Department of Labor (USDOL).
The primary objectives of this project are to
contribute towards the reduction of HIV/AIDS
risk behavior among the target group and to
reduce the level of employment related
discrimination against people who are HIV
positive.

Management-employee communications
continued to be emphasized through the Bank's
quarterly newsletter, "The JabiViews".
Preparation of the latter was facilitated by an
editorial committee comprised of supervisory
and professional staff and written contributions
by staff on the affairs and decisions of the
workplace were welcomed.

Staffing

As at 31 December 2004, the Central Bank's staff
totalled 133 out of 136 established positions. Of
the total persons employed, 32 were on contract
and 2 were employed on a temporary basis. From
12% in the previous year, the staff turnover rate
fell to 5% with seven separations occurring and
twelve new staff members being hired. Of note
was the return of Deputy Governor Yvette Alvarez
in December 2004 after a thirteen month hiatus with
Central Government.


ANNUAL REPORT 2004








ADMINISTRATION


Staff Development & Training

As in 2003, the Bank's training focused on
providing the requisite knowledge and skills to
strengthen both the economic intelligence and
operational arms of the Bank. Several staff
members at management level attended a number
of international courses/workshops. Local
training was also arranged to enable employees
to hone their supervisory skills. The Bank also
supported staff members that undertook further
self-development to enhance job performance.


Community Service


In support of the University of Belize's Internship
Programme, three students worked temporarily in
various departments to meet core requirements for
graduation. Four senior secondary school students
also did work-study for an average of two weeks.
In addition, the Bank sponsored a ten-week Summer
Employment Programme for ten students


enrolled at a tertiary level institution. The
programme provided paid employment and skills
development to the students while facilitating
the vacation schedule for auxiliary staff and
assisting in addressing backlogged clerical
functions.

Staff members and the Central Bank continued
to support other social projects during the year
through contributions to the Salvation Army's
Annual Christmas Appeal, the Belize Cancer
Society and the food and clothing drive for persons
living with HIV/AIDS.



Published Papers


In 2004, "Update on the Economy of Belize" by
Azucena Quan Novelo was published in Carib-
bean Dialogue Vol. 9 no 1 (Sir Arthur Lewis
Institute of Social and Economic Studies)


N











STATISTICAL APPENDIX


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

$mn


Primary Industries
Agriculture & forestry
Fishing
Mining
Secondary Industries
Manufacturing
Electricity & Water
Construction
Tertiary Industries
Wholesale & retail trade
Hotels & restaurants
Transport & Communications
Finance intermediation
Real estate & business services
Community, social & other services
General government services
Less: Financial Services Indirectly
All Industries at basic prices
Taxes less subsidies on products
GDP at market prices


252.8
181.6
62.2
9.0
300.5
159.2
58.4
82.8
938.1
270.5
58.5
141.7
103.7
98.2
100.7
164.8
35.2
1,456.2
208.6
1,664.7


237.9
168.8
59.7
9.4
301.5
155.6
62.2
83.7
1,017.0
288.4
66.8
158.4
111.7
112.1
105.4
174.1
55.7
1,500.7
236.9
1,737.6


245.5
173.0
63.4
9.0
309.5
156.5
64.4
88.6
1,108.8
301.8
68.4
184.0
133.3
124.9
108.6
187.7
74.4
r 1,589.3
263.7
1,853.0


291.7
184.4
98.1
9.2
292.4
157.8
59.4
75.3
1,196.4
305.2
83.6
186.8
163.7
129.3
121.6
206.2
91.3
1,689.2
272.4
1,961.6


288.6
186.2
92.6
9.8
321.7
175.7
63.6
82.4
1,266.6
305.8
97.5
199.8
172.0
140.9
135.1
215.5
95.3
1,781.6
289.5
2,071.2


Source: Central Statistical Office

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

Percent

Primary Industries 15.2 13.7 13.2 14.9 13.9
Agriculture & forestry 10.9 9.7 9.3 9.4 9.0
Fishing 3.7 3.4 3.4 5.0 4.5
Mining 0.5 0.5 0.5 0.5 0.5
Secondary Industries 18.0 17.4 16.7 14.9 15.5
Manufacturing 9.6 9.0 8.4 8.0 8.5
Electricity & Water 3.5 3.6 3.5 3.0 3.1
Construction 5.0 4.8 4.8 3.8 4.0
Tertiary Industries 56.4 58.5 59.8 61.0 61.2
W wholesale & retail trade 16.2 16.6 16.3 15.6 14.8
Hotels & restaurants 3.5 3.8 3.7 4.3 4.7
Transport & Communications 8.5 9.1 9.9 9.5 9.6
Finance intermediation 6.2 6.4 7.2 8.3 8.3
Real estate & business services 5.9 6.5 6.7 6.6 6.8
Community, social & other services 6.1 6.1 5.9 6.2 6.5
General government services 9.9 10.0 10.1 10.5 10.4
Less: Financial Services Indirectly 2.1 3.2 4.0 4.7 4.6
All Industries at basic prices 87.5 86.4 85.8 86.1 86.0
Taxes less subsidies on products 12.5 13.6 14.2 13.9 14.0
GDP at market prices 100.0 100.0 100.0 100.0 100.0
Source: Central Statistical Office
Figures in Table 1 may not reflect these percentages due to rounding









APPENDIX


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


Primary Industries
Agriculture & forestry
Fishing
Mining
Secondary Industries
Manufacturing
Electricity & Water
Construction
Tertiary Industries
Wholesale & retail trade
Hotels & restaurants
Transport & Communications
Finance intermediation
Real estate & business services
Community, social & other services
General government services
Less: Financial Services Indirectly Measured
All Industries at basic prices
Taxes less subsidies on products
GDP at market prices


252.8
181.6
62.2
9.0
300.5
159.2
58.4
82.8
938.1
270.5
58.5
141.7
103.7
98.2
100.7
164.8
-35.2
1,456.2
208.6
1,664.7


252.1
178.0
64.9
9.3
300.7
158.1
58.6
83.9
1,000.8
290.2
66.4
152.9
103.8
110.9
102.2
174.4
-52.1
1,501.6
240.0
1,741.5


252.9
183.9
60.3
8.8
307.8
160.5
60.2
87.0
1,074.1
301.8
68.0
163.7
131.1
121.7
106.5
181.2
-73.4
1,561.4
262.3
1,823.7


348.1
212.4
126.9
8.8
296.6
159.8
65.3
71.5
1,158.7
306.1
77.9
177.0
172.5
123.1
110.6
191.4
-97.3
1,706.0
284.9
1,990.9


379.9
237.6
133.0
9.3
318.2
179.1
64.3
74.7
1,197.1
305.0
90.0
187.6
178.8
129.4
113.6
192.7
-101.4
1,793.7
288.9
2,082.6


Source: Central Statistical Office

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

Percent

Primary Industries 11.9 -0.3 0.3 37.6 9.1
Agriculture & forestry 7.7 -2.0 3.3 15.5 11.9
Fishing 24.5 4.2 -7.1 110.5 4.8
Mining 23.7 3.4 -5.7 0.5 4.9
Secondary Industries 24.7 0.1 2.3 -3.6 7.3
Manufacturing 24.2 -0.7 1.5 -0.4 12.1
Electricity & Water 9.7 0.4 2.7 8.4 -1.4
Construction 39.0 1.3 3.7 -17.9 4.6
Tertiary Industries 11.0 6.7 7.3 7.9 3.3
Wholesale & retail trade 12.5 7.3 4.0 1.4 -0.4
Hotels & restaurants 10.6 13.5 2.5 14.5 15.5
Transport & Communications 13.1 7.9 7.1 8.1 5.9
Finance intermediation 46.1 0.0 26.4 31.5 3.7
Real estate & business services -2.8 13.0 9.7 1.1 5.1
Community, social & other services 1.6 1.5 4.2 3.9 2.7
General government services 6.3 5.8 3.9 5.6 0.6
Less: Financial Services Indirectly Measured 7.7 48.0 40.8 32.6 4.2
All Industries at basic prices 13.8 3.1 4.0 9.3 5.1
Taxes less subsidies on products 7.5 15.1 9.3 8.6 1.4
GDP at market prices 13.0 4.6 4.7 9.2 4.6
Source: Central Statistical Office
* Figures in Table 3 may not reflect these percentages due to rounding









CENTRAL BANK OF BELIZE A


Table 5: GDP by Expenditure


in Current Prices


GDP in $mn
Gov't. final consumption expenditure
Private final consumption expenditure
Gross capital formation
Changes in inventories including discrepancy
Gross Domestic Expenditure
Exports: goods & services
Imports: goods & services
Net Exports
Discrepancy
GDP market prices

Percent Distribution of GDP
Gov't. final consumption expenditure
Private final consumption expenditure
Gross capital formation
Exports: goods & services
Imports: goods & services
Net Exports
GDP market prices


214.8
1,231.8
477.0
50.7
1,974.3
881.5
1,226.0
-344.5
35.0
1,664.7


12.9
74.0
28.7
53.0
73.6
-20.7
100.0


228.3
1,357.4
438.4
-6.2
2,017.9r
887.0
1,204.9
-317.9
37.6
1,737.6


13.1
78.1
25.2
51.0
69.3
-18.3
100.0


266.8
1,456.8
421.5
23.0
2,168.2
980.3
1,233.4
-253.1
-62.1
1,853.0


14.4
78.6
22.7
52.9
66.6
-13.7
100.0


289.6
1,519.8
374.8
31.1
2,215.3
1,055.4
1,306.0
-250.6
-3.1
1,961.6


14.8
77.5
19.1
53.8
66.6
-12.8
100.0


300.9
1,632.8
373.3
36.8
2,343.8
1,002.6
1,239.7
-237.1
-35.5
2,071.2


14.5
78.8
18.0
48.4
59.9
-11.4
100.0


Source: Central Statistical Office


Table 6: GDP by Expenditure in Constant 2000 Prices


GDP in $mn
Gov't. final consumption expenditure 214.8 227.9 257.8 270.2 270.9
Private final consumption expenditure 1,231.8 1,346.7 1,432.8 1,475.3 1,542.9
Gross capital formation 477.0 447.2 423.3 364.0 344.4
Changes in inventories including discrepancy 50.7 -6.3 19.7 31.1 43.3
Gross Domestic Expenditure 1,974.3 2,015.5 2,133.6 2,140.6 2,201.5
Exports: goods & services 881.5 916.7 996.1 1,127.8 1,112.8
Imports: goods & services 1,226.0 1,216.2 1,248.1 1,274.5 1,180.6
Net Exports -344.5 -299.5 -252.0 -146.7 -67.8
Discrepancy 35.0 25.5 -57.9 -3.0 -51.1
GDP market prices 1,664.7 1,741.5 1,823.7 1,990.9 2,082.6

Percent Distribution of GDP
Gov't. final consumption expenditure 12.9 13.1 14.1 13.6 13.0
Private final consumption expenditure 74.0 77.3 78.6 74.1 74.1
Gross capital formation 28.7 25.7 23.2 18.3 16.5
Exports: goods & services 53.0 52.6 54.6 56.6 53.4
Imports: goods & services 73.6 69.8 68.4 64.0 56.7
Net Exports -20.7 -17.2 -13.8 -7.4 -3.3
GDP market prices 100.0 100.0 100.0 100.0 100.0
Source: Central Statistical Office


ANNUAL REPORT 2004










APPENDIX


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

$mn






Primary Sector 116.7 135.7 145.1 9.4
Agriculture 77.5 87.7 96.2 8.5
Marine Products 25.6 26.5 25.1 -1.4
Forestry 1.7 3.7 1.8 -1.9
Mining & Exploration 11.9 17.8 22.0 4.2

Secondary Sector 253.6 277.7 339.2 61.5
Manufacturing 23.0 12.6 14.9 2.3
Building & Construction 201.7 232.5 258.7 26.2
Utilities 28.9 32.6 65.6 33.0

Tertiary Sector 342.7 419.9 494.6 74.7
Transport 27.2 38.4 38.7 0.3
Tourism 51.8 73.1 84.5 11.4
Distribution 150.5 162.4 165.2 2.8
Other* 113.2 146.0 206.2 60.2

Personal Loans 191.5 208.4 197.1 -11.3
Total 904.5 1041.7 1176.0 134.3
Includes government services, real estate, financial institutions,
professional services, and entertainment.

Table 8: Commercial Banks' Weighted Average Interest Rates

Percentages





Weighted Lending Rates
Personal Loans 15.9 15.8 15.5 -0.3
Commercial Loans 14.3 13.9 14.0 0.1
Residential Construction 13.3 12.4 12.6 0.2
Other 10.1 10.6 10.1 -0.5
Weighted Average 14.5 14.2 14.0 -0.2
Weighted Deposit Rates
Demand 0.4 0.4 0.5 0.1
Savings/Cheque 5.2 5.1 5.1 0.0
Savings 5.1 5.1 5.1 0.0
Time 6.5 7.2 7.6 0.4
Weighted Average 4.5 4.9 5.2 0.3
Weighted Average Spread 10.0 9.3 8.8 -0.5










CENTRAL BANK OF BELIZE A


Table 9: Balance Of Payments Summary
Bz$mn

CURRENT ACCOUNT -365.2 -414.9 -364.7
Goods: Exports f.o.b. 619.4 631.0 613.9
Goods: Imports f.o.b. -993.8 -1,044.7 -961.5
Trade Balance -374.4 -413.7 -347.7
Services: Credit 313.9 357.3 398.3
Transportation 36.2 44.3 54.8
Travel 205.8 234.3 265.9
Other Goods & Services 41.6 46.5 53.9
Gov't Goods & Services 30.2 32.2 23.8
Services: Debit -260.9 -278.1 -291.3
Transportation -74.9 -78.6 -88.5
Travel -85.1 -88.3 -82.3
Other Goods & Services -83.2 -92.9 -104.1
Gov't Goods & Services -17.8 -18.3 -16.3
Balance on Goods & Services -321.4 -334.4 -240.6
Income: Credit 7.9 8.4 7.9
Compensation of Employees 3.8 5.0 4.9
Investment Income 4.1 3.4 3.0
Income: Debit -145.7 -179.4 -236.1
Compensation of Employees* -8.4 -10.9 -12.4
Investment Income -137.3 -168.5 -223.7
Balances on Goods, Services & Income -459.3 -505.4 -468.8
Current Transfers, n.i.e.: Credit 98.2 95.5 108.6
Current Transfers: Debit -4.1 -4.9 -4.4
CAPITAL ACCOUNT, n.i.e. 22.9 3.0 8.5
Capital Account, n.i.e.: Credit 25.1 4.9 10.0
Capital Account: Debit -2.2 -1.8 -1.5
FINANCIAL ACCOUNT, n.i.e. 280.7 368.7 259.2
Direct Investment Abroad 0.0 -0.7 -0.1
Direct Investment in Belize, n.i.e. 48.5 -2.7 255.1
Portfolio Investment Assets 0.0 -0.3 -0.5
Portfolio Investment Liabilities, n.i.e. 253.2 151.1 151.3
Financial Derivatives Assets 1.7 1.4 1.1
Financial Derivatives Liabilities 0.0 0.0 0.0
Other Investment Assets 6.7 -26.6 -14.8
Other Investment Liabilities -29.4 246.6 -132.9
NET ERRORS & OMISSIONS 50.9 -17.0 34.3
OVERALL BALANCE -10.9 -60.1 -62.7
RESERVE ASSETS (Minus = increase) 10.9 60.1 62.7
*Payments to non-resident workers w ere revised from 1999 to 2004 based on a field survey
of seasonal and border workers conducted in 2004.


ANNUAL REPORT 2004










APPENDIX


Table 10: Gross Imports (CIF) by SITC Categories
$mn

0 Food and Live Animals 106.3 118.8 107.8 118.7 109.2
1 Beverages and Tobacco 7.5 7.7 8.3 8.9 9.8
2 Crude Materials 8.0 11.6 7.5 6.7 7.3
3 Fuels and Lubricants 170.1 159.7 139.3 161.2 184.3
Of which electricity 15.0 16.9 23.8 28.4 29.7
4 Animal and Vegetable Oils 4.0 3.2 3.1 3.3 3.2
5 Chemicals 84.8 71.7 85.0 82.7 76.3
6 Manufactured Goods 143.8 136.2 128.2 128.7 136.8
7 Machinery and Transport Equipment 237.1 230.5 208.5 203.7 175.9
8 Miscellaneous Manufactured Goods 64.5 75.9 80.5 103.2 81.8
9 Co m oddities not classified elsewhere 0.4 0.4 0.2 0.9 0.0
Export Processing Zones 100.6 87.0 79.9 130.7 113.9
Personal Goods 3.1 4.3 3.2 3.4 2.6
Total 930.2 906.8 851.5 952.1 901.3
CFZ Direct Im ports 114.5 132.0 221.3 180.5 156.6
Grand Total 1,044.7 1,038.8 1,072.8 1,132.6 1,057.9
Sources: Central Statistical Office; Central Bank

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





Overdraft 76,937 0 0 8,639 15,050 91,987
Central Bank 74,121 0 0 8,639 8,377 82,498
Co m ercial Banks 2,816 0 0 0 6,673 9,489

Treasury Bills 100,000 0 0 2,626 0 100,000
Central Bank 81,413 0 0 1,979 -8,776 72,637
Commercial Banks 13,896 0 0 548 10,978 24,874
Other 4,691 0 0 99 -2,202 2,489

Treasury Notes 24,000 0 0 2,175 0 24,000
Central Bank 0 0 0 0 158 158
Commercial Banks 23,269 0 0 2,095 0 23,269
Other 731 0 0 80 -158 573

Defence Bonds 15,000 0 0 1,250 0 15,000
Central Bank 10,000 0 0 800 0 10,000
Commercial Banks 100 0 0 90 0 100
Other 4,900 0 0 360 0 4,900

Loans 42,847 9,000 1,925 2,091 0 49,922
DFC (Debt Restructuring) 8,431 0 500 492 0 7,931
BSSB (Housing) 691 0 13 42 0 678
BBL (Cohune Walk) 2,978 0 278 462 0 2,700
GOB/US Debt Swap 14,747 0 1,134 344 0 13,613
BBL (Infrastructure dev.) 15,000 9,000 0 751 0 24,000
Guardian Life Bze 1,000 0 0 90 0 1,000

TOTAL 258,784 9,000 1,925 16,781 15,050 280,909
R = Revised
P= Provisional
*Since October of 1998 Treasury Notes are being subscribed to in $US
They are now therefore, considered part of Foreign Liabilities How ever interest is still paid in local currency











CENTRAL BANK OF BELIZE / ANNUAL REPORT 2004

Table 12: Government of Belize Revenue and Expenditure

$'000




TOTAL REVENUE& GRANTS (1+2+3) 487,162 520,347 524,933 453,406 523,639
1).Current revenue 424,300 498,084 425,759 422,190 461,993
Taxrevenue 379,795 451,372 354,036 370,231 419,308
Income and profits 89,113 101,955 78,025 86,282 99,715
Taxes on property 6,142 20,020 2,724 2,423 3,810
Taxes on goods and services 120,033 135,045 111,447 118,657 145,534
Int'l trade and transactions 164,507 194,352 161,840 162,869 170,249

Non-Tax Revenue 44,505 46,712 71,723 51,959 42,685
Propertyincome 3,274 5,155 3,323 2,274 6,419
Licenses 0 11,837 0 0 9,866
Contributions to pension fund 0 0 0 0 0
Transfers from NFPE's 0 20,955 500 0 16,664
Repaymentof old loans 0 647 31,927 18,541 893
Other 31,247 8,118 35,973 31,144 8,843

2). Capital revenue 39,149 6,250 67,523 24,829 26,478
3). Grants & Debt Service Receipts 23,713 16,013 31,651 6,387 35,168

TOTAL EXPENDITURE (1+2) 645,425 554,113 593,756 666,992 648,898
1). Current Expenditure 401,033 424,424 333,445 393,048 467,985
Wages and Salaries 190,726 214,058 167,519 186,672 207,925
Pensions 26,665 23,901 25,115 26,682 31,087
Goods and Services 73,437 70,522 61,597 74,406 75,184
Interest Payments on Public Debt 81,336 82,604 51,758 77,403 121,489
Subsidies & currenttransfers 28,869 33,339 27,456 27,885 32,300

2). Capital Expenditure 244,392 129,689 260,311 273,944 180,913
Capital II (local sources) 72,337 59,342 108,771 89,627 59,659
Capital III (foreign sources) 95,275 70,347 134,840 99,142 87,754
of which Hurricane ERF 0 0 26,021 2,454 0
Capital Transfer & Net Lending 53,780 0 16,700 49,175 0
Unidentified Expenditure 23,000 36,000 33,500

CURRENT BALANCE 23,267 73,660 92,314 29,142 -5,992
OVERALL BALANCE -158,263 -33,766 -68,823 -213,586 -125,259
balance excluding Hurricane ERF -158,263 -33,766 -42,802 -211,132 -125,259

FINANCING 158,263 33,766 68,823 213,586 125,259
Domestic Financing -161,224 -220,877 -62,396 -39,351
Central Bank -9,431 -52,728 76,290 74,574
NetBorrowing 56,897 -14,360 101,739 -399
Change in Deposits -66,328 -38,368 -25,449 74,973
Commercial Banks -20,833 -29,195 -1,599 18,776
Net Borrowing -25,746 -24,891 -8,002 26,564
Change in Deposits 4,913 -4,304 6,403 -7,788
Transaction with DFC (debt) 0 -145,000 -127,998 -130,000
Other Domestic Financing -130,960 6,046 -9,089 -2,701
Financing Abroad 320,217 278,328 276,712 164,862
Disbursements 552,836 472,991 499,488 432,916
Amortization -100,041 -153,808 -100,876 -248,054
Interest& Penanties prepaymt 0 -3,654 0 0
Partial paymentfor BTL shares -114,000 0 -104,000 -10,000
Sinking Fund & JCF -18,578 -37,201 -17,900 -10,000
Other -732 11,372 -730 -252
Sources Ministry of Finance, Central Bank of Belize










APPENDIX


Table 13: Public Sector External Debt by Creditors


$'000






CENTRAL GOVERNMENT 1,417,449 432,915 248,052 109,454 2,840 1,605,151
Banco Nacional de Comercio Exterior 8,454 545 0 547 0 8,999
Fondo de Financ. de las Exportaciones 1,198 0 218 69 0 980
Government of Great Britain 16,558 0 5,350 0 1,151 12,359
Government of Peoples Rep. of China 174 0 58 0 0 116
Government ofthe United States* 9,164 0 1,371 325 0 7,792
Government of Trinidad and Tobago 28 0 4 1 0 24
Kuwait Fund for Arab Economic Dev 21,225 486 1,140 850 10 20,581
Republic of China 176,643 33,108 14,645 11,022 0 195,106
Caribbean Development Bank 61,019 25,959 2,511 2,447 0 84,468
European Economic Community 19,192 0 831 152 1,528 19,889
European Investment Bank 1,238 0 271 35 86 1,052
Inter-American Development Bank 127,480 15,100 3,207 4,321 0 139,373
International Fund for Agric. Dev. 2,317 361 683 98 65 2,060
Intl. Bank for Reconstruction & Dev. 71,869 2,992 6,513 2,685 0 68,348
Opec Fund for Int'l. Development 7,847 519 533 392 0 7,833
Allfirst Bank ofMaryland 3,780 0 840 222 0 2,940
Bear Stearns & CO. Inc. 450,000 0 0 43,250 0 450,000
Citibank, Trinidad & Tobago 15,429 0 3,429 1,444 0 12,000
Citicorp Merchant Bank Ltd. 51,429 0 2,857 4,642 0 48,571
CMFS Note Holders 0 157,910 0 5,063 0 157,910
International Bank ofMiami++ 228,505 56,730 192,730 14,271 0 92,505
KBC Bank NV 7,477 0 1,869 382 0 5,607
Provident Bank & Trust of Belize 1,829 0 1,455 102 0 374
Royal Merchant Bank 77,750 139,204 5,955 11,400 1 211,000
Salomon Smith Barney** 52,030 0 0 5,384 0 52,030
Belize Estate and Co. Ltd. 2,930 0 1,302 313 0 1,628
Caterpillar Financial Services Corp. 1,325 0 0 0 0 1,325
Export Import Bank of the United States 560 0 280 36 0 280
0
NON-FINANCIAL PUBLIC SECTOR 14,273 0 2,160 1,043 12 12,125
Kuwait Fund for Arab Economic Dev 8,820 0 690 352 12 8,141
CIBC Bank & Trust Company 5,454 0 1,470 691 0 3,984
0
FINANCIAL PUBLIC SECTOR 74,090 493 10,510 2,432 686 64,760
Caribbean Development Bank 46,084 493 3,267 1,754 13 43,322
European Economic Community 618 0 27 5 49 640
European Investment Bank 11,402 0 594 120 625 11,432
Citibank, Trinidad & Tobago 3,750 0 2,500 104 0 1,250
Citicorp Merchant Bank Ltd. 3,750 0 2,500 104 0 1,250
Paine Webber Real Estate Securities Inc. 2,000 0 100 16 0 1,900
Government ofthe United States 2,531 0 391 73 0 2,140
N.V. De Smet S.A. Engineers 3,955 0 1,130 256 0 2,825
GRAND TOTAL 1,505,813 433,408 260,721 112,929 3,538 1,682,036
Effective 31st March 2001, WASA loans were re-classified as private sector debt as a result of its full privatization
Effective 31st December, 2002 BPA Loans of Bz $23 8 mn were re-classified as private sector debt as a result of its full privatization
Outstanding external debt of private entities remained as a contingent liability of Central Government
* USAID Debt for Nature Swap Agreement as at 2ndAugust, 2001 was implemented on 30th November, 2001 for BZ $17,168
**Solomon Smith Barney Bond of US$29 Imn (established a US$20 mn sinking fund in 2002, additional deposit of $6 7mn in 03 )
++ Principal payments of (BZ$190 7mn) was part of a reprofiling arrangement with TIBOM Loans that formed part of the package were
US$50mn due in Nov 04, US$30mn due in Dec 04 andUS$15 3mn due in Jan 05
CMFS Capital Markets Financial Services
























CENTRAL BANK OF BELIZE

2004 FINANCIAL STATEMENTS




















CENTRAL BANK OF BELIZE

2004 Financial Statements



CONTENTS


PAGE

Auditors' report 1

Balance sheet 2 3

Statement of income 4

Statement of cash flows 5 6

Notes to the financial statements 7 -17











Horwath Hrwath Belize
Assurance and business advisory services
Jasmine Court, Suite 201
35A Regent Street P 0. Box 756
Belize City. Belize
Tel 501-227-6860.6861 6629
Fax S01-227-6072
E-mail eallp@btl.net
www.horwathbelize.com




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 2004, 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 responsibility 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 give a true and fair view of the financial position of Central Bank
of Belize as of 31 December 2004, and of the results of its operations and its cash flows for the year then
ended in accordance with International Financial Reporting Standards adopted by the International
Accounting Standards Board.





16 February 2005


Hoieah Slize is on independent member of HmrwaUh inernaolonaLr wii offices and associate firms Worldwla Prtnen S/P frmeov F Fellow of the tnstorute n Cinrrered
Acaouwntotl in England and Wales, and Lisa Zaoyen AiMS Maketing. Member of the Amerian Markeltng Assocaio;n


















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 2004,
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 responsibility 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 give a true and fair view of the financial position of Central Bank
of Belize as of 31 December 2004, and of the results of its operations and its cash flows for the year then
ended in accordance with International Financial Reporting Standards adopted by the International
Accounting Standards Board.


16 February 2005







Page 2


CENTRAL BANK OF BELIZE
BALANCE SHEET
At 31 December 2004
In Belize dollars.

Assets


APPROVED EXTERNAL ASSETS

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



BELIZE GOVERNMENT SECURITIES


BELIZE GOVERNMENT CURRENT ACCOUNT


Notes


5,2e


LOANS TO PUBLIC SECTOR


LOANS TO COMMERCIAL BANKS


2004


34,325,054

18,195,786
13,220,000
11,242,717

2,000,000

78,983,557

82,795,204


80,659,575


32,521,712


2003


119,873,204

17,164,707
10,000,000
2,665,371

2,000,000

151,703,282

91,412,770


72,444,782


10,000,000


5,124,086


BALANCES WITH LOCAL BANKERS AND CASH
ON HAND


OTHER ASSETS


PROPERTY AND EQUIPMENT


2a, 12


84,329


6,799,470


31,142,567


177,421


5,830,660


31,795,295


TOTAL ASSETS


312,986,414 368,488,296


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









Page 3


CENTRAL BANK OF BELIZE
BALANCE SHEET
At 31 December 2004 (Continued)
In Belize dollars.

LIABILITIES, CAPITAL AND RESERVES

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


BALANCES DUE TO CARICOM CENTRAL BANKS

OTHER LIABILITIES

COMMERCIAL BANK DISCOUNT FUND

GOVERNMENT SINKING FUND

BELIZE CREDIT FACILITY

LOANS PAYABLE TO FOREIGN INSTITUTIONS

TOTAL LIABILITIES

REVALUATION ACCOUNT

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


GENERAL RESERVE FUND 21

TOTAL LIABILITIES, CAPITAL AND RESERVES


) ~GOVERNOR

-" t t-~ ) DIRECTOR

<-'^U t--^ ) DEPUTY GOVERNOR


2004


NOTES



13


14





15

16

17

18

19



2c,20


2003


127,626,959
75,071,727

55,553,007
4,969,109

263,220,802
820,132

7,241,963

1,815,643

54,210,070

7,961,159

7,500,000


285,888,473 342,769,769

3,658,886 2,872.621


10,000,000 10,000,000

13,439,055 12,845,906


312,986,414


368,488,296


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


141,949,684
87,893,652

13,746,883
2,703,774

246,293,993
87,918

6,485,698

1,656,124

20,210,971

8,653,769

2,500,000








CENTRAL BANK OF BELIZE
STATEMENT OF INCOME
For the year ended 31 December 2004
In Belize dollars.

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


Discounts on local securities
Commission and other income

TOTAL INCOME


LESS: Interest expense
Income from operations


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


Total expenditure


NET PROFIT
NET PROFIT TRANSFERABLE TO THE GENERAL
RESERVE FUND AND CONSOLIDATED FUND
Transfer to general reserve fund in accordance with
section 9(1) of the Act
Balance credited to the accountant general for the
consolidated revenue fund


15,066,268 11,957,604
2,383,557 1,919,806
2,075,290 2,445,846

19,525,115 16,323,256


(3,774,953) (2,753,468)
15,750,162 13,569,788


(1,248,113) (1,107,715)

(5,153,161) (5,406,102)
(881,583) (849,185)
(2,535,818) (2,677,755)

(9,818,675) (10,040,757)


5,931,487 3,529,031


5,931,487 3,529,031


(593,149) (352,903)


5,338,338 3,176,128


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


Page 4


NOTES


2004


2003


2,953,341
8,560,116
800,825
2,751,986


3,432,725
6,316,883
800,000
1,407,996







Page 5


CENTRAL BANK OF BELIZE
STATEMENT OF CASH FLOWS
For the year ended 31 December 2004
In Belize dollars.


2004


2003


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

Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Belize Government current account
Loans to public sector/commercial bank
Acquisition of property and equipment
Proceeds from sale of assets
Reserve tranche in the IMF
Construction bonds
Net cash (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes and coins in circulation
Deposits by licensed financial institutions
Deposits by and balances due to Governments and Public Sector
entities
Government sinking fund
Deposits by international agencies
Balances due to Caricom central banks
Commercial Bank Discount Fund
Belize credit facility
Loan repayment made to foreign institutions

Net cash (used in) provided by financing activities


593,149


57,815
881,583
(10,649)

(1,026,625)
(756,265)
786,265


352,903



849,185
30,852

(1,356,361)
4,110,349
1,684,303


525,273 5,671,231


(8,214,793) (72,444,782)
(17,397,626) (124,086)
(229,207) (2,413,874)
11,000
(565,496) (1,106,444)
(6,000,000)
(26,396,122) (82,089,186)


14,322,725 (5,046,646)
12,821,925 18,064,185

(41,806,124) 20,608,916
(33,999,099) 14,040,012
(2,265,335) 504,978
(732,214) (679,572)
(159,519) (143,803)
692,610 733,682
(5,000,000) (5,000,000)

(56,125,031) 43,081,752


The accompanying notes form an integral part of these financial statements









Page 6


CENTRAL BANK OF BELIZE
STATEMENT OF CASH FLOWS
For the year ended 31 DECEMBER 2004 (Continued)

In Belize dollars.


2004


2003


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

CASH AND CASH EQUIVALENTS, END OF YEAR


CASH AND CASH EQUIVALENTS COMPRISE THE
FOLLOWING:

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




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


(81,995,880)


220,759,019


(33,336,203)


254,095,222


138,763,139 220,759,019






36,325,054 121,873,204
13,220,000 10,000,000
11,242,717 2,665,371
5,095,835 4,630,253


65,883,606 139,168,828


84,329 177,421
72,637,204 81,412,770
158,000
138,763,139 220,759,019


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%
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 (CONTINUED)

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.

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

h. Certain accounts from prior year 2003 have been reclassified to confirm to current year
presentation.











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


3. CENTRAL BANK OF BELIZE ACT SECTION 5 COMPLIANCE

Section 5 of the Act stipulates that:

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

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

At 31 December 2004 and 2003 total approved external assets approximated 32 percent and 58
percent of such liabilities respectively.


4. 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 2004, 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 BZ$3.1060 to SDR 1.0 at 31 December 2004 (2003 Bz$2.9719 to SDR
1.0).










Page 10


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


5. ACCRUED INTEREST AND CASH TRANSIT

Accrued interest and cash intransit consist of:


Accrued interest
Cash intransit


6. MARKETABLE SECURITIES ISSUED OR GUARANTEED
GOVERNMENTS AND FOREIGN FINANCIAL INSTITUTIONS


BY FOREIGN


These securities consist of 3% debentures issued by the Government of Dominica and maturing in
2006. The Bank has the intent and ability to hold these securities to maturity.


7. BELIZE GOVERNMENT SECURITIES

Belize Government securities consist of:


2004


Treasury Bills
Treasury Notes
Belize Defense Bonds


72,637,204
158,000
10,000,000

82,795,204


2003


81,412,770

10,000,000

91,412,770


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 2004 and 2003 the Bank's
aggregate holding of Belize Government securities approximated 3.53 times and 4 times,
respectively, the amount of paid up capital and general reserves of the Bank. The carrying
amount of these investments approximates fair value due to their short maturity.


2004


2003


978,465
10,264,252

11,242,717


1,265,538
1,399,833

2,665,371









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


8. BELIZE GOVERNMENT CURRENT ACCOUNT

In accordance with Section 34 of the Act, the Bank may make direct advances to the Government
provided that at any one time the total outstanding amount of direct advances shall not exceed
twenty percent of the current revenues of the Government collected during the preceding financial
year or the sum of fifty million dollars, whichever is greater. At 31 December 2004 and 2003
advances to Government represent approximately 96 percent and 90 percent of the authorized
limit respectively.


9. LOANS TO THE PUBLIC SECTOR


2004


2003


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. The loan is guaranteed by the
Government of Belize.


11% p.a. short-term loan maturing on 30 June 2005,
guaranteed by the Government of Belize.


5,000,000 10,000,000



27,521,712


32,521,712


10,000,000


10. LOANS TO COMMERCIAL BANKS


2004


2003


11% p.a. short-term loan due from a commercial bank
maturing on 25 February 2004. The loan is secured by the
assignment of a DFC Bond maturing in 2007 for the same
amount.

11% p.a. short-term loan due from a commercial bank
maturing on 12 March 2004. The loan is secured by a
promissory note signed by the Government of Belize.


2,500,000



2,624,086


5,124,086









Page 12


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


11. OTHER ASSETS

Other assets consist of:


Inventory of note and coins
Prepayments and accrued interest
Accounts receivable
Museum endowment fund
Other


Less: amortization


Museum endowment fund is amortized over 10 years commencing 2004.


12. PROPERTY AND EQUIPMENT

Property and equipment consist of:


Property
Furniture
Equipment
Vehicles
Work in progress


Less: accumulated depreciation


31,142,567 31,795,295


2004


1,976,485
3,113,519
1,094,290
578,150
94,841

6,857,285
57,815

6,799,470


2003

3,210,169
941,221
1,017,114
578,150
84,006

5,830,660


5,830,660


2004


2003


30,441,554
1,039,276
4,613,004
346,648
175,416

36,615,898
5,473,331


30,441,554
1,024,817
4,439,120
390,071
135,237

36,430,799
4,635,504







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


13. DEPOSITS BY LICENSED FINANCIAL INSTITUTIONS

Under the revised provisions of Section 13 of the Banks Financial Institutions Act 1995, licensed
financial institutions are required to keep on deposit with the Bank an amount equivalent to at
least 7% of their average deposit liabilities.

Under Section 21 A (1) of the International Banking Act, licensed financial offshore institutions
are required to maintain an account of a minimum balance of $200,000 with the Bank. These
deposits are interest free.


14. DEPOSITS BY INTERNATIONAL AGENCIES


The Bank acts as agent for and accepts deposits from international financial
December, deposits consist of:
2004


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


15. OTHER LIABILITIES



Interest payable
Severance and gratuities
Abandoned property
Other


1,316,408
148,878
24,705
400,293
716,450
97,040

2,703,774


2004


916,908
714,165
1,424,818
3,429,807


institutions. At 31

2003

2,011,572
142,451
99,538
317,035
716,450
1,682,063

4,969,109


2003

1,093,033
622,002
1,174,068
4,352,860


6,485,698 7,241,963







Page 14
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS
In Belize dollars.


16. COMMERCIAL BANK DISCOUNT FUND

Commercial Bank Discount Fund is a facility which was established by an agreement signed in
March 1983 by the Government of Belize and the United States of America, providing for a
discount fund to be operated through the Bank. The United States Government acting through
United States Agency for International Development (USAID) earmarked US $5 million in loan
funds up to 30 June 1987, to finance this facility. The facility enabled commercial banks in
Belize to discount with the Bank up to 100% of loans made to sub-borrowers for projects
approved by the Bank and USAID. In 1993, USAID and the Bank agreed that Bz $2 million and
Bz $1.5 million from the reflows to the Discount Fund could be used as a line of credit to
National Development Foundation of Belize (the Foundation) and Development Finance
Corporation (DFC), respectively.

The USAID loan has the following terms:

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

At 31 December 2004, outstanding loans discounted by commercial banks through the facility
amounted to nil (2003 $.3 million) net of repayments, against a total drawdown of $5.7 million
from USAID. At that date, reflows drawn down by the Foundation amounted to $1.6 million
(2003 $1.5 million) net of repayments, and by DFC $479,279 (2003 $743,095) net of
repayments.


17. GOVERNMENT SINKING FUND

Government Sinking Fund consists of US$3,164,752 and US$6,940,734 invested by the Bank on
behalf of the Government for a bond issue maturing in 2005.


18. BELIZE CREDIT FACILITY

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

The Bank's responsibility to assist is set out in an agreement signed between the Government and
the Bank on 13 March 1989.







Page 15
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS
In Belize dollars.


19. LOAN PAYABLE TO FOREIGN INSTITUTION

Loan payable to foreign institution consists of:
2004 2003

Due to a foreign institution repayable in 8 installments
commencing 4 November 2001 and every 6 months
thereafter. Interest accrues at 2.82% per annum above
LIBOR for the first 2 years and thereafter at 2% per
annum above LIBOR. The loan was negotiated for
US$5,000,000 for project financing and is secured by a
first-priority charge lien or security interest on a deposit
of US$1,250,000 placed by the Bank with the foreign
institution. 1,250,000 3,750,000

Due to a foreign institution repayable in 8 installments
commencing 4 November 2001 and every 6 months
thereafter. Interest accrues at 2.82% per annum above
LIBOR for the first 2 years and thereafter at 2% per
annum above LIBOR. The loan was negotiated for
US$5,000,000 for project financing and is secured by a
first-priority charge, lien or security interest on a deposit
of US$1,250,000 placed by the Bank with the foreign
institution. 1,250,000 3,750,000
2,500,000 7,500,000


These loans are guaranteed by the Government of Belize.


20. REVALUATION ACCOUNT

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

2004 2003

Net gain on revaluation of Reserve Tranche in the
International Monetary Fund 787,511 1,509,227
Net gain on revaluations during the year 2,871,375 1,363,394


3,658,886 2,872,621







Page 16
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS
In Belize dollars.


21. GENERAL RESERVE FUND

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


2004


Balance at beginning of year

Transfer (to)/from profits


12,845,906


593,149


2003


12,493,003


352,903


Balance at end of year


13,439,055


12,845,906


22. PENSION SCHEME

The Bank operates a defined benefit pension scheme which receives contributions from the Bank
and its eligible employees. During the year under review, the Bank contributed $162,106 (2003-
$144,302) to the scheme. The scheme is financially separate from the Bank and is managed by a
Board of Trustees. The cost of plan benefits is determined using an accrued benefit valuation
method.

The last actuarial valuation at 31 December 2002 reported the present value of past service
liabilities and plan assets to be $2,916,000 and $4,599,000, respectively.


Significant actuarial assumptions used in the valuation were:

I. A valuation rate of interest of 7% p.a.

II. A rate of escalation of pensionable salaries of 5% p.a.

III. Allowance for pensions is not to be increased in course of payments.


23. FINANCIAL INSTRUMENTS

The carrying amounts of cash and cash equivalents, and other short-term instruments and
obligations at the balance sheet date represent best estimates of fair value because of the relative
short-term maturities of these assets and liabilities. Long-term obligations have been contracted
at market terms and their carrying amounts approximate fair value to the extent it is practicable to
estimate.







Page 17
CENTRAL BANK OF BELIZE
NOTES TO THE FINANCIAL STATEMENTS
In Belize dollars.


24. COMMITMENTS AND CONTINGENCIES

a. The Bank is guarantor to the Government of Belize in a United States dollar/Japanese Yen
currency swap agreement with Citicorp. This agreement will terminate in June 2005.
Periodically, the swap agreement is valued and potential margin calls can be made. At 31
December 2004, a margin call of $5.2 million was made, charging as security under the guarantee
an equivalent amount of the Bank's funds held with Citicorp.

b. The Bank is contingently liable as co-signer with the Government of Belize on promissory notes
of US$79.0 million with International Bank of Miami and US$46.4 million with Capital Market
Financial Services.




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