• TABLE OF CONTENTS
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 Front Cover
 Title Page
 Front Matter
 Directors and principals
 Table of Contents
 Overview of the bank
 Economic review
 Operations
 Administration
 Appendices
 Financial statements
 Back Cover














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: 2006
Copyright Date: 2010
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Bibliographic ID: UF00098955
Volume ID: VID00007
Source Institution: University of Florida
Holding Location: University of Florida
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Table of Contents
    Front Cover
        Front Cover 1
        Front Cover 2
    Title Page
        Page i
    Front Matter
        Page ii
        Page iii
    Directors and principals
        Page iv
    Table of Contents
        Page v
        Page vi
        Page vii
    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
    Appendices
        Page 62
        Page 63
        Page 64
        Page 65
        Page 66
        Page 67
        Page 68
        Page 69
        Page 70
        Page 71
    Financial statements
        Page 72
        Page A-1
        Page A-2
        Page A-3
        Page A-4
        Page A-5
        Page A-6
        Page A-7
        Page A-8
        Page A-9
        Page A-10
        Page A-11
        Page A-12
        Page A-13
        Page A-14
        Page A-15
        Page A-16
        Page A-17
        Page A-18
        Page A-19
        Page A-20
        Page A-21
        Page A-22
        Page A-23
    Back Cover
        Page A-24
Full Text


CENTRAL BANK
IOF
BELIZE


ANNUAL REPORT
2006


WiV16 IPF IRPMId.V 1
.3 iJ.


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Cover Image: The graphics on the right of the cover illustrate a sketch of the National Symbols of Belize The Kill Billed Toucan, Baird's
Tapir, The Mahogany Tree and The Black Orchid by Gilvano Swasey, a feature which appears on the Belize currency notes.

Cover and Layout Design: Rasiel Vellos CBB Research Department

Prepared by: CBB Research Department

Printed by: CBB Reprographic Centre







r\,




CENTRAL BANK
OF
BELIZE


Twenty-fifth Annual Report
&
Statement of Accounts


For the Year Ending 31 December 2006














Abbreviations and Conventions
used in this Report


ACP African, Caribbean and Pacific
AML/CFT Anit-Money Laundering/Caribbean
Finandal Task Force
ASBA Assodation of Supervisors of Banks
of The Americas
APR Annual Percentage Rate
BEL Belize Electricity Limited
BFIA Banks and Finandal Institutions
Acts, 1995
BGA Banana Growers Assodation
BIS Bank for International Settlements
BNE Belize Natural Energy Ltd.
BSI Belize Sugar Industries Limited
BSSB Belize Sodal Security Board
BTB Belize Tourism Board
BTL Belize Telecommunications Ltd.
BWSL Belize Water Services Limited
CARICOM Caribbean Community and Common
Market
CABEI Central American Bank for Economic
Integration
CARTAC Caribbean Regional Technical
Assistance Centre
CAFTA-RD Central American Free Trade Agreement
and Dominican Republic
CEMLA Center of Monetary Studies for Latin


CIBC
CMFS
CDB
CFZ
CGA
CIF
CPI
CPBL
CSO
CS-DRMS

DFC
ECCB


America
Canadian Imperial Bank of Commerce
Capital Market Finandal Services
Caribbean Development Bank
Commerdal Free Zone
Citrus Growers Association
Cost, Insurance and Freight
Consumer Price Index
Citrus Products of Belize Ltd.
Central Statistical Office
Commonwealth Secretariat Debt Recording
Management System
Development Finance Corporation
Eastern Caribbean Central Bank


ECLAC

EDF
EIB
EPZ
EU/EEC
FOB
FY
GDP
GOB
GST
HIPC
HIV/AIDS

IBRD

IDB/IADB
IMF
NDFB

NICH

NFC
OECD

OECS

PGIA
ps
RECONDEV

RMB
ROC
SIF
TIBoM
UK
US/USA
VEMS
WTO


Economic Commission for Latin
America and the Caribbean
European Development Fund
European Investment Bank
Export Processing Zone
European Union
Free on Board
Fiscal Year
Gross Domestic Product
Government of Belize
General Sales Tax
Highly Indebted Poor Country
Human Immunodeficiency Virus/
Acquired Immune Defidency Syndrome
International Bank for Reconstruction
and Development
Inter-American Development Bank
International Monetary Fund
National Development Foundation
of Belize
National Institute of Culture and
History
Not from concentrate
Organisation for Economic
Cooperation and Development
Organisation of Eastern Caribbean
States
Phillip Goldson International Airport
Pound solid
Reconstruction and Development
Corporation
Royal Merchant Bank
Republic of China, Taiwan
Sodal Investment Fund
The International Bank of Miami
United Kingdom
United States of America
Visitor Expenditure Motivation Survey
World Trade Organisation


Notes and Conventions:

- $ refers to the Belize dollar unless otherwise stated
- mn denotes million
- bn denotes billion
- The figures for 2006 in this report are provisional, and the figures for 2005 have been revised.
- Since May of 1976 the Belize dollar has been fixed to the US dollar at the rate of US$1.00 = BZ$2.00.
- Totals in tables do not always equal the sum of their components due to rounding.


CENTRAL BANK OF BELIZE


2006 ANNUAL REPORT






2006 ANNUAL REPORT
\I


CENTRAL BANK OF BELIZE


V


April 27, 2007


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, 2006, together with a copy of the Bank's Statement of
Accounts, as certified by the External Auditors.

Yours sincerely,





Sydney J. Campbell
Governor









DIRECTORS AND PRINCIPALS


At December 31, 2006


BOARD OF DIRECTORS

SYDNEY CAMPBELL
Vice Chairman

MARION PALACIO

MICHEL CHEBAT

JAIME BRICENO

ROBERT SWIFT

Dr. CARLA BARNETT
Financial Secretary




PRINCIPAL OFFICERS

SYDNEY CAMPBELL
Governor

MARION PALACIO
Deputy Governor

CAROL HYDE
Manager, Human Resources & Administration

HOLLIS PARHAM
Manager, Finance

MARILYN GARDINER
Manager, Banking & Currency

NERI MATUS
Manager, Financial Sector Supervision

CHRISTINE VELLOS
Manager, Research

ORNEL BROOKS
Officer in Charge, Security








TABLE OF CONTENTS


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

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

Economic Review ........................................................ ............................... 1
E conom ic O verview ....................................................... ................ .................. 1
International and Regional Developments ........................................................... 4
Domestic Production, Prices and Employment................................................ 12
Monetary and Financial Developments ........ .................. ............................ 24
Central Government Operations and Public Debt ................................. ........ 30
Foreign Trade and Payments ............................................................................ 38
E conom ic P rosp ects ........................ .. ....................................... ................... 50

Operations ................................................................................................... 52
Foreign Exchange Operations ................... .............................................. .. 52
Relations with Commercial Banks........................................... ...................... 53
Transactions with Central Government ................................................................. 55
Supervision ofBanks & Financial Institutions ................................................. 56
Information Systems Unit ......................................................... ................... 57

Administration ..................................................................................58
Board of Directors ........................................... .......... ................... 58
Overseas Meetings .............................................................. ..58
F in a n ce ...................................... ....................................................... ................... 5 8
In terna l A ud it .............................................................................. ......................... 5 9
H um an R sources ............................................. .................................................... 59

Appendices .................................................................................................. 62
Monetary Policy Developments .................................................. ........................ 62
Statistical Appendix .............................................................. ...64

Financial Statements ................................................................................72
V








2006 ANNUAL REPORT
CENTRAL BANK OF BELIZE 06 ANNUAL REPORT


LIST OF TABLES


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

International and Regional Developments ..................................... ......... 4
Table II.1: Selected Indicators for Some OECD and Newly Industrialized Countries .......................................... 5
Table 11.2: Selected Indicators for Some Caribbean Countries .......................... .......................................... 6
Table 11.3: Selected Indicators for Mexico and Central America ............................ ................................ 9

Domestic Production, Prices and Employment................................. .....12
Table III.1: Annual Percent Change in Selected Indicators ........................................... ........................... 12
Table III.2: Sugarcane D deliveries ..................................................................................... ............ ................. ....... 13
Table III.3: C itrus Fruit D deliveries ....................... ............................................................ ........... .................. ...... 14
Table III.4: Sugar and M olasses Production ...................................................... ............................................. 18
Table III.5: Production of Citrus Juices and Pulp ...................................................... ............................... 19
Table III.6: Bonafide Tourism Arrivals & Expenditure ............................................................ ......................... 21
Table III.7: Quarterly Percentage Change in CPI Components by Major Commodity Group ............................... 22
Table III.8: Employed Labour Force by Industrial Group ....................................... .............................................23


M monetary and Financial Developments ...................................... ........ .. 24
Table IV 1: Factors Responsible for Money Supply Movements ........................................ ..................24
Table IV2: Money Supply ..................................................................................................... 25
Table IV3: Net Foreign Assets of the Banking System .............................................. ............................. 26
Tab le IV 4 : N et D om estic C credit ................................................................................................... ..................27
Table IV 5 : Commercial Banks' Holdings of Approved Liquid Assets ........................... .................................28

Central Government Operations and Public Debt...................................... 30
Table V 1: Government of Belize-Revenue and Expenditure .................................................... ....................... 30
Table V 2: Central Governm went's D om estic D ebt ........................................................................................... 33
Table V 3: Public Sector External D ebt by Source ................................................... ........................................ 34


Foreign Trade and Payments ............................................. .................... 38
Table VI. 1: Balance of Payments Summary and Financing Flows ...............................................................38
Table VI.2: Balance of Payments MerchandiseTrade ............................................... ............................ 39
T ab le V I.3 : D om estic E xp orts ................................................................................................................................ 39
Table V I.4: Exports of Sugar and M olasses ...................................................... ............................................. 40
Table VI.5: Export Sales of Citrus Juices and Pulp......................................................... ................... 41
Table V I.6: E exports of B ananas ... .................. ........................................................................................................ 42
Table VI.7: Exports of Marine Products ................................................................................................42
Table V I.8: O therM ajorExports ... ................................................................................ ............ .................. ....... 43
Table V I.9: D direction of V visible Trade ................................................................. ........................................... 46
Table VI.10: Balance of Payments Services, Income and Current Transfers.............................................47
Table VI. 11: Balance of Payments Capital and Financial Accounts...................................... 48
Table V I. 12: O official International R deserves .................................................................................... ...........................49

Operations.................................................................................................... 52
Table VII. 1: Central Bank Dealings in Foreign Exchange 2006 ........................................ ......................... 52








S2006 ANNUAL REPORT
CENTRAL BANK OF BELIZE

Table V II.2: External A assets R atio 2006 ...................................................................... ..................................... 53
Table VII.3: Commercial Bank Balances with the Central Bank ................................................ .................. 53
Table V II.4: Currency in Circulation2006 ................................................................... ..................................... 54
Table VII.5: Inter-Bank Market 2006 ...............................................................................................................54
Table VII.6: Central Bank Credit to Central Governm ent ..................... ........................ ..........................................55
Table VII.7: Government of Belize Treasury Bill Issues .............................................. ............................... 55
Table V II.8: List of Financial Institutions ................................................................................. ....................... 56
Table V II.9: List of C credit U onions ................................................................................... ............ ................ ....... 56

A pp en dices........................................................................................................................................................... 62
Table 1: Gross Domestic Product (GDP) by Industrial Origin at Current Prices .................................................. 64
Table 2: Percentage Share of GDP by Industrial Sector at Current Prices...................................................64
Table 3: Real Gross Domestic Product by Industrial Origin (2000=100) ................................................... 65
Table 4: Annual Percent Change In GDP by Sector at Constant 2000 Prices ................................................ 65
Table 5: GDP by Expenditure in Current Prices ......................... ............................... 66
Table 6: GDPby Expenditure in Constant 2000 Prices ........................................................... ........................66
Table 7: Sectoral Composition of Commercial Banks' Loans and Advances ............................................. 67
Table 8: Commercial Banks' Weighted Average Interest Rates .................................................... ..................67
Table 9: Balance of Payments Summary .......................................................................................................68
Table 10: Gross Imports (CIF) by SITC Categories.......................................................... ..................69
Table 11: Central Government's Domestic Debt ...................................................................... ...................69
Table 12: Government of Belize Revenue and Expenditure ......................................................... ..................70
Table 13: Public Sector External Debt by Creditors ................................................. .................................. 71

LIST OF CHARTS

Chart II.1: Real GDP Growthfor Selected Caribbean Countries ............................................... ....................... 7
Chart 11.2: Real GDP GrowthforM exico and CentralAmerica...................................................... ......................... 10
C hart III.1: B anana A create ......................................................................................... ................................... 14
Chart IV 1: Ratio of M 2 to GDP ........................................................................... .................. 25
Chart IV2: Annual Change in Net ForeignAssets of Central Bank & Commercial Banks ...................................25
Chart IV3: Annual Change in Commercial Banks' Loans Distribution .................................................. 27
Chart IV4 : Quarterly Change in Excess Liquidity ............................................................ ..................28
Chart IV 5: Quarterly Change in Excess Cash Reserves ........................................................... .................. 28
Chart IV6: Commercial Banks' Weighted Average Interest Rate Spread ................................................... 29
Chart V1: Central Government's Development Expenditure .................................................. .......................31
Chart V.2: Sources of Central Government's Domestic Debt........................................ ............................ 33
Chart V 3: Sources of Public SectorExternal Debt ................................................. .................................. 35
Chart V4: Debt Service Payments (Commercial Lenders) Before Restructuring ..............................................36
Chart V5: Debt Service Payments After Debt Restructuring ........................................ ...........................37
Chart V.6: Cash Flow Savings on Debt Service Payments ........................................ .............................37
Chart V I. 1: G ross O official International R deserves ..................................................................... ....................... 49

LIST OF BOXES

Box 1: M edium Term Outlook forBelizean Citrus ........................................................................ 17
B ox 2: Tourism D evelopm ents and Prospects ........................................................................... ....................... 20
B ox 3: M major Fiscal Incentives in 2006 .......................................................................... .................................. 32
Box 4: Belize's D ebt Restructuring Process ............................................................. ..............................................36
Box 5: Update on EU Banana Import Regim e ......................................................... ................................... 44
Box 6: Meetings Attended by the Governor and Deputy Governor during 2006 ......................................... 58









OVERVIEW OF THE BANK


4




MISSION STATEMENT

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

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

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

To regulate and encourage the development of the financial system and to
formulate economic policies that foster monetary and financial stability,
confidence and economic growth.

The Bank is committed to serving the interest ofthe people ofBelize through
highly motivated and skilled professionals who operate under the ethos of
integrity, efficiency and transparency.

In the pursuit of its mission, the Bank sets a number of goals and operating objectives. These are
listed below. 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 busi-
ness sector and the general public.
/ Provide efficient banking services to the commercial banks, the government and
various public sector bodies and regional and international organizations that hold
accounts at the Bank.
/ Provide guidelines to the banking community on matters such as money supply,
interest rates, credit and exchange rates.
SSet high standards of efficiency and organisation so as to encourage higher levels of
attainment in the Bank.
OBJECTIVES
/ Promote monetary stability.
/ Regulate the issue and availability of money and its international exchange.
/ Regulate and monitor the financial environment.








2006 ANNUAL REPORT
\I


CENTRAL BANK OF BELIZE


ORGANIZATION AND FUNCTIONS

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

Office of the Governor


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


* Streamlining and monitoring systems
and procedures to ensure appropriate
internal controls.
* Ensuring that all communications nec-
essary for the deliberations of the di-
rectors are prepared and submitted.


Administration


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


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


Human Resources


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


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








2006 ANNUAL REPORT


CENTRAL BANK OF BELIZE


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


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


Banking and Currency


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


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


Financial Sector Supervision


* Screening and processing applications for
domestic and international bank licenses
and registration of credit unions.
* Supervising and regulating banks, financial
institutions and credit unions through on-
site examination and off-site surveillance.


Research


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


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


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


Other Support Operations


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


* Maintaining the Bank's plant and
equipment.
* Maintaining security operations within the
Bank.


Finance










2006 ANNUAL REPORT
\I


Table L1: Major Economic Indicators

200 2m 00 20 2 m 20 m2


POPULATION AND EMPLOYMENT
Population (Thousands)
Employed Labour Force (Thousands)
Unemployment Rate (%)
INCOME
GDP at Current Market Prices ($mn)
Per Capita GDP ($, Current Mkt. Prices)
Real GDP Growth (%)
Sectoral Distribution of Constant 2000 GDP (%)
Primary Activities
Secondary Activities
Services
MONEY AND PRICES ($mn)
Inflation (Annual average percentage change)
Currency and Demand deposits (M1)
Quasi-Money (Savings and Time deposits)
Money Supply (M2)
Ratio of M2 to GDP (%)
CREDIT ($mn)
Commercial Bank Loans and Advances
Public Sector
Private Sector
INTEREST RATE (%)
Weighted Average Lending Rate (WALR)
Weighted Average Deposit Rate
Weighted Average Interest Rate Spread
CENTRAL GOVERNMENT FINANCES ($mn)
Current Revenue
Current Expenditure
Current Account Surplus(+)/Deficit(-)
Capital Expenditure
Overall Surplus(+)/Deficit(-)
Ratio of Budget Deficit to GDP at mkt. 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)


255.3 262.7 271.1 281.1
85.9 84.7 89.2 95.9
9.1 10.0 12.9 11.6

1,742.7 1,864.3 1,975.2 2,110.4
6,826.1 7,096.7 7,285.9 7,507.6
4.9 5.1 9.3 4.6

14.5 13.9 17.5 18.2
17.3 16.9 14.9 15.3
68.3 69.3 67.6 66.5

1.1 2.3 2.6 3.1
364.8 358.1 442.6 492.2
676.0 705.3 659.7 756.1
1,040.8 1,063.4 1,102.3 1,248.3
59.7 57.0 55.8 59.1

788.5 904.6 1,056.6 1,176.5
12.9 16.0 30.0 46.3
775.6 888.6 1,026.6 1,130.2


372.1 425.8 422.2 451.9
333.7 333.4 393.0 474.1
38.4 92.3 29.1 -22.2
267.4 260.3 276.4 173.2
-142.4 -68.8 -216.0 -133.6
-8.2 -3.7 -8.9 -6.3
72.7 -220.9 -62.4 -36.2
69.8 278.3 380.7 179.9

269.1 309.7 315.5 307.5
477.7 496.9 522.4 480.7
-208.7 -187.2 -206.9 -173.3
26.4 24.3 29.3 30.9
110.5 121.5 149.7 168.1
44.0 43.6 69.7 88.2


289.9 299.8
98.6 102.2
11.0 9.4

2,222.7 2,442.3
7,667.2 8,147.5
3.5 5.8

17.9 18.6
14.5 14.8
67.6 66.6

3.7 4.3
516.0 617.8
814.0 887.1
1,330.0 1,504.9
59.8 61.6

1,254.7 1,390.5
62.4 47.7
1,192.3 1,342.8


511.5 566.0
561.2 548.1
-49.7 17.9
127.1 100.5
-151.6 -44.3
-6.9 -1.8
-19.6 -10.9
127.0 55.6

325.3 426.5
556.2 611.9
-231.0 -185.5
40.9 57.8
204.2 252.6
133.7 205.2


Current Account Balance -182.3 -165.6 -176.4 -155.9 -160.5 -24.4
Capital and Financial Flows 173.5 151.6 174.5 127.3 177.8 47.7
Gross Change in Official International Reserves 3 2.7 5.4 30.1 31.4 -18.0 32.7
Gross Official International Reserves 120.1 114.7 84.6 53.3 71.3 104.5
Import Cover of Reserves (in months) 3.2 3.2 2.1 1.4 1.6 2.2
PUBLIC SECTOR DEBT
Disbursed Outstanding External Debt (US $mn)4 494.9 653.1 822.4 913.0 970.0 985.2
Ratio of Outstanding Debt to GDP at Mkt. Prices (%) 56.8 70.1 83.3 86.5 87.3 80.7
External Debt Service Payments (US $mn) 79.2 178.4 135.3 194.0 225.4 134.5
External Debt Service Ratio (%)5 17.9 36.1 25.6 35.7 36.5 17.2
Disbursed Outstanding Domestic Debt ($ mn) 208.7 171.9 256.5 278.5 279.4 299.9
Domestic Debt Service Payments ($ mn) 17.7 19.2 13.7 18.8 23.1 27.5
Sources Ministry of Finance, Central Statistical Office, & the Central Bank of Belize
SIncludes CFZ gross sales
2 Includes CFZ imports
3 Minus = increase
4 Excludes guaranteed debts
5= amounts related to refinancing were excluded


CENTRAL BANK OF BELIZE










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ECONOMIC OVERVIEW


The government held to its conservative fiscal
strategy in 2006 and monetary policy was tightened
further in support of the fiscal stance. While the
principal focus was on reducing domestic
consumption to safeguard the fixed exchange rate
and marshal the resources required to meet external
obligations, the economy was resilient largely due
to a timely boost provided by the launch of
commercial oil operations. As growth of the non-
oil sector slowed to 2.5%, GDP growth
nevertheless accelerated to 5.8% with value added
from the oil sector contributing 3.3% (measured in
2006 prices). Activity in the primary sector fell as
bad weather, disease and cyclical factors impacted
negatively on agriculture, and financial difficulties in
the farmed shrimp sub-sector caused a downturn
in fishing. The secondary sector experienced a
contrasting turnaround largely due to an upsurge in
local electricity production. While decelerating, the
services sector registered an increase that was driven
by wholesale and retail activity and expansion of
the telecommunication infrastructure.

Measured annually in April, the rate of
unemployment fell from 11.0% to 9.4%, with job
increases being concentrated in services such as
wholesale/retail trade and tourism. Domestic prices
continued an upward trend with a 4.3% increase in
the CPI resulting from spiking world oil prices,
higher electricity rates and the government's
imposition of a broader based general sales tax.


There was a significant improvement in the balance
of payments position largely due to a strong
performance from the export sector, which
benefited from sugar quota increases, high prices
for citrus and sugar, the commencement of oil
exportation, and increased CFZ cross border sales.
The export increase eclipsed a 10.0% rise in imports
and contributed to a 19.7% contraction in the
merchandise trade deficit. Adding to the
improvement was a 53.4% increase in the surplus
on the services account that reflected a substantial
rise in tourism earnings and remittance inflows. A
significant reduction was therefore recorded in the
external current account deficit (from 14.4% of
GDP to 2.1 .. of GDP). Inflows from loans, grants
and foreign direct investment financed the deficit
and pushed the gross official foreign reserves up
to $208.9mn (equivalent to approximately 2.2
months of merchandise imports).

Increased buoyancy in the external sector created
conditions in the banking system that minimized
the effectiveness of Central Bank interventions
aimed at reducing liquidity and monetary expansion.
In addition to the heightening of commercial bank
reserve requirements in January and September, the
arrangement whereby monthly BSSB surpluses are
sterilized in the Central Bank continued, and the co-
mingling of non-resident and domestic deposits,
which had previously caused an artificial boosting
of liquidity, ceased in January when the International








2006 ANNUAL REPORT


CENTRAL BANK OF BELIZE


Banking Act was fully implemented. Even so,
generally liquid conditions prevailed, with broad
money growth accelerating to 13.3% driven
primarily by growth in net foreign assets and private
sector loans. Credit increases for personal loans
accounted for 46.5% of new disbursements and
there were also marked increases in lending for
activity in real estate, distributive trade, construction,
professional services and transportation. Against
the backdrop of higher reserve requirements and
robust credit growth, competitive behaviour among
the banks intensified slightly and was manifested in
a slight narrowing of their weighted average interest
rate spread. While the weighted average lending
rate registered a decline of 10 basis points to 14.2%,
the weighted average deposit rate rose by 30 basis
points to 5.8% principally due to an increase in the
rate offered on time deposits.

Under the weight of its substantial debt service
obligations, Central Government continued efforts
to improve its fiscal performance. The overall deficit
was slashed by 70.8% to $44.3mn (1.8% of GDP)
with revenues rising by 12.8% and expenditure being
decreased by 5.6%. Capital expenditure declined
for the third consecutive year and revenues were
boosted by the implementation of a broader based
general sales tax. The true measure of the fiscal
effort was shown in the improvement in the primary
balance where a surplus of$97.6mn (4.0% ofGDP)
was recorded. The overall deficit was financed
principally from external sources, with the
government borrowing to facilitate external debt
service payments during the year. In December,
recognizing that the trend in its external payments


and receipts was unsustainable, and following the
advice of its consultants (Houlihan Lokey Howard
& Zukin), the government officially launched a
programme to restructure the external debt stock.
Pending the completion of the restructuring
process, payments to commercial creditors were
temporarily suspended and the postponement
contributed to the improved 2006 fiscal outturn.

In other developments, Central Government's
domestic debt rose to $299.9mn (12.3% of GDP)
with loan repayments of $11.6mn being outweighed
by a new Treasury Note issue valued at $31.5mn.
These Notes were made out in favour of the Central
Bank in fulfillment of the government's guarantee
of Central Bank loans to the DFC and NDFB that
were non performing The public sector's external
debt also increased by 1.6% to $1,970.4mn (80.7%
of GDP) with loan disbursements of $167.2mn
and principal and interest payments summing to
$271.3mn.

Projections for 2007 include a deceleration in GDP
growth to around 3.5% based on the assumption
of austerity measures that will continue to be
required even with successful completion of the
debt restructuring exercise. In light of the
government's reaffirmation of commitment to a
conservative fiscal strategy, no significant change is
expected in its overall deficit or in the level of its
reliance on domestic financing. On the other hand,
given the need to boost official reserves to higher
levels, the upward trend in commercial bank liquidity
will call for additional Central Bank initiatives to
effectively dampen credit expansion and








INTERNATIONAL & REGIONAL DEVELOPMENTS


consumption growth. If these policies are
successfully executed, there is a good likelihood that
recent improvements in the balance of payments
will continue, particularly since the export sector is
forecasted to continue its good performance in
2007. The latter will hinge on higher CFZ sales and
significant increases in citrus and petroleum earnings
that should neutralize a fall-off in receipts from
banana and farmed shrimp. Further increases are
expected from the tourism sector, and inflows from
foreign direct investment for major construction
projects such as the Vaca Dam will support the
balance of payments and boost economic activity.
While unemployment may rise slightly, the upward
trend in domestic prices is expected to decelerate
to 3.0% with lower fuel acquisition costs and tax
rates being held constant.


~









ITIONAL & REGIONAL DEVELOP


In 2006, the world economy experienced broad
based and robust growth of approximately 5.0%
notwithstanding a tightening of monetary policy in
some of the major economies aimed at heading
off a possible buildup of inflationary pressure. The
growth impetus was largely provided by economic
activity in China, India and the United States.
Eurozone countries also experienced their strongest
expansion since 2000 andJapan's performance was
positively impacted by strong growth in the other
Asian countries. Emerging and developing countries
around the world benefitted from surging demand
for commodities with oil producing countries, in
particular, capitalizing on unprecedented increases
in energy prices. Crude oil prices posted record
highs, in excess of US$78 per barrel and averaging
US$66 per barrel throughout the year. The
downside of this was an increase in cost push
factors, which, along with reduced spare capacity
and declining unemployment, set the stage for
increased global inflationary pressures that could
threaten the momentum of future global expansion.

In the United States, GDP growth slowed slightly
to 3.3% as higher interest rates and a weakening
housing market dampened the growth of private
consumption. Corporate profits, business
investment and confidence remained strong,
however, and notwithstanding the housing
downturn, the economy continued to perform
dynamically, adding an average of 149,000 new jobs
per month and reducing the unemployment rate
from 5.1% in 2005 to 4.8% in 2006. Inflation rose


by 3.5%, partly due to high gasoline prices and a
reduction in excess capacity. Meanwhile, the
depreciation of the dollar against the Euro, and to
a lesser extent, the yen, contributed to an estimated
8.5% increase in exports of goods and services.
The external current account deficit for 2006 was
estimated at 6.6% of GDP.

In the United Kingdom, GDP growth accelerated
slightly to 2.7" driven by public investment, exports,
a resurgence in the housing market and increases in
private consumption. Unemployment registered a
small increase (from 4.8% to 5. ''..) as immigration
and a higher participation rate caused growth in the
labor force to outstrip the rate of job creation.
Notwithstanding a tightening of monetary policy,
with the Bank of England discount rate rising by
25 basis points to 4.75% in August, annual inflation
exceeded the Bank's 2.0% targetwith a 2.3% increase
being recorded.


The strongperformance of other Asian economies
provided a boost to the Japanese economy, which
grew by an estimated 2.8% with unemployment
declining to 4.1%. The expansion included increases
in private consumption and business investments
that were underpinned by robust corporate profits.
With exports performingwell, the external current
account surplus increased to 3.8% of GDP. After
almost seven years of fallingprices,Japan ended its
deflationary spiral with prices recording a 0.3%
increase. Responding to this, the Bank of Japan
raised its interest rate by 25 basis points in July and









INTERNATIONAL & REGIONAL DEVELOPMENTS


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

P G t t I i t e ac R i U

Coutr ( 66. (66 (66. 66t (0/6666)


United States
United Kingdom
Japan
Taiwan
China
Euro Area


J.5
2.0
2.6
4.4
10.0
1.5


-b.5
-2.0
+3.5
+4.7
+7.2
-0.1


-b.b
-2.3
+3.8
+6.1
+7.2
-0.1


Sources: OECD, World Economic Outlook, United States Department of Labor, The Economist,
UK Government Statistics, International Energy Outlook 2006
n.a. = not available


is expected to enact further increases if price

pressures continue to build.


Taiwan recorded growth of 4.4% with high-tech

manufacturing maintaining its position as the

country's most lucrative economic sector and

unemployment declining from 4.4% to 3.9% largely

due to the increase in export-oriented activities.

Inflation also fell to 0.4% as domestic competitive

behaviour increased with the continued liberalization

of the Taiwanese economy and a strong currency

limited the impact of inflation originating from

trading partners. Notwithstanding the steady

appreciation of the New Taiwan dollar against the

US dollar, the current account registered a surplus

of 6.1% of GDP and as of July 2006, the foreign

exchange reserves of Taiwan were the fourth largest

in the world.


China continued to experience booming growth

with a 10.5% increase in GDP driven by exports,

private consumption, and fixed-asset investments.

Unemployment stood at 9.8%. Retail sales grewby


13.5% in the first three quarters of 2006, while the

annual inflation rate stood at a modest 1.5%.

Although the government imposed successive

increases in reserve requirements to curb monetary

expansion via bank lending, business investment

grew by almost 30.0%. Notwithstanding the

continuing appreciation of the renminbi, exports

expanded rapidly while import growth stagnated

and this resulted in a record trade surplus estimated

in September 2006 at US$110.0bn, or 7.2% of

GDP


In general, there was a gradual increase in the Euro

Area's economic momentum during the year with

GDP growing by around 2.6% as compared to

1.5% in 2005. Business fixed investment, exports

and production were largely responsible for the

increase and private consumption also emerged as

a key component of the recovery process. Even

with oil price increases, annual inflation stood at

1.8%, well within the European Central Bank's target

of 2.0%. Unemployment edged downwards from

8.7% in 2005 to 7.9% in 2006.


~








2006 ANNUAL REPORT


CENTRAL BANK OF BELIZE


Development in Selected Regional
Economies


The Caribbean


Solid performance in tourism and construction
combined with increases in agriculture, financial
services and manufacturing underpinned average
growth of 6.3% in CARICOM, the best
performance of the past 25 years. Stay-over tourism
outshone the cruise sector, which experienced a
decline in arrivals. Construction activity generally
heated up with preparations for the hosting of the
2007 Cricket World Cup and hotel-related
renovations and expansions. Agricultural production
also benefitted from good weather while high world
prices for agricultural exports led to an upswing in
export earnings. Monetary policy in the CARICOM
countries was generally aimed at dampening
domestic demand for imports and achieving price
stability. While most economies experienced robust
revenue growth arising from the economic
expansion and improved tax administration, some
countries also faced widening fiscal deficits due to
capital outlays for Cricket World Cup preparations.


In Barbados, the economy grew by 3.5% driven
by activity in construction related to the preparations
for the Cricket World Cup, transportation, storage,
communications and wholesale and retail trade.
Tourism value added grew by 2.5% as increases in
stay-over tourists eclipsed a decline in cruise tourism.
Higher oil prices pushed the average inflation rate
up to 6.5% while the average rate of unemployment
held steady at 9.1%. Strong growth in revenues
helped to shave US$70.4mn from the fiscal deficit,
which declined to 1.7% of GDP. The external
current account deficit also declined as the
merchandise trade deficit narrowed and tourism
receipts increased. Financing for this deficit included
withdrawals of US$18.0mn from the international
reserves, which ended the year at US$599.3mn.

Output in Guyana grew by 4.8%, spurred by a
rebound in sugar and rice production, a surge in
public and private investment associated with the
hosting of the Cricket World Cup and higher
domestic consumption. Apart from agriculture,
other sectors of note were distribution, construction
and forestry,which had double digit growth rates,
and manufacturing, transport, communication and


Table 11.2: Selected Indicators for Some Caribbean Countries


GD Growt Inli Rat U p Ineaio


Barbados
Guyana
Jamaica
OECS
Trinidad & Tobago


3.5
4.8
2.6
7.1
12.0


9.1
n.a.
11.3
n.a.
8.0


618.2
250.2
2,169.1
596.9
4,771.4


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


599.3
290.2
2,399.1
719.4
6,760.6








INTERNATIONAL & REGIONAL DEVELOPMENTS


financial services that grew by 8.0%. Inflation rose
by 7.5% due to higher prices for oil, medical and
personal care and the gradual depreciation of the
Guyana dollar. With higher revenues from taxes and

grants outpacing expenditure, the fiscal deficit fell
from 14.1% to 13.2% of GDP. Debt relief of
US$283.0mn under the HIPC initiative led to a
17.9% reduction in Guyana's external debt stock to
US$898.5mn. Increases in merchandise exports and
inward remittances contributed to a 1.0% decline
in the external current account deficit to
US$134.8mn.

Growth inJamaica's economy accelerated to 2.6%
driven by expansions of 14.7% in agriculture and
12.5% in tourism as the island recorded increases in
both stayover and cruise ship visitors. Activity in
manufacturing, the utilities and transportation,
storage and communication also increased during
the year. While unemployment fell from 11.3% to
10.7%, inflation dipped to 5.8% from 12.9% in
2005 largely due to greater stability in agricultural
prices and the exchange rate. With revenues coming
in below target and expenditures increasing due to
a higher than expected wage bill, the fiscal deficit


was projected to widen to between 3.0% and 4.0%
of GDP Meanwhile, although the external trade
balance worsened, the international reserves position
strengthened to "l' 99.1mn due to foreign direct
investment inflows into the hotel industry, increased
remittances and higher tourism receipts.

Trinidad and Tobago continued to lead the region
with GDP growth of 12.0% on the back of a
20.6% expansion in its. i sector. Non-.e ,. it .-
activity also grew strongly with expansions in
construction, services and manufacturing The latter
registered an 11.8% increase that was underpinned
by strong growth elsewhere in CARICOM.
Unemployment during the first half of the year
declined to 7.2%, while higher food prices caused
inflation to rise by 7.9%. Notwithstanding
substantial growth in expenditure, the government
recorded current and overall surpluses of
US$5,849.8mn and US$580.lmn, respectively. And
although capital outflows increased, the surplus on
the external current account was sufficient to push
reserves upward by 41.7% to US$6,760.6mn,
equivalent to over 11.0 months of goods and
services imports.


Chart 1.1: Real GDP Growth for Selected Caribbean Countries


Guyana


Jamaica


*2005

[]2006


Trinidad &
Tobago


Barbados


OECS


~








2006 ANNUAL REPORT


CENTRAL BANK OF BELIZE


At 7.1%, growth in the OECS countries was among
the highest that the group has achieved in recent
times. Heightened activity in tourism (mostly due
to increases in stay-over arrivals) and construction
connected with public and private sector
preparations for the Cricket World Cup
underpinned the growth surge. Higher external
demand also stimulated a 3.4% increase in
manufacturing output. There was some pressure
on fiscal accounts as overall deficits widened due
to significant increases in capital expenditure that
outpaced revenue increases derived from robust
growth in national income and improved tax
administration. In the external sector, larger inflows
on the services and capital accounts eclipsed an
increase in the merchandise trade deficit and foreign
exchange reserves therefore rose to US$0.7bn at
year-end. A notable area of concern for policy
makers in the OECS continued to be the upward
trend of the group's total outstanding debt in recent
years.


Mexico and Central America


Growth in the Mexican economy accelerated to
4.8% with consumption, investment and exports
rising significantly. The latter reflected stronggrowth
in exports of petroleum and automobiles that
contributed to higher employment as well as a
reduction in the external current account deficit to
0.3% of GDP The inflation rate remained at 4.0%
due to higher prices for milk, premium gasoline
and diesel. Family remittances from abroad rose to
US$24.Obn and consumer confidence was high as
the unemployment rate fell for the second


consecutive year to reach 4.6%. The government
was able to hold the fiscal deficit to approximately
0.3% of GDP as increased revenues (principally
from petroleum income) more than offset the
growth in expenditures associated with major
infrastructural projects and the presidential elections
inJuly. With the pay off of US$12.4bn in external
debt, international reserves declined to US$68.6bn.


Economic activity in Central America grewby 5.1%
in 2006 fueled by domestic consumption, private
sector investment and strong export demand. Most
of the countries recorded significant increases in
inward remittances and growth in private sector
credit that underpinned the rise in domestic
consumption. The Panamanian economy grew the
fastest with its GDP increasing by around 7.5%,
while Ni.- i i i111 i -, J..11 behind the restwith growth
of 3.7%. Notwithstanding the impact of higher
crude oil prices, inflation generally declined due to
lower food prices and state subsidies for utilities.
Inflation rates ranged from 2.0% in Panama to
10.0% in Costa Rica. Buoyed by high commodity
prices, revenues from exports expanded and the
terms of trade improved. External current account
deficits, as a percentage of GDP, therefore decreased
in most of the Central American countries.

Guatemala's economy grew by 4.6"', driven by
private sector investment and consumption that was
supported by a significant increase in inward family
remittances. Notwithstanding lower tariffs linked
to the implementation of the Free Trade Agreement
among the US, the Dominican Republic and Central
America (CAFTA-RD), fiscal revenues increased in








INTERNATIONAL & REGIONAL DEVELOPMENTS


Table 11.3: Selected Indicators for Mexico and Central America

C county R te ( %) In lation Rte ^ ^ ^ ^ ^ ^ ~ Ra itcio ( %)R eser esB U Sbn^ ^

2005 2006 2005 2006 2005 2006 2005 2006^^^^^^^^^


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


3.0 4.8


real terms by 7.0% with improvements in tax
administration and more stringent measures to
control contraband trade and tax evasion.
However, expenditures grew proportionately, and
the fiscal deficit therefore remained at 1.5% of GDP.
Inflation declined to 4.9% due to the relative stability
of the exchange rate and an increase in agricultural
output. For the second consecutive year, the external
current account deficit stood at 4.3% of GDP with
the deficit on trade in goods and services being
somewhat mitigated by increased receipts of family
remittances. Capital and financial inflows of US
$1.7bn (including foreign direct investments of US
'".2,',i not only financed the current account

deficit but also pushed the international reserves up
by U. 22. ,IinTi to U -.4.0bn, equal to over 4
months of goods and services imports.

Honduras also experienced an upswingwith GDP
growing by 5.6%. As in the case of Guatemala
growth drivers included private sector investment
and consumption with family remittances

(amounting to 26.0% of GDP) playing a key role
and the export sector performingwell. In addition
to increases in agriculture and manufacturing,


construction activities heated up with private
investment into new commercial centers, "maquila"
related activities and residential construction. The
rate of inflation also fell to 4.9% due to stable grain
prices, fuel subsidies and exchange rate stability.
Even with the fall in tax revenue occasioned by
Honduras' participation in the CAFTA-RD, the
government was able to reduce its fiscal deficit to
1.0% of GDP aided by debt relief of
US$149.0mn, higher receipts from grants and
income and sale taxes, and by reducing its capital
outlays. The external current account deficit declined
from 0.8% to 0.2% of GDP, as family remittance
inflows partly offset the deficit on trade in goods
and services. Financial inflows, which included US
$300.0mn in foreign direct investments mostly for
communications, transportation and "maquila"
operations, funded the deficit and raised
international reserves to L '-430.0mn.

Led by a 19.0'1', rise in exports, growth in Costa
Rica accelerated to 6 S"' during 2006. Activity was
strong in rni tiuF.. -.11 in ,-, agriculture, construction,
and services such as tourism, financial intermediation
and telecommunications. An upsurge in imports and


n.a


68.6


~








2006 ANNUAL REPORT


CENTRAL BANK OF BELIZE


profit repatriation eclipsed the growth in exports
and caused the external current account deficit to
rise to 5.0"' of GDP. The latter was funded by
financial inflows that also helped to push the
international reserves up by US$760.0mn. During
the year, the government experienced a worsening
of the fiscal deficit from 2.1% to 2.4" .. of GDP
as increased payments for interest and wages
outweighed the rise in revenues derived from
improved tax administration and the economic
expansion. The inflation rate fell to 10.0'" (which
was below the Central Bank's target of 11.0%) partly
due to a change in the method of calculating the
CPI and declining prices of petroleum during the
latter part of the year. Unemployment also declined
from 6.6% to 6.(0"',.

Activity in agriculture, reconstruction works due to
hurricane and volcano damages, transportation and
financial services helped to push El Salvador's GDP
up by 3.8" ', in 2006. Unemployment nevertheless
rose slightly as "maquila" production declined, and
inflation averaged 3.9% with reductions in the cost
of food, transportation, rent, water, gas and


Chart 11.2: Real GDP Growth for


electricity. Exports grew by 4.7%, as increases in
traditional and non-traditional exports offset a
decline in "maquila" exports. Across the board
increases drove up imports by 12.0%. Like
Guatemala and Honduras, higher family remittance
inflows helped to boost private consumption and
eased the impact of high petroleum prices on the
external current account where the deficit stood at
4.6% of GDP. Higher interest and pension
payments, subsidies for transportation, electricity and
liquid gas combined with reconstruction costs led
to a fiscal deficit equivalent to 2.9% of GDP, similar
to that realized in 2005. With the issue of a new
international bond for US$656.3mn, the external
public sector debt reached US$5.6bn. At year-end,
net international reserves stood at US$2.lbn, equal
to 4.7 months of imports of goods and services.

Nicaragua's economy decelerated slightly from
4.0% to 3.7%, as a decline in domestic demand
was partly offset by strong export growth. Private
sector investment and consumption fell in the climate
of political uncertainty occasioned by the
presidential election. The slowdown was also


Mexico and Central America






0 2005
S -i 5 02006


Mexico Panama Costa Rica El Salvador Nicaragua Honduras Guatemala








INTERNATIONAL & REGIONAL DEVELOPMENTS


influenced by higher international petroleum prices
that increased production costs and reduced
disposable income. Under pressure from high oil
prices and mini devaluations, inflation measured
9.1%. After donations, the fiscal deficit stood at
1.1% of GDP, which was within the target set by
the IMF structural adjustment program. The country
benefited from multilateral debt reduction under
the HIPC initiative and its external debt was reduced
from 109.0% to 86.0% of GDP. An increase in
family remittances also contributed to a reduction
in its external current account deficit from 16.3%
to 14.2% of GDP A surplus on the financial
account that featured U -'-" I .Omn in foreign direct
investment financed the deficit and pushed
international reserves upward by US$31.lmn to
US$868.0mn.

For the third consecutive year, the Panamanian
economy grew strongly (7. Y' .. driven by strong
external demand arising from the global expansion,
domestic consumption and private investment.
Activity in construction and mining was buoyant.


Modest growth occurred in agriculture and
manufacturing while financial intermediation and
transportation performed well. The upsurge in
economic activity was accompanied by a 1.0%
decline in the rate of unemployment to 8.6%.
Inflation fell to 2.0% as higher petroleum prices
were offset by lower costs for food, clothing and
medical services. The government's fiscal deficit fell
to 2.9% of GDP, with tax revenues rising by 20.0%
in response to fiscal and social security reforms and
a 20.0% increase in revenues from the Panama Canal
that were due to higher toll fees. Notwithstanding
an increase in the merchandise trade deficit, the
external current account deficit declined to 4.2%
of GDP as higher inflows from transportation
and tourism services were recorded. A surplus of
US$615mn was recorded on the financial account,
which was mostly attributable to foreign direct
investment that reached a record high of '2 .1 ..i
with the sale of the largest Panamanian bank for
US$1.7bn.


~










: PRODUCTION, PRICES & EMPI


Production


With growth of the non-oil sector decelerating to

2.5%, the launch of commercial oil operations

provided a timely boost to the economy in 2006.

In real terms, GDP increased by 5.8% with the oil

sector accounting for 3.3% of this growth (note:

the new sector's contribution was measured in 2006

prices). Unemployment (measured annually in the

month of April) declined from 11.0% to 9.4%

largely due to job creation in the tertiary sector.


Primary sector activity contracted with agricultural

production being affected by disease, unfavourable

weather and natural cyclical factors, and fishing

decreasing mostly due to a sharp fall in farmed


shrimp output. On the other hand, although

manufacturing and construction declined (due to

lower output of citrus, shrimp and cigarettes, the

wrap-up of the Chalillo project in the previous year

and delays in the start-up of several major new

projects), activity in the secondary sector

experienced a turnaround that was almost entirely

due to a 34.6% surge in the utilities most of which

came from local output of electricity.


The tertiary or services sector registered a 3.4%

increase as higherimports fueled an 8.4" .., ::1 ,-. .,i

in wholesale and retail activity, while transport and

communications increased for the third consecutive

year with the largest telecommunications service
provider expanding the coverage of its cellular


Table III.1: Annual Percent Change in Selected Indicators

GDP at Current Market Prices 6.8 4.7 9.9


Real GDP (2000 prices)
Non Oil sector Real GDP (2000 prices)

Primary Activities
of which: Agriculture
Fishing
Forestry

Secondary Activities
of which: Construction
Manufacturing


4.6
4.6

9.4
11.9
5.5
8.1

7.4
4.6
12.3


3.5
3.5

3.3
-0.7
9.8
11.1

-0.9
-3.4
0.1


(1)5.8
2.5

12.7
1.4
-17.0
1.3

5.2
-2.9
-2.0


Services 3.3 6.3 3.9
of which: Restaurant & Hotel 7.8 4.1 -3.4
Trade 0.0 5.6 8.4
Public Administration 1.3 1.3 -0.4
Transport and Communication 5.0 7.8 5.2
Financial intermediation 5.4 12.9 2.9
Consumer Price Index
Average 3.1 3.7 4.3
End of period 3.0 4.2 3.1
Source: Central Statistical Office
(1) Petroleum's contribution to real GDP is measured in 2006 prices, not 2000 prices.

12








DOMESTIC PRODUCTION, PRICES & EMPLOYMENT


network in the southern part of the country.
Continued growth in these subsectors contrasted
with a slight downturn in hotel and restaurant
activities that was due to the fall in cruise ship visitors
and a decline in government services that reflected
the continuation of fiscal restraint and allocation
of resources to meet public debt obligations.

The Consumer Price Index (CPI) rose by 4.3% due
to significant increases in the average acquisition
costs of oil, higher import costs and an increase in
electricity rates.



Agriculture

Sugarcane


After a drought induced decline in yields for the
2004/2005 sugarcane crop, a return to normal
rainfall patterns during the critical growing period
of the 2005/2006 crop boosted sugarcane
production and deliveries by 26.3% to 1,173,469
long tons. Farmer deliveries rose by 28.0% to
1,124,300 long tons while those from the company's
research division more than doubled to 20,767 long
tons. Notwithstanding the surge in deliveries, a
significant amount of stand over sugarcane was left
in the fields due to heavy June rains that prevented
field access. While the higher rainfall increased
biomass yields, it also reduced the concentration


of sugars in the sugarcane (pol of 11.6% versus
12.9% in 2004/2005) and caused a decline in cane
purity (from 85.83% to 83.9 Y'..

The average final price per long ton of sugarcane
rose by $6.53 to $60.73 due to exchange rate gains
from the Euro denominated average unit price
negotiated on the futures market, a temporary
increase in the preferential sales to the US and
European Union markets, lower per unit freight
charges during the first half of the year (since prices
are quoted on a CIF basis) and a significant
improvement in the world raw sugar price that
pushed up sugar prices in Belize's regional markets.

Citrus


After the previous year's bumper crop, citrus
production for the 2005/2006 crop went into a
cyclical decline with yields down by 23.0% to 6.9mn
boxes of fruit. Approximately 95.7% of the crop
was processed, 2.2% went into fresh fruit exports
and 2.1% was rejected at the factories.

The smaller crop led to a 15.1% decline in factory
deliveries to 6.6mn boxes. While orange performed
poorly with deliveries contracting by 21.3% to
4.9mn boxes, grapefruit scored record breaking
deliveries with a 10.4% increase to 1.7mn boxes.
The orange crop reflected the natural phenomenon
of a lower blossom set after a flurry of fruit


Table III.2: Sugarcane Deliveries


1 0KI3I/ 200I40 2005/06 .


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


1,149,475 929,393 1,173,469












Table III.3: Citrus Fruit Deliveries
II2 I003 I205 0 0/I.


6,426
4,947
1,479


7,793
6,265
1,528


production in the previous year. The improvement
in grapefruit yields was attributed to higher earnings
that enabled farmers to increase the use of field
inputs, the rehabilitation of groves and the continued
implementation of the Mexican fruit fly control
programme that reduces fruit drop. Payment on
the basis of the pound solids yield per box of fruit
maintained the incentive to farmers to take better
care of groves and pay more attention to fruit
quality. In another longer term, positive
development, the demand for plants increased as
farmers rehabilitated groves by replacing trees that
had died.


Notwithstanding a 4.0% forecasted increase in
world citrus output, the poor performance of
Florida's citrus crop due to the effects of hurricanes,
disease (citrus canker) and urban development


pressures influenced Belize's key export markets.
With US stocks of orange and grapefruit juices at
one of the lowest level in years and production
expected to remain virtually stable, export prices
for orange and grapefruit juices were strong during
the year. The final price for orange was $1.68 per
pound solid (or $9.99 per box) compared to $0.95
(or $5.85 per box) received for the 2004/2005 crop,
while that of grapefruit was $9.23 per box, slightly
lower than the $9.82 paid in 2004/2005.

Banana

Unfavourable weather during the first part of the
year, grower hesitance to invest in their groves due
to uncertainties regarding the impact of the new
EU import regime and the outbreak of Sigatoka
disease in the latter part of the year pushed banana
production down to 3.8mn boxes, approximately


Chart III.1: Banana Acreage


January 2006
To be Ranted
171 acres


December 2006


Rantilla
297 acres


To be Ranted
55 acres


RFoducing
6,035 acres


CENTRAL BANK OF BELIZE


2006 ANNUAL REPORT


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


6,618
4,931
1,688


Rantilla
210 acres


Producing
6,089 acres








DOMESTIC PRODUCTION, PRICES & EMPLOYMENT


0.2mn boxes below the previous year's output.

Acreage under cultivation was more or less
unchanged compared to the previous year. In
January, 6,035 acres had harvestable trees and 210
acres were under plantilla (young, non-yielding trees).
By December, harvestable acreage had increased
to 6,089 and the area under plantilla had risen to
297 acres.

Papaya

Belizean papaya remained competitive compared
to the Mexican and Brazilian product due to its high
quality and the country's proximity to the US market.
While the mainstay of the industry was the large
papaya variety (Tainung), efforts to identify a high
quality, small variety with a longer shelf life
continued.

During 2006, papaya output rose as area under
cultivation increased by 507 acres to a total of 1,910
acres, and production in the Orange Walk District
revived. Of this acreage, 1,300 acres were devoted
to large papayas and 610 acres to the small solo
variety. Production was concentrated in the Corozal
District where all the large papayas and some 230
acres of solo papaya were located. Acreage under
solo cultivation in the Orange Walk and Cayo
Districts amounted to 300 acres and 80 acres,
respectively.

Other Agricultural Production

Output of basic grains, vegetables and fruits was
lackluster with yields being affected by excessive
rains that reduced planting and restricted harvest


activities. Grain production was generally lower,
except for soybean, output of which almost
doubled to 1.4mn pounds with harvested acreage
rising from 300 acres to 700 acres. In contrast,
corn production fell by 22.0% to 81.3mn pounds
reflecting a 13.9% fall in harvested acreage as well
as lower yields. After being self sufficient in corn
over an extended period, imports of a small
quantity were necessary in 2006. In recent
developments, some farmers have been shifting
from corn to papaya production, a trend that could
become sufficiently significant in the future to impact
corn acreage and output. Sorghum yields declined
by 32.2% as adverse weather prompted a decline
in harvested acreage and average yields. Bad
weather and delayed cash payments also led to a
22.9% reduction in the harvested acreage of rice,
with output being driven down by 33.2% to 26.1mn
pounds. Bean production was down by 13.4% to
14.5mn pounds as a supply overhang from the
previous year and field losses caused by excessive
rain led to a reduction in harvested acreage and an
even bigger decline in average yields per acre.


A combination of wet weather and competition
from the contraband trade also took its toll on
production of some vegetables and root crops.
While output of hot pepper, onion, carrot, lettuce,
cocoyam and yam declined, increases were recorded
in cabbage, cucumber, okra, pumpkin, sweet
pepper, tomato, Irish potato, celery, yampi and
cassava.

In general, the livestock sector did well with
increases in cattle and pig dressed weights of 1.3%








2006 ANNUAL REPORT


CENTRAL BANK OF BELIZE


to 3.2mn pounds and 25.6% to 2.6mn pounds,
respectively, while that of poultry declined by 2.0%
to 29.9mn pounds. Milk output fell by 20.4% to
6.6mn pounds while egg production increased by
9.7%, albeit still falling short of domestic demand.
Honey production was up by 54.8% to 0.1mn
pounds.

Marine Products

A decline in farmed shrimp, a reduction in the wild
capture of most other marine species (except for
conch) and a fall in Tilapia fish fillet led to an 11.3%
contraction in fishery output to 23.7mn pounds.

Farmed shrimp was down by 11.7% to 22.4mn
pounds with the shift by some farms from two to
one harvest cycle and with production cuts from
some farms facing financial difficulties. \ il..I capture
of marine shrimp also declined by one-third to
0.05mn pounds, the low catch reflecting the over
exploitation of shrimp fishing grounds in southern
Belize during the last decade. Output of lobster,
another marine resource that is subject to pressure
from over h --c fir,-, fell by 30.9% to 0.5mn
pounds while whole fish almost halved to 0.01mn
pounds. In contrast, conch entered a cyclical,
reproductive peak with output increasing by 9.4%
to 0.7mn pounds.

Other major developments during the year included
the introduction of vertical long line fishing (also
known as deep sea fishing) and cage farming. In
joint collaboration with the Japanese International
Cooperation Agency (JICA), the fisheries


department conducted a workshop on vertical long
line fishing in Belize that encouraged a few
fishermen to engage in this activity. In 2006, the
first marine cage farming facility for the commercial
production of Cobiawas established at Robinson
Point Caye, and interest has been expressed in the
production of other species such as Pompano.


Forestry, Mining and Construction

Reports are that Belizean entrepreneurs began the
commercial exploitation of the ornamental Xate
leaf during the year. Forestry expanded by 1.3%
even though logging activities were restricted during
the rainy season in line with Forestry Department
guidelines aimed at sustainable management of the
country's forest resources.

Construction shrank by 2.9%, a small decline that
was partly due to the wrap-up of the Chalillo
construction in 2005, the completion of the US
Embassy and delays in the start-up of the Vaca Dam
and tourist oriented developments.

Mining expanded mostly due to the start of
petroleum production from the Spanish Lookout
oil field that has proven reserves of approximately
10.0mn barrels. As of mid 2006, five wells were in
production with a daily output of approximately
2,800 barrels and an annual petroleum production
of approximately 796,962 barrels.








DOMESTIC PRODUCTION, PRICES & EMPLOYMENT


Box 1: Medium Term Outlook for Belizean Citrus

The outlook for the Belizean citrus industry over the next four to five years remains positive since yields
in major citrus producing areas such as Cuba, Brazil, Florida and California have been negatively affected
by disease and unusual weather patterns.

A significant portion of Brazil's citrus groves are suffering from the effects of citrus canker and citrus
variegated chlorosis (CVC) diseases. Yields from Florida's groves have also been down due to the citrus
tristeza virus, citrus canker and the residual effects of back-to-back hurricanes. In a fairly recent
development, the acreage under citrus production has been declining in Florida as low fruit prices and
high real estate values have been prompting a sell-off of groves. In California, a severe frost in 2006
contributed to the 2006/07 U.S. crop being the smallest since 1990/91. Belize, in contrast, has remained
relatively free of any major disease or pest and has been spared from major weather disasters over the
past four years.

Dr. Thomas Spreen, Chairman of Food and Resource Economics at the University of Florida, has
pointed out that even if new groves were planted in Brazil or Florida in 2006, it would take at least five
to six years before any significant amount of fruit could be harvested and prices should therefore remain
high over this period. A window of opportunity therefore exists for Belizean growers to benefit from
increases in market share and profits.

While global production fundamentals are bullish for Belize, as a small citrus producer and price taker,
market trends on the demand side are not as favorable. The high retail price of orange juice over the next
few years may adversely affect consumer demand as has been occurring in the US market where a
downward consumption trend has been apparent since 1999/2' 1" Average US per capital consumption
for the 2006/07 crop is expected to decline by a further 2.(0' to 4.2 gallons.



US per capital Consumption of Orange Juice

5.8
5.6
5.4
5.2
0 5.0
i 4.8
4.6
4.4
4.2
4.0



Season

Source: Economic Research Services USDA

cont'd...








2006 ANNUAL REPORT


Box 1: Medium Term Outlook for Belizean Citrus (cont'd)


Manufacturing

Sugar and Molasses


Factory operations commenced on November 28h
and closed on July 02nd after 217 days of operations.
A 26.3% rebound in sugarcane deliveries boosted
sugar production by 11.0% to 111,323 long tons, a
less than proportionate increase that was due to the
lower sugar content of the crop.

While the 24 hour delivery system operated
successfully, factory time efficiency declined by 3.4%
as down time for repairs increased and the factory


battled with high mud levels that showed no
improvement over the previous year. Lower sucrose
content contributed to a deterioration in the cane/
sugar ratio so that it required 13.8% more sugarcane
to produce a given amount of sugar. Due to the
increase in sugarcane processing volume, output of
molasses rose by 10.9% to 41,250 long tons.

Citrus Juices and Pulp

The 15.1% decline in citrus deliveries was
exacerbated by reductions in the average yield of
pound solids (ps) per box of orange and grapefruit.
Citrus juice production for the 2005/2006 crop year


Table III.4: Sugar and Molasses Production

2030 2II04I5 20II0


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


116,515 100,328
41,117 37,181


92.27
85.09
9.87


94.57
85.83
9.26


CENTRAL BANK OF BELIZE


The demand for orange concentrate, Belize's main product, is likely to be more affected by the higher
prices than demand for not-from-concentrate (NFC) orange juices, a product that Belize has been de-
emphasizing. Although NFC is higher priced than other forms of juice, its consumers have shown a
willingness to pay more because of the perception of greater juice freshness and wholesomeness.

Juice prices in the grapefruit market are expected to be low in the coming years due to stagnating demand
for both fresh and processed grapefruit. The availability and quality of numerous fresh fruit alternatives
has been having a negative impact on grapefruit consumption, particularly among younger consumers.
Grapefruit is considered a difficult fruit to eat because it has to be peeled and sectioned and its taste can
be inconsistent. Recent evidence indicates that per capital consumption of grapefruit is directly related to
age, with older consumers eating more. Unless the eating patterns of younger consumers change as they
age, this could have significant negative impacts on future grapefruit demand and prices.


111,323
41,250


91.34
83.95
10.54








DOMESTIC PRODUCTION, PRICES & EMPLOYMENT


Table III.5: Production of Citrus Juices and Pulp

200/0 200/0 2005/0S6S


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


consequently declined by 19.1% to 35.8mn pound
solids. While the average pound solid per box of
fruit fluctuates yearly, an upward trend in average
yields per box is evident over the 4 years since the
implementation of farmer payment based on
pound solids.

Virtually all deliveries went into the production of
orange and grapefruit concentrate. In line with
deliveries, output of orange concentrate fell by
22.2% to 29.3mn ps, while that of grapefruit
concentrate rose by 8.3% to 6.3mn ps. With Asian
demand r- , i- freeze concentrate production
was minimal and accounted for only 1.8% of the
concentrate juices. A bullish market for concentrate
juices further limited production of not-from-
concentrate juices, which fell to 0. mn pound solids.
Output of pulp (mostly from orange) edged up
by a marginal 0.8% to 2.5mn pounds.


Other Manufacturing Production


Businesses engaged in other miscellaneous
manufacturing activities rebounded after a
slowdown in 2005 that was linked to the hiking of
excise duties and increased competition from
contraband products. Softdrink output rose by


11.9% to 4.6mn gallons, and fertilizer production
was up by 6.6% to 28,200 long tons to meet
demand in the citrus and sugar belts. Flour output
also rose by 6.1% to 32.0mn pounds and a measure
of success in the crackdown on contraband trade
enabled the local beer industry to regain some
ground with a small 1.3% increase to 1.9mn gallons,
a level that still fell below output in 2004. Success
against contraband did not extend to the local
cigarette industry, which experienced a further
reduction in market share with output plummeting
by 42.1% to 45.2mn units, a second consecutive
year of decline.Output of rum remained virtually
unchanged at 0.03mn gallons.


Tourism


Notwithstanding risks such as terrorism, health
scares due to the avian flu and rising oil prices,
international tourism experienced a record year in
2006 with preliminary results from the World
Tourism Organization (WTO) indicating a 4.5%
increase in the number of international tourist
arrivals to approximately 842.0mn.Within the region,
tourist arrivals in the Caribbean islands and Central
America grew by 3.2% and 6.1%, respectively.


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


44,221
37,689
5,846
686

2,490


35,778
29,332
6,328
117

2,509








2006 ANNUAL REPORT
CENTRAL BANK OF BELIZE 06 ANNUAL REPORT

Box 2: Tourism Developments and Prospects


Following the general trend in the Caribbean, the performance of the tourism sector was mixed. While
stay-over visitors increased by 4.8"' ,, cruise ship arrivals declined by 18.0% with the number of port calls
to the country falling for the second consecutive year.

During the year, the Belize Tourism Board (BTB) maintained its promotional efforts, particularly in the
North American and European markets, through advertising campaigns and attendance at the most
important tourism trade shows. Perceiving the potential of the Canadian market, the BTB began to
focus more of its effort in targeting that market, especially since the PGIA was expanded to enable it to
accommodate direct flights from that country. The BTB also tried to attract more visitors from Central
America such as Guatemalans and Salvadorans.

Among the most important infrastructural developments in 2006 was the work done in the first phase
of the project to expand the international airport by extending the runway and building a new four-lane
airport road. Upon completion, the 7,300 feet runway would be able to accommodate the European
Airbus and Boeing 767, trans-atlantic aircraft with a capacity of between 200 and 300 passengers.
Closer to home and notwithstanding these expansion plans, TikalJets, a Guatemalan airline that provided
service between Guatemala City and Belize City, ceased operations during the year.

The development programme for 2007 is expected to include:

a) Paving of the Placencia road

b) Completion of the first phase of the PGIA runway expansion

c) Establishment of a Tourism Development Fund for Belize City

d) Presentations to different European stakeholders to promote the improvements at the airport

e) Implementation of a BTIA/BTB project that is funded by the IADB to increase the
competitiveness of micro, small and community based organizations, which service the cruise
ship tourism sector

f) Continuation of the Stakebank project to provide docking facilities for cruise ships

g) Construction of condominiums at Northern Ambergris and in the Placencia area
h) The launch by Delta Airlines of one weekly direct flight from Los Angeles to Belize

Source: Belize Tourism Board








DOMESTIC PRODUCTION, PRICES & EMPLOYMENT


Table III.6: Bonafide Tourism Arrivals & Expenditure

2004 2005 200.


Stayover Arrivals
Air
Land
Sea
Total stayovers
Cruise Ship Arrivals


164,073
48,165
8,121
220,359
766,292


175,965
43,815
7,256
227,036
720,298


179,892
49,398
8,550
237,839
590,336


Tourist Expenditure ($mn) 324.5 397.1 492.0
Sources: Immigration Department, Belize Tourism Board, Central Bank of Belize


In Belize, stay-over arrivals increased by 4.8% to
237,839, reflecting the relatively buoyant economic
growth and increased marketing efforts in major
markets such as the US, Europe and Canada. On
the other hand, cruise ship visitors declined by 18.0%
to 590,336 disembarkations partly due to a spike in
the demand for Mediterranean cruise vacations and
the lingering aftereffects of the highly active 2005
hurricane season.

The number of overnight visitors entering the
country through the Phillip Goldson International
Airport (PGIA) increased by 2.2%, while arrivals
through the land and sea borders grew by 12.7%
and 17.8%, respectively. Visitors from the United
States rose by 3.4%, accounting for about half of
the increase in stay-over arrivals and 64.0% of total
stay-over arrivals. Arrivals from the EU, which
ranked as the second largest market with 14.0% of
all stay-overs, were up by 5.2%. Visitors from other
countries also increased by 8.5%, with the most
notable growth coming from Canada, where
targeted marketing efforts were successful in
boosting Belize as a tourist destination.

Meanwhile, after peaking in 2004 with 766,292


disembarkations, cruise ship arrivals saw consecutive
declines of 6.0% in 2005 and a further 18.0% in
2006 as port calls fell from 370 in 2005 to 295 in
2006. The latter reflected the redeployment
elsewhere of a cruise ship that used to make weekly
port calls to Belize. The market appears to be partly
affected by the fact that potential visitors from
America seem increasingly willing to venture further
from home to destinations such as the
Mediterranean, which has led to the deployment
of more ships to that region.



Prices

A combination of external and domestic factors
drove up the cost of living for the seventh
consecutive year. Continued high demand from
China and the U.S.A. and turbulence in the Middle
East and Nigeria caused global oil prices to peak at
historic levels and raised domestic i. n costs.
Furthermore, import costs, measured by the US
export price index, rose by 3.4% (up to October,
2006), creatingmore domestic inflationary pressures.
Other major domestic cost push factors included an
increase in electricity rates and the replacement of








2006 ANNUAL REPORT


CENTRAL BANK OF BELIZE


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

I Inflation~rr


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


the sales tax (at minimum of 9.0( by broader
based general sales tax of 10.0% during the second
half of the year. The cumulative effect was a 4.3%
increase in the Consumer Price Index (CPI) as
average prices increased across all categories of
goods and services.

"Transport and Communication" services had the
biggest increase of 6.9% due to the higher price of
fuel at the pump. "Rent, Water, Fuel and Power"
grew by 4.9%, driven by a 13.0% increase in
electricity rates implemented in January and a sharp
rise in butane costs. "Food, Beverage and Tobacco"
closely followed with growth of 4.3% reflecting
higher prices for beer and basic foodstuffs.


Categories with relatively high import content such
as "Household Goods & Maintenance" and
"Personal Care" increased by 2.5% each, while
increases in "Medical Care", "Recreation, Education
& Culture" and "Clothing and Footwear" were
more modest at 1.7%, 1.4% and 0.6%, respectively.


Employment

The unemployment rate declined from 11.0% to
9.4% as the labour force increased by 1.8% to
112,806 while the employed labour force rose by
3.7% to 102,233. The largest job growth was in the
tertiary sector, which contrasted with a fall in
employment in the primary sector and modest job
creation in the secondary sector. Even with a 1.4%
decline in workers, agriculture remained the largest
job provider, accounting for some 18.0% of total
employment.

In the primary sector, modest gains in banana and
miningwere offset by lower employment in sugar,
fishing, domestic agriculture and forestry. The losses
in the sugar industry reflected the increase in
mechanical harvesting and the movement of labour
to the free zone while lower employment in the
fishing industry was linked to the reduction in output
and the sale of more head-on, shell-on shrimps to
Europe and Mexico that require reduced processing.

Within the secondary sector, increased employment
of 7.4% in construction and 2.1% in manufacturing


346.6
92.0
167.0
85.3
20.1
170.1
80.4
37.9
1,000








T e 1: DOMESTIC PRODUCTIONa PRICE b I POYMEN


Table III.8: Employed Labour Force by Industrial Group


Agriculture nec 18,157 18,671 18,406
Forestry, logging, sawmilling 1,010 961 733
Fishing and fish processing 2,554 2,330 2,070
Mining and Quarrying 401 211 434
Manufacturing 7,607 7,210 7,363
Electricity, gas & water 768 934 879
Construction 6,595 6,884 7,390
Wholesale, retail, repair 16,227 15,944 16,722
Tourism (Hotels & Restaurants) 11,062 12,865 13,981
Transport and Communication 3,683 3,553 4,352
Financial intermediation 1,939 1,594 1,800
Real Estate, renting 2,123 2,084 2,431
General Government Services 9,885 10,033 9,345
Community, Social & Personal Services 13,531 15,084 16,041
Work Abroad'1) 157 85 0
Activities not classified elsewhere 212 146 285
Total, All Sectors 95,911 98,589 102,233
Source: Central Statistical Office
(1) Covers work abroad and in 2004, workers in commercial free zone as well.


offset a 5.9% fall in jobs within the utilities.

The largest increase in service employment occurred
in "\\ wholesale, retail, repair" and "Hotels and
Restaurants", the latter maintaining its position as
the fourth largest employer with some 13.7% of
the employed labour force. Jobs within the third
largest category, "Community, Social and Personal


Services", expanded by 6.3% to 16,041 individuals,
while employment in government services fell by
6.9% to 9,345, reflecting government's tight fiscal
position.










iTARY & FINANCIAL DEVELOP


Generally liquid conditions prevailed as growth in
the broad money supply accelerated to 13.3% in
2006. This occurred even though the policy
framework remained tight with the Government
achieving a primary surplus on its operations and
the Central Bank intervening in January and
September to raise commercial bank reserve
requirements. Additional efforts were made to
moderate the buildup of commercial bank liquidity
with agreement being reached with the Belize Social
Security Board (BSSB) to continue the sterilization
of its monthly surpluses with the Central Bank
during the year. The co-mingling of domestic and
offshore deposits, which had caused an artificial
boosting of bank liquidity in previous years was
also addressed inJanuarywith the commercial banks
being required to transfer all non-resident foreign
currency deposits to international affiliates as


stipulated under the International BankingAct. While
these measures had some degree of success, the
underlying upward momentum in liquidity remained
a reality that appeared to call for an eventual increase
in the periodicity and flexibility of Central Bank
interventions. Immediate action was however
considered unnecessary in view of the breathing
room provided by the bouyancy of the external
sector and the continuation of fiscal restraint.


Given the public sector's reduced reliance on
domestic financing, monetary growth was driven
by elevated receipts from exports and tourism,
foreign loans, and an acceleration in private sector
credit, most of which occurred in the second half
of the year. Narrow money '[I1) expanded by
19.8%, the largest increase recorded over the past
five years. In addition to a 16.5% rise in the public's


Table IV.1: Factors Responsible for Money Supply Movements
$mn
Psito as at Changes
Duing
Dec 2004 Dec 200 Dec 2006 2006


Net Foreign Assets
Central Bank
Commercial Bank


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


Central Bank Foreign Liabilities (Long-term)


2.5 0.0


0.0 0.0


Other Items (net)

Money Supply M2


187.9 213.6 322.0 108.3

1,248.3 1,330.0 1,505.0 175.0


85.5
104.1
-18.6


134.2
140.8
-6.6


1,409.4
144.8
61.3
1,203.3


261.1
206.5
54.6

1,565.9
183.5
27.9
1,354.5


1,353.2
175.1
46.9
1,131.2


127.0
65.8
61.2

156.3
38.5
-33.4
151.2









MOETRY& INNCALDEELPMNT


Chart IV.1: Ratio of M2 to GDP


55.0%


45.0%

40.0%


94 95 96 97 98 99 00 01 02 03 04 05 06
-- M2/GDP


currency holdings, there was a 28.2% surge in
demand deposits. The latter was dominated by
private utilities, and to a lesser extent, other business
enterprises. One particular private utility played a
key role in accounting for roughly 40.0% of the
increase in demand deposits. Quasi money also grew
strongly with a 9.0% increase that included increases
of $20.2mn in savings and $52.9mn in time
deposits. As is generally the case, individuals
accounted for most of the increase in savings. In


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


-U' 97 98 99 00 01 02 03 04 05 06

S4-Commercial Banks ---Central Bank


the case of time deposits, the growth was spread
somewhat evenly during the four quarters and
largely reflected increased holdings by the utilities,
the BSSB, credit unions, individuals and business
enterprises. Businesses and individuals accounted for
34.0% of the increase, the private utilities for 29.7%
and the BSSB and credit unions combined for
28.2%.


Benefitting from the recovery in the external current


Table IV.2: Money Supply
$mn
Position tChgs
During
Dec 2004 Dec 200 Dec 2006 2006


Money Supply (M2)


Money Supply (M1)
Currency with the Public
Demand Deposits
Savings/Cheque Deposits


1,248.3 1,330.0 1,505.0


492.2
115.3
241.2
135.7

756.1
112.8
643.3


Quasi-Money
Savings Deposits
Time Deposits


516.0
117.5
254.5
144.0

814.0
115.7
698.3


617.9
136.9
326.3
154.7

887.1
135.9
751.2


175.0

101.9
19.4
71.8
10.7

73.1
20.2
52.9








2006 ANNUAL REPORT


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


PoSo a t Changs
During
Dec 2004 Dec 2005 Dec 2006 2006


Net Foreign Assets


85.5 134.2 261.1 127.0


Central Bank
Foreign Assets
Foreign Liabilities(Demand)

Commercial Banks
Foreign Assets
Foreign Liab. (Short-Term)


account as well as new loan disbursements, the
banking system recorded a 94.6% improvement in
the overall net foreign asset position. The Central
Bank's net foreign assets rose by $65.8mn to
$206.5mn although it recorded lower foreign
exchange inflows and outflows than in the previous
year when substantial transactions to refinance
portions of the external debt had been undertaken.
Of the $370.5mn received in 2006, some 43.0%
came from loan disbursements. Purchases from
domestic commercial banks accounted for 31.0%
with the commercial banks upping sales to the
Central Bank partly to meet higher reserve
requirements. Inflows from sugar exports, oil
taxation, grants, revaluation gains and interest
earnings made up the balance. Outflows totalled
$304.5mn, the bulk being payments on behalf of
the public sector and some 8.6% i- 4mn)
consisting of sales to commercial banks and BEL.
Even with increased sales to the Central Bank, the
improvement in the commercial banks' position was
also marked with a ". 1 2n,'in rise in net foreign assets


that included foreign asset increases of '*2 .s,-i
while foreign liabilities shrank by $28.4mn.

With the growth in foreign inflows reducing the
impact of the tighter framework, there was a
sizeable increase in credit to the private sector of
12.6% as compared to 6.4% in 2005. The expansion
was dominated by personal loans, which rose by
24.4% and accounted for 46.5% of total new
disbursements. Other substantial increases were
recorded for tertiary sector activity in real estate,
distributive trade, professional services and
transportation. In the secondary sector, the main
focus was on construction, since, in a notable
development, the utilities reduced their commercial
bank loan balances by over 50.0% using loan and
equity funds obtained from the BSSB. Lending to
the primary sector increased slightly with activity in
mining and exploration picking up and funds being
extended for the established export crops (banana,
citrus and sugar).

Net credit to Central Government fluctuated


CENTRAL BANK OF BELIZE


104.1
106.9
2.8

-18.6
129.3
147.9


140.8
143.5
2.7

-6.6
147.6
154.2


206.5
208.9
2.4

54.6
180.4
125.8


65.8
65.4
-0.4

61.2
32.8
-28.4








MOETRY& INNCALDEELPMNT


Table IV.4: Net Domestic Credit


$mn
Psito as ahne
Duin
Dec 2004 Dec 200 Dec 2006 2006


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


significantly during the year with movements in the
government's Central Bank overdraft (which
peaked at $156.4mn in November) being largely
determined by timing differences between external
debt service payments and foreign loan
disbursements intended to help the government
meet those obligations. Those receipts enabled the
government to reduce loan balances held with the
Central Bank and the commercial banks by year
end. Hence, while a net increase in funding for


246.9
165.3
81.6


249.2
181.8
67.4


71.8 104.4


175.1
46.9
1,131.2
1,353.2


144.8
61.3
1,203.3
1,409.4


271.7
228.9
42.8

88.2

183.5
27.9
1,354.5
1,565.9


22.3
47.0
-24.7

-16.2

38.5
-33.4
151.2
156.3


Central Government of $38.5mn was recorded
during 2006, this was largely due to a new 5-year
Treasury note issue valued at $31.5mn thatwas made
out in favour of the Central Bank in fulfillment of
government's guarantee ofDFC and NDFB loans
that were not performing. In addition to the primary
note issue, the Central Bank purchased an additional
$16.3mn in Treasury bills and notes from the
commercial banks in the secondary market.


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


rn-rn


-20


-40

9 \O
e,~. Y"


J


I


SO
Sa


e9 .J


0
&e, ci









CENTRAL BANK OF BELIZE


Chart IV.4 : Quarterly Change in Excess
Liquidity


120

100

80

60 -


111111111111
SExcess Liquid assets

Robust deposit growth stemming from unusually
high export receipts created generally liquid

conditions for the commercial banks duringthe year.
After a contraction inJanuary due to a 1.0% increase

in reserve requirements, excess statutory liquidity

began to build up again, reaching a peak of

$100.7mn in August. In the beginning of

September, the Central Bank responded by
implementing a further 1.0% increase in commercial


2006 ANNUAL REPORT


Chart IV.5 : Quarterly Change in Excess
Cash Reserves

20

15-

10

5

0

-5

-10

111111111111


SExcess cash reserves

bank required reserves (from 9.0% to 10.0% for

cash and from 22.0% to 23.0% for secondary
reserves). However, this seemed to have minimal

effectiveness in restraining the lending activity of

the banks, which normally heightens in the months
leadingup to Christmas. With the lending spurt that

began in August continuing in the third quarter, this
reinforced the downward shift in liquidity that

resulted from the increase in reserve requirements.


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

Positon a at Cange
I- II~I- II IDuIring


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


324.2
33.7
81.7
102.9
25.9
80.0
237.9
86.3
84.7
83.3
1.4


330.0
35.6
111.8
120.0
22.8
39.8
271.6
58.4
112.2
103.5
8.7


377.7
40.9
152.1
131.4
12.0
41.3
310.0
67.7
150.0
134.8
15.2


47.6
5.4
40.3
11.3
-10.9
1.5
38.4
9.2
37.8
31.3
6.5








MONETARY & FINANCIAL DEVELOPMENTS


After shrinking by 45.5% between August and
October, however, growth in excess statutory
liquidity began to trend upward again, ending the
year at $67.7mn, a year on year increase of 15.8%
as commercial bank holdings of approved liquid
assets rose by 4-'.6mn relative to a $38.4mnincrease
in required holdings. For the second consecutive
year, average excess cash reserves were held at levels
that were significantly above the long term trend
for such holdings. The atypical increase was due to
the portfolio decisions of only one bank and the
Central Bankwas therefore content to monitor the
situation without taking immediate action. At year-
end, excess cash reserves stood at $15.2mn, a 74 4" ..
increase over the position at the end of 2005 with
daily average holdings of cash reserves rising by
$37.8mn relative to a $31.3mn increase in required
holdings.


A slight narrowing of the banks' interest rate spread
in 2006 continued a 5-year downward trend that
began when the number of domestic commercial
banks were increased from four to five. The
legislative change that paved the way for export
processing zones to do banking business with
domestically licensed international banks has also
heightened the level of competition in the banking
system in recent years. The impact of higher reserve
requirements was an additional factor that led the
banks to compete for market shares by offering
more attractive rates to customers. While the
weighted average lending rate fell by 10 basis points
to 14.2%, the weighted average deposit rate rose
to 5.8%. The latterwas some 30 basis points higher
than the start of the year and largely reflected a 40
basis points increase in the weighted average time
deposit rate.


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


11.5
11
10.5
10
9.5
9
8.5
8
7.5
7
96 97 98 99 00 01 02 03 04 05 06
96 97 98 99 O0 01 02 03 04 05 06












-OVERNMENT OPERATIONS & Pi


Central Government Operations


During the 2006 calendar year, Central

Government's overall deficitwas slashed by 70.8%

to $44.3mn (1.8% of GDP) with revenues rising

by 12.8% while expenditure was 5.6% lower. A

primary surplus that totalled $97.6mn (4.0% of

GDP) was recorded. The revenue surge partly

reflected an upturn in tax collections associated with

increased economic activity as well as the

introduction of the broader based general sales tax

inJuly. In addition to cost containment efforts, the

expenditure decline reflected the lowering of debt

related interest and fees (compared to 2005 when

unusually large finance and insurance charges were


incurred for international bond placements) as well

as the fact that some loan payments were

temporarily suspended in December with the

initiation of the debt restructuringprogramme. A

decline in outlays under the Capital III component

of the budget also contributed to the overall

lowering in expenditure.


Financing for the fiscal deficit came from external

sources, as the government borrowed mostly to

meet external debt service payments during the year.

External loan disbursements amounted to $169.4mn

while amortization stood at $123.3mn. Financing

from the domestic system came by way of a new

Treasury Note issue totalling $31.5mn, the proceeds


Table V.1: Government of Belize Summary of Revenue and Expenditure
$mn
I~~~ In nII. I


Current Revenue
Tax Revenue
Non-Tax Revenue
Current Expenditure
CURRENT BALANCE
Capital Revenue
Capital Expenditure (Capital II local sources)
OPERATING SURPLUS
Total Grants
Total Revenue and Grants
Total Capital Expenditure
Total Expenditure
of which Interest Payment on Public Debt
PRIMARY BALANCE
OVERALL BALANCE

FINANCING REQUIREMENTS
Net Privatization Proceeds
Domestic Financing
Financing Abroad
Other

Ratio to GDP (%)
Current Balance
Operating Surplus
Primary Balance
Overall Balance
Sources Central Bank ofBelize, Ministryof Finance


451.9
408.4
43.5
474.1
-22.2
26.5
55.4
-51.1
35.4
513.8
173.2
647.4
122.4
-11.2
-133.6

133.6
-10.0
-36.2
179.9
-0.1


-1.1
-2.4
-0.5
-6.3


511.5
457.8
53.6
561.2
-49.7
6.4
49.7
-93.0
18.8
536.7
127.1
688.2
149.5
-2.1
-151.6

151.6
44.4
-19.6
127.0
-0.1


-2.2
-4.2
-0.1
-6.8


566.0
514.4
51.5
548.1
17.9
10.0
67.9
-40.0
29.3
605.3
101.5
649.6
141.9
97.6
-44.3

44.3
0.0
-10.9
55.6
-0.3


0.7
-1.6
4.0
-1.8


54.5
56.6
-2.1
-13.1
67.6
3.6
18.2
52.9
10.5
68.6
-25.6
-38.7
-7.6
99.7
107.3

-107.3
-44.4
8.7
-71.4
-0.2


3.0
2.5
4.1
5.0








CENTRAL GOVERNMENT OPERATIONS & PUBLIC DEBT
iii


Chart V.1: Central Government's Development Expenditure


150.0
125.0
100.0
75.0
50.0
25.0


2004


2005


2006


SCapital II


of which were swapped against non performing
Central Bank loans previously extended to the DFC
and NDFB under government guarantee. For the
purpose of the fiscal accounts, the transaction was
not treated as a transfer to the DFC but rather as
bringing about a shift in liabilities from the Central
Bank to Central Government.


During the year, current revenue posted a healthy
10.7% growth to $566.0mn (23.2% of GDP) with
a $56.6mn increase in tax revenue eclipsing a $2.1mn
decline in non-tax revenue. The largest growth was
in revenues from goods and services, which were
boosted by $32.7mn with the switch from the sales
tax (which had a minimum rate of 9.' '.." to the
broader based general sale tax (at 10.11"-. In
addition, tax revenue from income and profits
increased by $16.3mn and revenues from taxes on
international trade were up by $9.1mn in tandem
with the growth in imports. Non-tax revenue
declined as new income of $4.8mn in petroleum
royalties did not offset the deferral of property
income revenue to 2007 and an 11.3% fall in license


OECapital III


fees. Capital revenue totalled $10.0mn and some
$29.3mnwas received in grants (including $10.0mn
each from the United Kingdom and Venezuela).

All categories of current expenditure declined,
except for subsidies and transfers, which increased
because of the reclassification of wages paid to
Karl Heusner Memorial Hospital staff. A temporary
halt to payments on the external commercial debt
shaved $15.5mn off interest payments, and without
the need to pay the sizeable insurance and finance
fees connected with the 2005 bond placements,
outlays on goods and services reverted to normal
levels. An overall decline of 2.3% was therefore
recorded in current expenditure over the year.

Capital expenditure fell by 20.1% to $101.5mn, the
third consecutive year in which a decline has
occurred. While expenditure on locally funded
Capital II projects increased by 36.7%, outlays on
externally funded (Capital III) projects were down
by 55.9%. Capital transfers and net lending also
contracted by 48.3%. Education accounted for
24.0% of total capital outlays with the University


I








2006 ANNUAL REPORT
CENTRAL BANK OF BELIZE 06 ANNUAL REPORT

Box 3: Major Fiscal Initiatives in 2006

February- Under the Health Sector Reform Project, the Ministry of Health embarked on work to
build and renovate health facilities throughout the country. In addition to construction work, the project
included components that addressed the improvement of human resource capacity and procurement
of equipment and ambulances.The estimated project cost exceeded BZ$7.0mn and was funded by
loans from the IDB and the CDB.

June- Belize Petroleum and Fn,, i -- Ltd, (BPEL) the Government's Oil Company and Petr6leos de
Venezuela, (PDVSA) signed the Articles and Memorandum of Association of aJoint Venture Company,
registered as ALBA Petr6caribe (Belize Fi',, i _',1 Ltd. Under the Agreement the Government of Belize
is able to purchase petroleum by paying only 60.0% of the cost at the time of purchase when petroleum
is priced at over U ., i/barrel. The Government of Belize may retain 40.0"' of the cost as financing,
which can be channeled to projects aimed at alleviating poverty in Belize. The financing would then be
amortized after a two-year grace period over 23 years at 1.0 % interest per annum.

July- The sales tax was replaced by the General Sales Tax (GST). Under Section 99 of the GST Act,
Section 62 of the Stamp Duties Act, which requires a ten cent stamp to be placed on every receipt for
payment of ten dollars or more, and the Entertainment Tax Act were repealed.

August- The Government of Belize announced its decision to seek the cooperation of the country's
private sector creditors in achieving the restructuring of approximately U ... I, i l i in external debt. It
was expected that the bulk of the public sector's external commercial debt would be affected by the
proposed restructuring. The Government also approached official creditors to solicit assistance in dealing
with the country's unsustainable debt burden.

September- An Association Agreement was signed between the Government of Belize and the Central
American Bank for Economic Integration (CABEI) that enabled Belize to be incorporated to CABEI
as a Non-founding Beneficiary Member. CABEI, which was established by the Governments of
Guatemala, El Salvador, Honduras, Costa Rica and Nicaragua, plans to contribute to the social and
economic development of the Central American region by investing U C -'2 ,,I in the three major areas
of: Poverty Alleviation, the Integration Process and Globalization. By becoming a non-founding beneficiary
member, the Government of Belize, as well as the private sector, will be able to benefit from projects
and programmes financed by the Bank.

November- The Income and Business Tax Act was amended to provide for a special tax regime for
companies engaged in petroleum operations. These companies were exempted from the business tax
and made subject to an income tax rate of 40% of their chargeable income.

December- The Inter-American Development Bank announced its approval of a U 1 -'" I.i-,i fast-
disbursing policy based loan to support Belize's agenda of reforms to restore macroeconomic and
financial stability, improve its business climate and bolster investor confidence. The loan is to be disbursed
in two trenches, the first of $10.0mn in December, and the second of $15.0mn to occur in 2007. The
loan (at LIBOR) is to be amortized over 20 years and includes a five-year grace period.
December- The Caribbean Development Bank [CDB] approved a US^2,. ''r,,i Policy Based Loan for
Belize comprised of US$15.0mn from CDB's Ordinary Capital Resources [OCR] and US$10.0min
from CDB's Special Fund Resources [SFR]. A loan of US$12.6mn loan was also approved to finance
the upgrading of the Placencia Road.

December- The Government of Belize made an offer to exchange the country's outstanding commercial
indebtedness in return for new U.S. dollar bonds to be issued by Belize ("New Bonds"). The New
Bonds have a final maturity falling due in 2029; equal semi-annual principal amortizations commencing
in 2019, and a step-up coupon structure with annual interest payments set at 4.25% for the first three
years after issuance of the New Bonds, 6.00% for years four and five, rising to 8.50"',. in year seven
through to maturity. The exchange offer was preceded by four months of intensive consultations between
the affected creditors and the Belizean authorities.

Source: Government of Belize Press Releases, Laws of Belize








CENTRAL GOVERNMENT OPERATIONS & PUBLIC DEBT


Table V.2: Central Government's Domestic Debt
$mn
Inmstrmentm0 4 2m00 2m0s


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


of Belize and tertiary level scholarships accounting

for $14.3mn, and some $6.6mn being disbursed
for technical andvocational training. Approximately

18.0% of outlays went to infrastructural projects
such as rural electrification, maintenance of
highways, feeder roads, streets and drains and

construction of the Orange Walk bypass. An

equivalent amount went on social development
programs executed under the Social Investment
Fund, Basic Needs and Trust Fund, National
Institute of Cultural Heritage, and Commonwealth
Debt Initiative, among others. Health, the
environment and agriculture accounted for 8.6%,

8.9% and 3.8%, respectively, with outlays forprojects
that included National Health Insurance, health
sector reform, land development/management and


139.5
100.0
24.0
15.0
278.5
Bank of Belize


140.5
100.0
24.0
15.0
279.4


129.1
100.0
55.8
15.0
299.9


agricultural health services (BAHA).


Central Government's Domestic Debt

Central Government's domestic debt rose by 7.3%
to $299.9mn during the year as a $7.2mn decline in
overdraft balances and amortization payments of
$4.4mn were more than offset by a new 5-year

Treasury Note issue valued at $31.5mn. Proceeds
from the latter were swapped against non

performing Central Bank loans to DFC ($29.9mn)

and the NDFB ($1.6mn) that had been guaranteed
by Central Government.


By way of trade in the secondary market,
commercial banks and other private entities
surrendered $12.6mn in Treasury Bills to the Central


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


250.0

200.0

150.0


100.0

50.0


Central Bank Commercial Banks

*2004 m2005


Other


02006


I








2006 ANNUAL REPORT
~~I .. .


Table V.3: Public Sector External Debt by Source


Ousadn .ners .utstand.n.
Deb & Ot0- Vauto Debt
311120 Disuemn Amrizto Chre Adjustments-31112200


Bilateral 326.8 131.6
Bonds 983.5 0.0
Commercial Banks 213.9 3.5
Multilateral 414.4 32.1
Suppliers Credit 1.4 0.0
Total 1,940.0 167.2
Source: Ministry of Finance Central Bank of Belize

Bank, and the latter sold $0.5mn of its newly
acquired Treasury Notes to private entities. Of the
$14.3mn in older Treasury Notes that matured in
December 2006, the commercial bank rolled over
$10.0mn and the Central Bank took up the remaining
$4.3mn.

The Belize Bank and the GOB/US debt for nature
swap account were the recipients of the largest
principal payments amounting to $1.7mn and
$1.2mn, respectively. Smaller payments were made
to the DFC, Atlantic Bank, Recondev, the BSSB
and to the Belize Tourist Village for dredging the
Belize harbour. Of the $23.2mn in government
interest payments, the Central Bank received
$13.3mn as the cost of funds provided through
the overdraft facility. Holders of Treasury Bills,
Notes and Defence Bonds received $3.2mn,
$1.3mn and $1.2mn, respectively. A $2.7mn interest

payment went to the Belize Bank, while the DFC
received $0.5mn. Smaller sums were paid to
Reconstruction and Development, GOB/US debt
for nature swap, BSSB, Guardian Life and Atlantic
Bank.

External Public Sector Debt

The public sector's external debt rose by 1.6% to


32.7
42.9
37.5
26.6
1.2
140.8


16.8
72.5
19.7
19.6
0.1
128.7


426.8
940.7
179.9
422.8
0.2
1,970.4


$1,970.4mn (80.7% of GDP) with new
disbursements of $167.2mn all going to Central
Government. The latter accounted for 92.4%
($1,821.3mn) of the outstanding debt, while the
non-financial and financial public sector held 2.1%
and 5.5%, respectively.


Bilateral disbursements of $100.0mn from
Venezuela and $30.0mn from ROC/Taiwan
supported the Government's cash flow and assisted
in meeting external debt service obligations.
Disbursements from multilateral creditors totalled
$32.1mn. Included in this was $20.0mn from the
IDB that represented the first tranche ofa $50.0mn
policy based loan, and $7.4mn from CDB. Some
$4.4mn in disbursements consisted of capitalized
interest payments, the largest being $3.5mn on a
loan from TIBoM. At year-end, the public sector
debt was comprised of bonds (47.7" ,, bilateral
loans (21.7%), multilateral loans (21.5%),
commercial loans (9.1'.. and export credits (less
than 0.1"'..;


In an effort to achieve greater sustainability in
external flows, the Government launched a
programme to restructure the public sector's
commercial debt in December. As a result, two


CENTRAL BANK OF BELIZE








CENTRAL GOVERNMENT OPERATIONS & PUBLIC DEBT


Chart V.3: Sources of Public Sector External Debt


2004 2005 2006


nBilateral *Multilateral *Bonds *Commercial Banks *Suppliers Credit


bond payments (totaling $3.0mn in principal and
$15.5mn in interest) were put on hold. Central
Government's amortization therefore amounted to
$121.3mn with bondholders receiving 32.3% of
the total. The largest payments went to Bear Stearns
($28.6mn) and Citicorp Merchant Bank Ltd
($7.9mn). Bilateral creditors accounted for 24.6%
($32.7mn) of total payments, of which $14.7mn
was paid to ROC/Taiwan. Commercial banks
accounted for 22.3%, and multilateral lenders/
suppliers received the remaining 20.9%.
Repayments by the financial public sector totalled
$13.9mn with $7.9mn going to DFC/North
American securitization loan, $4.3mn to multilateral
lenders, and $1.7mn to bilateral creditors. Of the
$5.5mn repaid by the non-financial public sector,
the Belize Water Services Ltd. sent a total of $3.0mn
(to CDB and Amtrade International), and Belize
Airport Authority payments to CIBC Bank & Trust
Company and the Government of Kuwait
summed to $2.5mn.


Annual interest payments by Central Government
totalled $118.9mn partly because of the
rescheduling of payments that were to have been
made in December. Payments to bondholders
amounted to $72.5mn and included $46.9mn to
Bear Stearns and $20.9mn to Royal Merchant Bank.
Of the $16.8mn paid to bilateral lenders, ROC/
Taiwan accounted for $13.4mn. Multilateral
creditors, commercial banks, and suppliers received
$19.6mn, $14.0mn, and $0.1mn, respectively.
Financial and non-financial public sector institutions
paid a total of$9.8mnwith notable payments going
to Belize Mortgage Company ($5.6mn) and the
CDB ($3.1mn).

A $4.0mn increase in the value of the external debt
was recorded during the year due to the appreciation
of the euro, pound sterling and Kuwait dinar against
the U.S. dollar. Upward adjustments in loans
denominated in euro, pound sterling and the Kuwait
dinar amounted to $2.8mn, $0.9mn, and $0.3mn,
respectively.


1000.0
900.0
800.0
700.0
600.0
500.0
400.0
300.0
200.0
100.0
0.0


I








2006 ANNUAL REPORT
CENTRAL BANK OF BELIZE 06 ANNUAL REPORT

Box 4: Belize's Debt Restructuring Process

In recent years, the government of Belize has borrowed extensively from foreign commercial banks and
from other lenders through the issuance of US dollar bonds in the international capital market to finance
an expansionary economic programme and cover hurricane rehabilitation costs. Between 1998 and
2006, the external public sector debt stock almost quadrupled from US. $256.9mn to US $985.2mn
with bonds and other commercial loans accounting for 56.9% of this debt. In addition to high debt
servicing costs stemming from an average effective interest rate of 11.25%, the maturities for most of
the new external obligations were tightly bunched together over a ten year period between 2005 and
2015. The loan amortization profile was also highly uneven with sharp spikes occurringwhen the bullet
payments for designated international bonds became due. Adding to the pressure was the presence of
a put option on a US $76.1mn bond that was exercisable in 2007, all indications being that the bond
holder was going to exercise this put option. (See Chart V4.) With a weakening in the foreign exchange
reserve position and successive downgrades from the international credit rating agencies, the Government
was finding it increasingly expensive to access international funds to meet its debt service payments,
particularly with the exercisable put option in 2007 looming ahead.
Chart V.4: Debt Service Payments Before Restructuring

200
180
160
140
z 120
100
80
60
40
20
1 0-------- ,---,---,---,---,---,---,----------------------------





Years
Interest Payments I Prncpal Repayments

To prevent a possible default on external loan payments and a full-blown balance of payment crisis, the
Government therefore obtained a resolution from the National Assembly to restructure some US
$565.0mn of its external obligations and contracted Houlihan Lokey Howard and Zukin as consultants
to facilitate the process. Having committed itself to a debt restructuring the Government received assistance
in the form of special policy based loans from the IDB and CDB and bilateral loans from ROC/Taiwan
(US $30.0mn) and Venezuela (US $50.0mn) were also obtained to meet the government's external debt
service obligations and boost international reserves.

After extensive consultations with creditors to devise a palatable debt restructuring offer, Government
proposed to exchange the various commercial debt instruments with one US dollar "super-bond", the
main elements of which are listed below
A final maturity in February 2029, with principal repaid in equal semi-annual installments starting
August 2019
A step-up coupon structure based on the following schedule: 4.25% in years 1 to 3; 6.00% in
years 4 to 5; and 8.50% from year 6 onwards
Redeemable at par by the Government at any point after the end of the grace period.

The Government launched its formal offer on December 18, 2006 and debt service payments were

cont'd...










CENTRAL GOVERNMENT OPERATIONS & PUBLIC DEBT


Box 4: Belize's Debt Restructuring Process (cont'd)


temporarily suspended with the Government offering to pay accrued interest and principal payments up

to the closing date (20 February, 2007) of the exchange offer as a "participation fee" to the participating

creditors. The new loan repayment profile smooths debt service payments as indicated in Chart V5 and

significantly lowers the cost of debt servicing in the short and medium terms.
Chart V.5: Debt Service Payments After Debt Restructuring


z
')
n


200
180
160
140
120
100
80
60
16o -------------------------------------------------



40
20
120 ----------------------------------------------------------
100m m m m m m m--------------------------_----------------


Years
I Interest Payments E Principal Repayments


As illustrated in Chart V6, foreign exchange outflows for debt service payments during the first nine years

are projected to fall by an average of US $48.0mn per year or US '.4 1t.Omn cumulative over the nine

year period. This positive development should improve the country's general economic outlook, investment

climate and credit ratings. The longer repayment period should also afford the country the opportunity to

expand its economic base so that the higher debt servicing obligations that fall due in the later years will

be less burdensome.


Chart V.6: Cash Flow Savings on Debt Service Payments

500

400 ---

300
z
200

100

0
2007 2008 2009 2010 2011 2012 2013 2014 2015
-100
Years
-- Annual Savings --Accumulated Annual Savings





It should however be noted that notwithstanding the improvement in the repayment schedule, a

medium term forecast indicates the need for dexterous management and continued fiscal and monetary

restraint to ensure sustainability in handling the national external debt.






Sources: Ministry of Finance; Central Bank of Belize


I










FOREIGNN TRADE AND PAYMENT:


A reduced trade deficit and increased inflows from
tourism and remittances contributed to a significant
improvement in the external current account in 2006.
From 2Ii 9mn (14.4% of GDP) in 2005 the deficit
fell to $48.9mn (2.0% of GDP). Net capital and
financial inflows (mostly from foreign direct
investment in tourism, banking, and real estate and,
to a lesser extent, public and private sector external
beo' .-. --Wi',i covered the current account shortfall
and pushed the gross official reserves up by $65.4mn
to $208.9mn, the equivalent of 2.2 months of
merchandise imports.


Merchandise Trade


The merchandise trade deficit narrowed to $370.9mn
(a 19.7% improvement) as a 31.1% increase in
exports outpaced a further 10.0% rise in imports.


Table VI.1: Balance of Payments


CURRENT ACCOUNT
Merchandise Trade
Services(1)
Income
Current Transfers
CAPITAL ACCOUNT
FINANCIAL ACCOUNT
NET ERRORS & COMMISSIONS
OVERALL BALANCE
FINANCING
Memo Items:
Import cover in months
Current AccountlGDP Ratio (%)


The latter included increases for domestic
consumption and the CFZ of 8.8% and 16.7%,
respectively. Slightly more than one third of the
increase in imports for the domestic market was
made up of capital investment goods for export
processors. The remainder reflected increased
demand for construction materials, transportation
equipment and higher fuel acquisition costs. Exports
were boosted by the advent of crude oil exports,
high citrus prices and the temporary re-allocation of
preferential sugar quotas to Belize.


Domestic Exports

Higher international prices and crude oil sales pushed
domestic exports up by 36.3% to '42 1 n-, in 2006.
Notably, petroleum accounted for 56.2% of the
increase. The remainder was made up of a substantial


- Summary and Financing Flows
$mn


2004 20. mm.,


-320.9
-462.0
267.4
-228.8
102.4
5.9
349.7
1.9
36.6
-36.6


-311.7
-346.5
176.4
-233.5
91.8
19.6
234.9
-5.2
-62.3
62.3


-48.9
-370.9
410.5
-236.3
147.9
18.3
77.1
18.9
65.4
-65.4


(1) Tourism earnings for 2005 were based on actual inflows into the banking system 2005,
while estimates for 2004 & 2006 were based on Visitor Expenditure Surveys.












Table VI.2: Balance of Payments MerchandiseTrade
$mn

Goods Exports, f.o.b. 614.9 650.5 852.9 31.1%
of which: Domestic Exports 372.9 397.8 542.1 36.3%
CFZsales 218.9 227.4 277.0 21.8%
Other Re-exports 23.1 25.2 33.9 34.5%
Goods Imports, f.o.b. 961.4 1,112.4 1,223.9 10.0%
of which: Free Circulation Area 818.9 938.9 1,021.3 8.8%
CFZ(1) 142.5 173.6 202.6 16.7%
Merchandise Trade Balance -346.5 -462.0 -370.9 -19.7%
(1) This CFZ item excludes fuel and goods obtained from the free circulation area.


surge in citrus and sugar earnings, and smaller

increases from molasses, papaya, banana and

garments that offset reduced earnings from marine

products and non-traditional exports.


Sugar and Molasses


With increased output fortuitously coincidingwith

stronger prices across all markets and a temporary

hike in preferential market quotas in 2006, sugar

exports rose by 9.3% in volume and 43.2% in value


to $100.lmn. The largest revenue gain came from

the EU where tonnage expanded by 39.2%

reflecting a 3.5% rise in the quantity of Protocol

sugar and a more than sevenfold increase in sales

of Special Preferential Sugar (SPS) as Belize was

allowed to meet shortfalls from other CARICOM

countries. Even with the programmed

implementation of a 5.1% cut in the price of

Protocol sugar that affected 42.5% of EU tonnage,

receipts from the EU rose by 54.1% to $65.3mn

due to the volume increase and a 9.5% gain in the


Table VI.3: Domestic Exports
$mn

Traditional Exports 349.7 362.3 430.7
Sugar 79.7 69.9 100.1
Citrus Juices(1) 47.1 77.5 120.2
Citrus Concentrate 45.8 76.5 120.2
Not-from-Concentrate 1.3 0.9 0.0
Molasses(l) 2.6 5.5 6.3
Bananas 53.0 49.9 50.6
Marine 107.4 98.1 86.0
Garments 37.1 34.5 36.6
Papayas 22.8 26.9 31.0
Petroleum(2) 0.0 0.0 81.1
Non-traditional Exports 23.2 35.5 30.3
Total Exports 372.9 397.8 542.1
Sources: Central Statistical Office, BSI, CPBL, Central Bank of Belize
(1) Reflect actuals sales as reported by processor.
(2) Estimated F.O.B value of petroleum shipment.









CENTRAL BANK OF BELIZE


Table VI.4: Exports of Sugar and Molasses
2004 2005 2006
Vol m e Vau Vol m- au ol au
(ln tos ($'000 (ln tos $00 (long tos ($. 000)


Sugar(1' 107,103 79,682 88
E.U. 47,965 47,273 39
USA 10,917 8,364 11
CARICOM 46,367 22,707 35
Other 1,854 1,338 1

Molasses(2) 32,706 2,645 33
Sources: Belize Sugar Industries, CSO
(1) Reflects value of export shipments.
(2) Relect actual sales as reported by the processor.


exchange rate between the US dollar and the Euro

that was negotiated on the futures market


Exports to the US market surged by 70.6% to

18,794 long tons with Belize receiving a temporary
increase in quota allocation to cover shortfalls in

US production after hurricane damages to the
sugarcane growing belt of Louisiana and Florida.
With increases in both volume and average unit

price, revenues from this market more than
doubled to $17.5mn.

The diversion of sugar to the more profitable

preferential markets caused exports to CARICOM

(mostly of' - I e..l1 sugar) to contract by 44.3% to
19,660 long tons. Earnings fellby 15.1% to $15.0mn,
a less than proportionate decline as the average price
rose from US$0.11 to US$0.17 per pound
influenced by a hike in the world price for raw sugar.
The latter averaged a record breaking US$0.16 per

pound in 2006 due to supply shortages in the United
States and Asian markets and the diversion of more
Brazilian sugarcane into ethanol production.


Exports to other markets (namely' - ..l1 sugar to


Curacao and Canada) were up by 22.4% to 2,288
long tons, while earnings increased by 62.4% to
$2.2mn as the average price per pound rose by

US$0.05 to $0.21.


Molasses followed this positive trend with export
volume rising by 5.3% to 35,100 long tons and
earnings up by 13.5% to $6.3mn as shortfalls in the
US market pushed the average price up from
$165.56 to $178.46 per long ton.


Citrus Juices and Pulp


Supply shortages underpinned high citrus juice prices
and provided additional market opportunities in
2006. The citrus industry responded with a 19.8%
surge in export volume that consisted of the current
year's juice production and almost all of the
inventory overhang from the previous year.

Revenues increased by 55.1% to $120.2mn, making
citrus juices the lead foreign exchange earner in
domestic commodity exports.


While the volume of orange concentrate exports

increased by 23.8%, high prices provided a further


2006 ANNUAL REPORT


,131
,928
,015
,319
,869
,336


69,899
42,392
8,441
17,720
1,346

5,519


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

35,100


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

6,264








FOREIGN TRADE & PAYMENTS


boost to earnings, which rose by 74.2% to $94.9mn.
In addition to lower US production due to hurricane
damage, disease and the sale of some groves to
real estate developers, the market was influenced
by the levying of anti-dumping duties against
Brazilian concentrates. The US was the lead purchaser
of Belize's orange concentrates, accounting for
59.5% of export volume and 64.4% of revenue.
Even with a 7.5% fall in volume, revenues from
sales to the US were up by 50.9% to $61.1mn due
to an increase in the average price per pound solid
of $1.10. Prices also rallied in Europe, the next
largest consumer with 8.2mn pound solids valued
at $19.4mn. Sales to the Caribbean increased by
20.3% in volume to 6.3mn pound solids and 23.7%
in value to $14.1mn. On the other hand, weakening
demand in Asia caused sales of orange freeze
concentrate to plunge by 91.1% to a minimal 0.06mn
pound solids.


Exports ofgrapefruit concentrate increased by 5.9%
to 6.6mn pound solids while earnings rose by 14.5%
to $25.2mn. Sales to Europe almost doubled and
accounted for 54.5% of volume and 50.4% of
earnings. Prices improved by 19.4% in the US,
which, as the second largest market, accounted for
earnings of $7.1mn (27.9% of total grapefruit
revenue). With the focus on the higher priced
European and US markets, sales to the Caribbean
declined by 16.8% to 0.6mn pound solids valued
at $1.8mn. Sales of grapefruit freeze concentrate
fell by 12.3% to 0.7mn pound solids, but a 6.2%
increase in the average unit price limited the revenue
decline to 6.9% ($3.4mn).


Sales of not-from-concentrate were negligible and
the strong momentum of pulp exports achieved in
the previous year slowed somewhat with sales down
21.4% to 2.0mn pounds and revenue declining by
30.6% to $l.lmn.


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

2004 2005 2


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


27,806
22,643
5,163
45.8
33.0
12.8


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


42,815
36,165
6,650
120.2
94.9
25.3


Not-from-concentrate Exports ('000 ps) 284 227 0.8
Orange 67 189 0.8
Grapefruit 217 38 0
Not-from-concentrate Value ($mn) 1.3 0.9 0.0
Orange 0.3 0.7 0.0
Grapefruit 1.0 0.2 0.0

Pulp Export ('000 pounds) 332 2,548 2,002
Pulp Value ($mn) 0.2 1.6 1.1
Source: Citrus Products of Belize Ltd
(1) Reflects actual sales as reported by the processor and not the value of export shipments
as reported by the CSO. Export shipments go to inventory for sale at a later point in time.


Na












Table VI.6: Exports of Bananas
20I 0Ii I2II


79,428
53.0


76,164
49.9


Marine Products


A 1. - i -h start due to unfavourable weather and

the spread of Sigatoka in the latter half of the year

impacted negatively on banana causing a 1.6%

decline in annual exports to 74,925 metric tons. A

slight improvement in earnings (up 1.4% to

$50.6mn) was due to the 5.7% increase in the average

annual negotiated box price and the elimination of

second class banana in the export mix in 2006 (unlike

2005 when 5.6% of the export mix was classified

as second class banana). Notwithstanding quality

penalties, growers received a final, average box

price of $12.84 compared to $12.40 in 2005. Under

the first come, first serve system, some 7,313 metric

tons (equal to 9.8% of export tonnage) were

subjected to the out of quota tariff of *176 per

metric ton. This cost will be shared equally between

the marketer and the industry and will be paid off

in 2007 by deducting approximately $0.44 per

export box during the year.


After peaking in 2005, marine export volume fell

by 13.8% while revenue declined by 12.3% to

$86.0mn. Low prices and the costliness of

intensifying production techniques caused some

shrimp farms, including the largest, which accounted

for about 40.0% of total production in 2005, to

shift from two to one harvest cycle per year. Shrimp

export volume consequently fell by 16.3% to 15.9mn

pounds. Receipts declined by 16.1% to $62.5mn

with a slight increase in U.S. and European prices

compensating for lower prices in the Caribbean and

Mexican markets. About 46.0% of total export

volume went to the US, 33.5% was sent to Mexico,

and Europe accounted for 19.0% of market share.

While sales to the US declined by 18.4%, shrimp

exports to Europe increased by 3.6%. The upward

trend in sales of "head-on, shell-on" shrimp

continuedwith Europe and Mexico accounting for

the bulk of sales.


Table VI.7: Exports of Marine Products

200 200 2006
Voum Vau Voum Vau Voue au
(900 lb s) 99 9$900 ('0 lb 99 999 ($00 ('00lbs 00


Lobster Tail 505
Lobster Head 33
Shrimp 16,999
Conch 596
Whole/Fillet Fish 251
Other 3
Total 18,387
Source: Central Statistical Office


CENTRAL BANK OF BELIZE


2006 ANNUAL REPORT


Volume (metric tons)
Value ($mn)
Source: Central Statistical Office


Banana


74,925
50.6


14,980
162
85,153
5,810
1,229
38
107,372


502
20
19,024
547
307
4
20,404


14,703
126
74,530
7,501
1,206
55
98,121


392
6
15,922
707
540
25
17,593


13,884
43
62,520
8,109
1,210
250
86,016












Lobster exports fell by 23.8% as a result of
abnormally warm water temperature and heavy
exploitation over a sustained period. Revenues
declined by 6.1% as a 23.2% increase in the average
price to ^ 4.99 per pound partly compensated for
the fall in volume. While exports of conch were up
by 29.2%, the average price was 16.3% lower at
$11.47 per pound and resulted in a proportionately
smaller revenue increase of 8.1% ($8.1mn).


Exports offish (whole and fillet) registered a 75.9%
increase to 0.5mn pounds valued at $1.2mn, while
exports of other marine products, namely stone
crab, rose to 0.03mn pounds valued at $0.2mn.

Other Major Exports


Garment exports totalled 3.6mn pounds ($36.6mn)
reflecting increases of 2.9% in volume and 5.8% in
value over the previous year.


remained second to Mexico in supplying papayas
to the US, followed by Brazil, whose market share
has been declining since 2004, and Guatemala, which
has steadily increased its exports.

In 2006, Belize became the newest oil exporting
country with sales of 705,644 barrels of crude oil
at an estimated fo.b. value of $81.1mn. The latter
was equivalent to an average price of US$57.54
per barrel, which was arrived at after adjusting the
c.i.f. value for quality differentials (approximately
US$4.00 per barrel) and international freight and
handling charges (about US$7.00 per barrel). Of a
high quality similar to the industry's light sweet crude,
Belize's petroleum was sold to the United States,
Costa Rica, Panama and El Salvador and was
benchmarked to the West Texas Intermediate crude
oil price.


Non-traditional Exports


Strong growth in output and i -. i i-. marketing
resulted in a 20.3% expansion in papaya exports,
earnings ofwhich rose by 15.2% to $31.0mn. Belize


Table VI.8: Other Major Exports


Garments
Volume (mn Ibs) 3.9 3.5 3.6
Value ($mn) 37.1 34.5 36.6
Papayas
Volume ('000 Ibs) 55,607 63,129 75,928
Value ($mn) 22.8 26.9 31.0
Petroleum(1)
Volume (barrels) 0 0 705,644
Value ($mn) 0 0 81.1
Sources: Central Statistical Office, Central Bank
(1) Quality differentials and international transportation cost w as taken
out of the C.I.F. value as reported by the CSO to derive a F.O.B.value.


Ha








2006 ANNUAL REPORT
CENTRAL BANK OF BELIZE 06 ANNUAL REPORT


Box 5: Update on EU Banana Import Regime


On January 1, 2006, the new EU banana import regime came into force establishing a tariff of *176 per
tonne on Most Favoured Nations (MFN) banana, namely Latin American "dollar banana", and a duty-
free quota of 775,000 tonnes for Africa, Caribbean and Pacific (ACP) banana. While an official study of
the situation has not yet been done, reports u. -. _.. t that for the first 11 months of 2006, ACP banana
exports to the EU rose by 20.0% compared to an 8.2% increase for Latin American exports and that the
ACP's market share increased over the period, while that of the Latin American countries declined
slightly. The increased competition also appears to have adversely affected prices on the EU market. In
the third quarter of 2006, banana prices fell by 20.0% and though there was a partial recovery in the
fourth quarter, prices were still more than 10.(0"' below 2005 price levels.

In November 2006, Ecuador filed a request for consultation with the EU, disputing the WTO consistency
of the duty-free quota for ACP bananas and the level of the tariff. According to Eurostat, the EU's
statistical agency, Ecuador's share of EU banana imports fell from 29.9% to 27.5% for the first 11
months of 2006, which provides some justification for its claim of market injury. Once the case is taken
to a dispute settlement stage, further downward pressure is to be expected on the tariff of *176 per
tonne.

Meanwhile, the Management Committee for Bananas accepted the European Commission's proposal
for a duty-free quota of 775,000 tonnes for ACP countries for 2007. Some 81.0% of this quota will be
on a 'first come, first serve' basis and the remaining 19.0% will be under licenses, the same division that
was applied for the March to December period in 2006. A total of 628,152 tonnes under the 'first come,
first serve' basis will be allocated in six trenches (one tranche is equal to a two month period) of 104,692
tonnes each. The remaining 146,848 tonnes of the duty-free quota will be reserved for operators who
actually imported bananas from ACP countries in 2006, and the respective import licenses will be
proportional to the quantities these operators imported in 2006.

In other developments, the ACP countries are favourably disposed to the inclusion of sugar and banana
in the new Economic Partnership Agreements (EPA) currently under negotiations but the "how" of this
is still unknown. Furthermore, changes in the EU support programs for EU banana producers may
lead to additional downward price pressures. The net result is that the banana import regime remains
quite fluid with high market uncertainties.

Source: Agritrade- http://agrtrade.cta.int/en/commodities/banana sector/news
European Commission Agriculture and Rural Development -
http:/ /ec.europa.eu/agriculture/newsroom /en/240.htm
Bridges Weekly Trade News Digest
http://www.icrsd.org.weeklv/06-11-22/storv4.htm












Receipts from non-traditional exports registered a
14.6% decline to $30.3mn as earnings from veneer
sheet/plywood, fresh oranges, beans, grapefruit oil
and sawn wood fell. An 84.6% volume decline was
recorded for veneer sheet/plywood while sales of
fresh oranges to Europe were down by 5.8% in
volume and 21.0% in value, due to layovers in a
neighboring country that increased shipping time/
costs and reduced shelf life. Reduced bean output
resulted in sales of red kidney and black beans falling
by 40.1% to $5.3mn. Meanwhile, even with no
change in volume, revenue from grapefruit oil
declined by a substantial 54.1% to $2.8mn and
earnings from orange oil were held constant only
through a 24.3% increase in export volume. In a
positive development, an increase in the price for
pepper sauces offset a 21.7% decline in volume to
push earnings up by 21.8%, while revenues from a
medley of miscellaneous, non-traditional exports
almost doubled.

Re-exports

With approximately 2.0mn persons entering the
CFZ during 2006, sales rose by 21.8% to $277.0mn
and drove up re-exports by 23.1% to $310.9mn.
The improvement was partly due to a temporary
increase in the value of duty free goods allowed
into Mexico during the peak season (November
and December) and the luring of a wider cross
section of Mexican consumers, including patrons
of the adjacent casinos, into high end merchandise
stores. Other re-exports grew by $8.7mn with
increased sales of liquor, jewelry, water storage tanks,
footwear, scaffolding equipment and scrap metal.


Gross Imports

Gross imports (f.o.b.) rose by $111.5mn with
merchandise imported into the customs' territory
and the CFZ increasing by $82.4mn and $29.0mn,
respectively. All categories of imports rose except
Food and i'veAnimas', which fell by $2.2mn due to
lower imports of durum wheat. Goods for 'Export
Processing Zones'led with a $30.2mn increase that
consisted mostly of capital equipment and
machinery for the aquaculture industry Manufactured
Goods' followed with a $17.6mn increase that was
linked to higher outlays for construction materials,
and to a much lesser extent, purchases of bottles,
paper and vats. Tractors, fire engines, other vehicles,
aircraft and yachts largely accounted for a $17.6mn
rise in Machiner and TransportEquipment' Higher
fuel acquisition costs largely explained the $8.9mn
rise in 'I Fuel, Lubricants andElectricity'since
the full operationality of the Chalillo Dam caused a
contraction in electricity imports. 'ChemicalProducts'
increased by $4.0mn with higher imports of
fertilizers and fungicides while 'CrudeMaterias' Other
Manufactures' and 'Beverages and Tobacco 'edged up by
$1.7mn, $1.lmn and $0.6mn, respectively.


Direction of Visible Trade


Even with the share of exports going to the United
States falling from 50.4% in 2005 to 37.0% due
mostly to lower shrimp sales and a change in the
export mix, the US retained its position as the
primary export market in 2006. Higher sales of
shrimp, sugar and citrus concentrates kept the


Ka








2006 ANNUAL REPORT


CENTRAL BANK OF BELIZE


market share of the UK and other European

countries relatively stable at 30.6%. The most

dramatic shift was an increase from 0.7% in 2005

to 18.6% in 2006 in the share of exports going to

Central America, which was due to the sale of

petroleum to Costa Rica, Panama and El Salvador.

CARICOM's share fell to 8.1% with the diversion

of sugar from this market to the preferential EU

and US markets. A fall in farmed shrimp sales

accounted for the decline in Mexico's market share

from 5.6% to 3.2%.


The US was also the primary source of imports,

supplying 37.5% of the total, a small downward
shift from the 39.1% of 2005. The share of imports

from Mexico, the UK, CARICOM, and Canada

fell marginally while Central America increased its

share from 19.5% to 20.5% by supplying goods

for the CFZ, construction materials, lubricants,

butane and chemical products. The import shares

of other EU and other miscellaneous countries rose

by 0.9 and 0.7 percentage points, respectively, the

latter mostly reflecting higher imports of goods for

the CFZ from China and other Asian countries and


an increase in the acquisition cost of fuel.


Services


Net receipts from services rose by 53.4% to

$410.5mn with inflows rising by 21.6% while

outflows contracted by 5.3%. Notwithstanding a

decrease in cruise ship visitors, inflows from tourism

rose by 30.2% with an increase in overnight arrivals

and improvements in tourism services. Inflows

from other services and official foreign institutions

also increased although part of the latter may reflect

more accurate classification by the commercial banks.


Contributing to the improvement on the services

account, outlays on travel, government embassies

and other services declined and payments for

insurance and financial services were also lower than

in 2005 when substantial insurance and financial costs

associated with the Bear Stearns Bonds were

incurred. The only services account to record an

increase in net outflows was transportation with

shipping agents reporting lower earnings due to


Table VI.9: Direction of Visible Trade
Percentage
Exports. l) Impors.M
660 660 606. 660 660 66.&


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


bb.4
1.4
19.7
10.1
0.4
11.0
0.2
1.7
100.0


Source: Central Statistical Office
(1) excludes CFZ sales


bU.4
5.6
23.1
7.2
0.7
10.5
0.1
2.5
100.0


3/.U
3.2
16.3
14.3
18.6
8.1
0.1
2.5
100.0


38./
10.3
2.3
3.9
19.2
2.6
1.2
21.8
100.0


39.1
9.4
1.6
5.1
19.5
2.4
1.3
21.6
100.0


3/.b
9.2
1.4
6.0
20.5
2.0
1.0
22.3
100.0













the reduction in cruise ship port calls while payments

linked to the increase in trade volume were higher.


Income


Higher earnings from US embassy construction

workers along with a small decrease in payments

to seasonal agricultural workers resulted in a small

net labour inflow of $0.5mn. On the other hand,

outflows for investment income rose by 5.4% as a

modest increase in Central Bank foreign asset interest

earnings was eclipsed by increases in profit

remittances, reinvested earnings and private sector

interest payments. The net result was a 3.3% increase

in net outflows on non-resident labour and capital

that summed to $236.3mn.


Current Transfers


Net inflows from current transfers rose by 44.4%

to $147.9mn reflecting increases in inbound family

remittances (which accounted for the bulk of the

increase), higher inflows to credit unions and


insurance companies and a doubling in grants to

the government.



Capital and Financial Accounts


The surplus on the capital account increased to

$18.3mn due to debt forgiveness from the British

Government of some $9. lmn compared to $1.3mn

in 2005, and capital grants of $7.0mn compared to

$3.9mn in 2005. In contrast, the surplus on the

financial account declined sharply from '-40.7mn

in 2005 to $77.1mn in 2006 due to reductions in

foreign direct investment, public sector borrowings

and commercial bank foreign liabilities.


Without privatization inflows to boost receipts, such

as those from the sale of Belize

Telecommunications Limited shares in 2005, foreign

direct investment fell by 42.5% to $145.9mn. While

equity in the electricity and citrus companies was

sold to foreign investors for a combined sum of

$72.8mn, these proceeds were mostly used to pay


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


20M "5 2m.


Services
Transportation
Travel(1)
Other Goods and Services
Govt. Goods and Services, N.I.E
Income
Labour Income(2)
Investment Income
Current Transfers
Government
Private


470.6
54.8
336.1
56.0
23.8
&7
4.9
38
121.5
20.7
100.8


2942
89.2
85.2
103.5
16.3
2422
12.4
229.7
29.7
4.6
25.1


176.4
-34.4
250.9
-47.5
7.5
-233.5
-7.5
-225.9
91.8
16.1
75.7


5846
59.4
408.3
81.3
35.6
13.6
7.5
6.0
136.7
11.0
125.7


317.2
100.2
83.3
110.5
23.2
2424
11.7
230.7
343
4.8
29.5


267.4
-40.8
325.0
-29.2
12.4
-228.8
-4.2
-224.7
102.4
6.2
96.2


710.8
57.1
505.2
100.9
47.6
20.0
11.9
8.1
1843
21.8
162.5


300.3
109.1
82.1
91.4
17.7
256.3
11.4
245.0
36.4
4.9
31.5


410.5
-52.0
423.1
9.5
29.9
-236.3
0.5
-236.9
147.9
17.0
131.0


(1) Tourism earrings for 2005 were based on actual inflows into the barking system 2005, while estimates for 2004 & 200
vere based on Visitor Expenditure Surveys.
(2) Paymerts to non-resident workers were revised from 1999 to 20D4 based on a field survey of non-resident seasonal
and border workers conducted in 2004.


Ka








2006 ANNUAL REPORT


CENTRAL BANK OF BELIZE


down foreign debts, so the impact on the balance

of payments was minimal. Of greater significance

were investments in tourism, real estate, and the

reinvested earnings of the banking sector, which

accounted for much of the financial surplus.


Assets held abroad more than tripled to $61.5mn,

reflecting a $3. lmn capital subscription payment to

CABEI by Government, a $32.8mn increase in

commercial bank foreign assets that resulted from

the surge in export receipts and remittances, and

deposits held in offshore banks by private entities.


During the year, public sector borrowings and

principal repayments more than halved to $167.2mn

and $140.8mn, respectively, the latter being partly

due to the government's decision to initiate the


restructuring of its commercial debts in December

and its postponement of debt service payments

pending completion of the process. In another

development of note, foreign liabilities of domestic

commercial banks contracted by $64.5mn partly

due to the shift of non-resident foreign currency

deposits to their international affiliates in accordance

with the International Banking Act. In contrast, the

foreign liabilities of other private sector entities

expanded as loan disbursements associated with

investments in agriculture, aquaculture, petroleum,

tourism and telecommunications exceeded loan

repayments.


Official International Reserves


Table VI.11: Balance of Payments Capital and Financial Accounts
$mn
200 2005 206.


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


19.6
18.6
1.1
234.9
-0.1
223.0
-0.5
153.8
1.1
0.0
-8.8
0.0
0.0
-10.6
1.8
-133.5
-8.0
-105.9
0.7
-20.3
62.3


5.9
5.2
0.8
349.7
-2.0
253.8
-0.4
36.1
0.5
-11.1
-17.2
0.0
0.0
-18.3
1.1
90.0
-2.6
90.2
6.5
-4.1
-36.6


18.3
16.1
2.2
77.1
-1.1
145.9
-0.5
-47.7
0.0
0.0
-61.5
0.0
-3.1
-32.8
-25.6
42.1
-0.4
76.9
-64.5
30.0
-65.4













Table VI.12: Official International Reserves

$mn


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


106.9
79.6
4.77
13.1
61.7
27.2
2.8
0.1
2.7
104.1


143.5
115.8
5.0
12.1
98.7
27.7
2.7
0.3
2.4
140.8


Although holdings by Central Government declined

by $9.4mn, the gross international reserves increased

by $65.4mn to $208.9mn with the Central Bank's

foreign asset holdings increasing by $74.8mn as a

result of foreign exchange purchases from the

domestic commercial banks and loan disbursements


Foreign liabilities declined slightly to $2.4mn, hence,

an overall increase of $65.8mn in the net

international reserve position to $206.5mn.


Chart VI.1: Gross Official International Reserves and Months of Imports


BZ$m n
300

250

200-

150

100

50--

0


Months of Im ports


208.9
190.6
5.8
12.7
172.1
18.3
2.4
0.2
2.2
206.5


65.4
74.8
0.8
0.6
73.4
-9.4
-0.4
-0.1
-0.3
65.7


C( (CD ( (C (C (C (C (C O O O
- 0) O0 O K) -P 1 0) 0 O K) -P1
I iGross Reserves -- Months of Imports










ECONOMIC PROSPECTS


Notwithstanding the success of the government's
external debt restructuring effort, current forecasts
show that debt servicingpressures will be adequately
ameliorated in the short term only. This means that
there is a continued need for fiscal and monetary
discipline to restrain domestic consumption and
safeguard the foreign reserve position. The required
climate of disciplined austerity should cause GDP
growth to decelerate to around 3.3% with possible
slight increase in the level ofunemployment.


The external balance of payments is expected to
be stable in 2007. Receipts from gross exports are
likely to remain at the 2006 level as an improvement
in CFZ sales offsets a projected 2.0% fall in earnings
from domestic exports. The latter is beingprojected
largely due to declines in the values of sugar, banana
and farmed shrimp exports,which are expected to
outweigh significant increases in citrus and petroleum
earnings. The government recently reaffirmed its
commitment to keep a tight rein on deficit spending.
This, together with a proactive monetary policy
effort to slow the growth of credit, would help to
ratchet down domestic consumption and contribute
to a buildup in foreign reserves.


In the domestic economy, activity in the primary
sector is expected to contract marginally as a
significant expansion in petroleum production and
small increases in agriculture and mining are
overshadowed by a substantial contraction in fishing.
From 0.8mn barrels in 2006, petroleum production
from the current field is expected to peak at about


1.lmn barrels in 2007. Exports of the latter will be
approximately 0.9mn barrels valued at $92.0mn
with domestic sales rising to 0.2mn barrels as a more
purified product is made available for the home
market. With a modest recovery in grain production,
steady growth in livestock and a 10.0% increase in
papaya outweighing declines in sugarcane, citrus
and banana, growth in agriculture and forestry
should range between 1% and 2%.


Sugarcane deliveries for the 2006/2007 crop are
estimated at 1,150,000 long tons, down 2.0% from
2006, and sugar exports forecasted at about 97,700
long tons valued at $78.0mn, a substantial fall from
the $100.1mn realized in 2006 that would be partly
due to the impact of the first 5.1% cut in EU sugar
prices. Earnings from molasses are also projected
to decline with prices falling due to a rally in US
molasses production. Where the citrus crop is
concerned, heavy rains have reduced the blossom
set and factory deliveries of the 2006/2007 citrus
crop will be some 9.0% lower, at 6.0mn boxes,
with juice output dropping by an estimated 6.7%
to 33.0mn pound solids (ps). Even with the decline
in output, citrus is expected to deliver another
revenue windfall of 1 2.0mn (a 9.8% increase) due
to the contracted sale of the entire crop year's juice
output and the further strengthening of orange juice
prices. In the face of a slow recovery from Sigatoka
disease, banana exports can be expected to come
in at approximately 66,000 metric tons, and with
prices remaining virtually stable, earnings would sum
to -.4-.0mn.








ECONOMIC PROSPECTS
~II


Meanwhile, it is expected that marine output will
decline for the second consecutive year with an
estimated 18.0% contraction beinglargely due to a
production slump on some of the larger shrimp
farms now in financial difficulties and a cyclical
downturn in the conch catch. On the other hand,
tilapia output could more than double as a result
of expansions undertaken in the previous year and
the wild capture of lobster is projected to improve
by over 20.0% bringing export volume back up to
average levels of around 0.5mn pounds.


While the fall-off in sugarcane and citrus processing
will impact negatively on manufacturing, an
estimated 17.'1 -, ::p tn. !. in electricity production
and strong growth in construction as major projects
such as the co-generation plant, the Vaca Dam and
cruise ship docking facilities are launchedwould yield
an overall increase of around 5.0% in secondary
sector activity during the year.


Growth in the services sector should be moderate
at around 2.8% as an increase in capital investments
for projects such as the co-generation plant and Vaca


Dam is offset by the necessary slowdown in private
consumption. Activity in tourism should maintain
momentum with a modest expansion driven by a
projected 4.5% increase in stay over visitors the
positive impact ofwhich would eclipse the negative
effect of a 10% fall in cruise ship arrivals. While
decelerating, wholesale and retail activity should
therefore remain moderately strong. Meanwhile,
if the growth in private sector credit is contained
and the fiscal stance remains conservative, only
modest growth would be expected in financial
intermediation, general government services and
community, social and personal services.


Developments in the CPI are again likely to be
heavily influenced by the trend in oil prices. Current
indications are that lower international acquisition
costs for fuel may lead to some downward
movement in fuel prices at the pump in 2007. In
2006, the CPI was boosted upward by the
implementation of the general sales tax. Since, no
changes in the GST are being projected in 2007,
the rate of inflation can be expected to fall from
4.3% to around 3.0% in 2007.


l~ss ,










OPERATIONS


Foreign Exchange Operations


During 2006, the Central Bank recorded net

purchases of $73.9mn as a result of its trade in US
dollars, Canadian dollars, and Pound Sterling.

Purchases exceeded sales in six of the twelve months,

the peak months beingJanuary, July and December
when loan and grant inflows from ROC/Taiwan,

Venezuela and the IADB were received. These

specifically included US$20.0mn from ROC/
Taiwan in January, US''.Omn from the

Government of Venezuela in July and a total of

US$35mn from the IADB and the Government
of Venezuela in December. Purchases from the

domestic commercial banks increased sharply by

64.0% to US$56.6mn mostly because of the
heightening of cash reserves requirements during

the year. The trade in CARICOM currencies was


principally for the settlement of official transactions

and resulted in net sales of$1.5mn.


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 i - i.r i
amount of notes and coins in circulation and the

Bank's demand and time deposit liabilities. This

ratio peaked at 48.4% inJuly and bottomed out at

30.1% in October. At year-end, the Bank's external
assets were comprised of 89.2% in cash and fixed

deposits, 7.7% in foreign securities and some 3.1%
consisted of Special Drawing Rights with the
International Monetary Fund.


Table VII.1: Central Bank Dealings in Foreign Exchange 2006


$mn
Month US $, Canadian $, and UK 0 [Currenci


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


55.3
22.2
20.7
29.8
24.0
17.7
56.4
25.9
17.5
15.6
19.5
90.4
395.0


15.0
31.4
36.6
22.5
12.8
33.5
14.8
46.4
39.2
32.8
14.7
21.4
321.1


40.3
-9.2
-15.9
7.3
11.2
-15.8
41.6
-20.5
-21.7
-17.2
4.8
69.0
73.9


0.00
0.00
0.00
0.00
0.00
0.07
0.24
0.00
0.00
0.00
0.00
0.00
0.31


0.34
0.16
0.02
0.08
0.14
0.21
0.14
0.03
0.34
0.21
0.05
0.10
1.82


-0.34
-0.16
-0.02
-0.08
-0.14
-0.14
0.10
-0.03
-0.34
-0.21
-0.05
-0.10
-1.51








OPERATIONS


Table VII.2: External Asset Ratio 2006
MOT Asset ","ile Externl. Ase


155.6
146.3
130.5
137.8
149.8
133.7
175.3
154.9
133.0
115.9
121.0
190.0


370.1
366.6
352.3
365.1
369.1
373.2
361.9
376.8
380.5
385.4
400.7
395.7


42.04
39.91
37.04
37.74
40.59
35.83
48.44
41.11
34.95
30.07
30.20
48.02


Relations with Commercial Banks


Cash Balances

In an attempt to forestall a liquidity bubble that could

ratchet up credit growth and foreign exchange

demand, the Central Bank raised the cash reserve

requirement for domestic commercial banks from

8% to 9% of average deposit liabilities with effect

from January 1st, 2006. A further intervention was

made in the beginning of September when the cash

reserve requirement was increased from 9% to 10%.

While required average cash holdings rose by


$13.9mn inJanuary and by $16.6mn in September

the average excess in cash reserve holdings remained

at more than $15.0mn for nine months out of the

twelve months and closed at $15.2mn at the end

of December; some $6.5mn higher than the

position at the end of the previous year.


At December 31, 2006 currency in circulation was

$26.4mn (18. S"' higher than that of the previous

year with currency held by the public increasingly

$19.4mn and commercial banks' vault cash holdings

up by $7.0mn. The month of lowest currency
circulation was January, and from that point on


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


1,282.0
1,206.4
1,234.4
1,253.1
1,268.5
1,283.6
1,297.6
1,333.8
1,341.2
1,343.4
1,348.0


1I 1 .4
115.4
108.6
111.1
112.8
114.2
115.5
116.8
133.4
134.1
134.3
134.8


132.0
127.6
128.7
130.1
128.8
122.7
124.0
145.3
150.1
151.5
150.0


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


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


/.9
16.6
19.0
17.6
17.3
14.6
7.2
7.2
11.9
16.0
17.2
15.2


I








2006 ANNUAL REPORT


Table VII.4: Currency in Circulation 2006
$mn
MONT Noes oins Totl CmmerialBan Curencwit


119.7
124.8
126.1
131.8
132.0
133.7
134.6
136.2
136.6
138.1
138.7
153.5


14.6
14.7
14.9
15.0
15.2
15.3
15.4
15.5
15.5
15.6
15.6
15.9


134.3
139.5
141.0
146.8
147.2
149.0
150.0
151.7
152.1
153.7
154.3
169.4


22.8
23.0
21.7
21.2
25.8
21.7
23.7
24.4
22.0
25.9
25.5
32.5


111.5
116.5
119.3
125.6
121.4
127.3
126.3
127.3
130.1
127.8
128.8
136.9


growth was uninterrupted. The largest increase

(some $15.1mn) occurred in December, which is
generally the peak time for transactions.


Inter-Bank Market


Transactions with Central Government


Section 34 of the Central Bank of Belize Act (as

amended in 1993), makes it possible for the Bank

to extend advances to Central Government of up

to a maximum c(' 2 .. of current revenue collected


In the years following its establishment in January during the preceding
1995, the Inter-Bank Market Facility has been largely million, whichever
inactive. However, a significant increase in activity
was observed over the July to December period in The legal ceiling
2006 as liquidity in some of the banks tightened, However, advan
and the Central Bank effected a 6".. decrease (from exceeded this limit
17% to 11'.. in the interest rate, making it more reaching a high of
attractive to borrow from the Facility. falling at year-end

Table VII.5: Inter-Bank Market 2006


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


Financial year or a sum of $50.0

is greater.


for 2006 stood at $106.0mn.
ces to Central Government
in several months of the year,
$156.4mn in November and
to $88.9mn. The extensive use


0.00
0.00
0.00
0.00
0.00
0.00
5.00
4.00
3.00
3.00
0.00
3.00


CENTRAL BANK OF BELIZE


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


I MONTH Placed Borrowed^









OPERATIONS


Table VII.6: Central Bank Credit to Central Government


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


65.8
70.8
61.8
58.8
48.8
48.8
50.1
58.1
71.1
91.1
84.4
86.4


9.0
9.0
9.0
9.0
9.0
9.0
9.0
40.5
40.5
40.5
40.0
44.2


10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0


99.20
101.23
113.30
122.52
124.12
145.23
91.93
120.52
134.63
138.61
156.44
88.85


3.49
3.70
3.33
3.20
2.79
2.79
2.84
4.47
5.01
5.83
5.53
5.79


22.00
22.45
25.13
23.34
23.65
27.67
17.51
22.96
25.65
26.41
29.81
16.93


A: Central Bank Holdings of Government Securities as a multiple of Central Bank's paid up Capital and Reserves
B: Advance to Government as a percentage of Government's estimated recurrent revenue fiscal year
Revised Estimates for Fiscal 2004/2005 $450.823mn (January March)
Approved Estimates for Fiscal 2005/2006 $524.857mn (April December)


of the overdraft facility was principally due to the

government's need to meet its external debt

obligations since it achieved a substantial primary

surplus on its operations in 2006.


Treasury Bills


As the Government's agent, the Central Bank

continued to conduct Treasury bill operations on


its behalf during the year. Treasury bills with a total

value of $100.0mn (the maximum presently

allowable) were traded in the secondary market.

The Central Bank was dominant in the market with

monthly average holdings valued at $66.3mn and

commercial banks holding most of the remainder.

The Bank's holdings were lowest in May andJune

($48.8mn) and peaked in October at $91. mn. At


Table VII.7: Government of Belize Treasury Bill Issues


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


03/29/06
04/26/06
05/10/06
06/07/06
06/29/06
07/26/06
08/09/06
09/06/06
09/29/06
10/25/06
11/08/06
12/06/06
12/29/06
01/24/07
02/07/07
03/07/07


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


1/06
2/06
3/06
4/06
5/06
6/06
7/06
8/06
9/06
10/06
11/06
12/06
13/06
14/06
15/06
16/06


I











Table VII.8: List of Banks and Financial Institutions
Do esi Bak Inentoa ak-innilIsiuin


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


Atlantc Internatonal Bank Ltd.
Belize Bank Internatonal Ltd.
Caye Internatonal Bank Ltd.
Handels Bank & Trust Company Ltd.
Investmentand Commerce Bank Ltd.
Market Street Bank Ltd.
The Oxxy Bank Ltd.
Provident Bank& Trust of Belize Ltd.


Belize Unit Trust Corp. Ltd.


year end, Central Bank Treasury bill holdings stood
at $86.4mn.

Treasury Notes

In April 2006 Government of Belize amended the
Treasury Bill Act to increase the statutory limit of
Treasury Notes to $75.0mn. These notes have a
maturity that ranges between one and five years and
for the most part carry a 9% rate of interest. At the
end of 2006, the outstanding Treasury Notes
amounted to $56.8mn, of which some $44.2mn
was held by the Central Bank of Belize.



Supervision of Banks and Financial
Institutions


In working to ensure the safety and soundness of
the financial institutions currently operating in Belize,
the Financial Sector Supervision Department (FSSD)
closely monitored the activities of five domestic

Table VII.9: List


commercial banks, eight international banks, as well
as fourteen active credit unions and one financial
institution.

In addition to off-site surveillance of the entire
system, risk focused on-site examinations were
conducted on one domestic bank, three
international banks, three credit unions and one
financial institution. These examinations
encompassed safety and soundness issues plus a
review of the systems that have been set in place
to prevent money laundering and combat the
financing of terrorism (AML/CFT).

Nine applications for extensions of credit facilities
in excess of 25% of their capital and unimpaired
reserves were received from commercial banks
during the course of the year. Of the total amount
requested, the Central Bank Board of Directors
granted approval for domestic banks to on-lend
$68.5mn and for international banks to advance

of Credit Unions


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


CENTRAL BANK OF BELIZE


2006 ANNUAL REPORT








OPERATIONS


L ',*2, 2-ircii to specific private sector customers.

In the latter part of the year, one application for an
"A" Class international banking license and one
application for a financial institution license were
received and the requisite processing to determine
the viability of the applications was started.


In an effort to bring Belize's legislation in line with
international standards, the Banks and Financial
Institutions Act was revised and the proposed bill
was circulated among industry stakeholders with a
view to the commencement of consultations in early
2007. The department also continued to work
toward improving the exchange of information
with the institutions currently being regulated by the
Central Bank. As part of this effort, it continued to
coordinate quarterly meetings of domestic
commercial bank managers and instituted meetings
with managers of international banks in 2006.


Information Systems


Overview

In 2006, the Bank upgraded its network operating
system and some of its mission-critical systems. It
completed the automation of processes to update
anti-virus signatures, to synchronize the network
time using Internet based time servers, and to
download and apply the Microsoft Windows
patches and security updates from the Internet.

Network Infastructure

After completing the upgrade of the Bank's network


infrastructure from Windows 2000 to Windows
2003, the ISU upgraded the Microsoft Exchange
Mail Server 5.5 to Microsoft Exchange Server 2003.
The Webroot Spy Sweeper Enterprise anti-spyware
software was also deployed on the network as part
of the bank's security strategy for its internal
network.

Application Software

As recommended by SWIFT, detailed plans were
made for the SWIFTNET Migration Phase 2, which
is to be completely implemented by June 2007. All
the required hardware and software online orders
were placed and business continuity plans for the
SWIFT system were upgraded and successfully
tested. A second connectivity option was also
implemented which is based on an Internet
connection, and which provides an additional
recovery option for this critical system.

In October, a new version of the CS-DRMS was
installed that is being tested in a parallel run. This
new version will be placed in production by March
2007.

The Bank also launched a project to covert the
documents in its archives and record center into an
electronic format. The trainingwas outsourced and
training for all secretaries and records management
staff was completed in December 2006. The
substantial work of preparing electronic images of
files and other documents has begun and will
continue during 2007.


I











ADMINISTRATION


The Board of Directors


The Board of Directors held 11 meetings in 2006

and considered 60 submissions.


Overseas Meetings


In their capacity as executive officers to the Bank

and as advisors to Government, the Governor &

Deputy Governor attended several meetings in

2006, some of which are shown in Box 6.


The Central Bank's financial statements for the year

ended December 31,2006, with comparative figures

for the previous year are annexed to this report.

During the year, the Bank's assets rose by 22.6%

with external assets rising by 65.0% to $190.0mn

and holdings of domestic assets increasingly 2.9%

to $254.6mn.


The net operating surplus stood at $12.9mn

compared to $8.5mn in 2005. Interest income


Box 6: Meetings Attended by the Governor and Deputy Governor during 2006

Nae-------------------


Meeting of CARICOM Central Bank Governors


February


Barbados


Meeting of the Alternates Committee of CEMLA

Seminar on Financial Integration for Central Bank Governors of Latin
America and the Caribbean)

2" Annual meeting of Group of Latin American & Caribbean Debt
Management Specialists

36t Annual Meeting of the Board of Governors of the Caribbean
Development Bank

43r' Meeting of Central Bank Governors of the Americas and the 81st
Meeting of Central Bank Governors of Latin American and Spain

Meeting of CARICOM Central Bank Governors


ASBA Seminar entitled Operational Risk in Basel II

Meeting of the Alternates Committee of CEMLA

Meeting of CARICOM Central Bank Governors


Offshore Practitioners Conference


Fourth IMF Roundtable for Offshore & Onshore Supervisors and Standard
Setters


March

March


April



May



May



June

August

August


November

November

December


Buenos Aires, Argentina

Caracas, Venezuela


Cartagena, Colombia



Montego Bay, Jamaica



Lima,Peru



Georgetown, Guyana


Mexico City

Mexico City


Georgetown Guyana

Panama

Cayman Islands


Finance








ADMINISTRATION
~II


amounted to $24.2mn and accounted for 93.8%
of total gross earnings. The bulk (some $18.3mn)
was derived from interest earned on domestic
government securities and loans extended to the
government through the overdraft facility. Earnings
from commissions and other income totalled
$1.6mn. Current expenditure summed to $12.9mn
with staff costs, interest payments and other
operating costs accounting for 45.8 %, 12.8%, and
41.4%, respectively.

As provided for under Section 9(1) of the Central
Bank Act, $1.3mn or 10.0% of the net operating
surplus will be paid into the Central Bank's General
Reserve Fund. The balance of $11.6mn will be
transferred to the Accountant General for the
Government of Belize's Consolidated Revenue
Fund.


Internal Audit


In addition to its ongoing internal control
assessments of the Bank's operations, the Internal
Audit Unit conducted special audits of the following
Central Bank activities during 2006:

* End of year reconciliation of transactions in 2005.

* Processes for the receipt, handling and disposal
of non-monetary abandoned property.

* Existence and management of computer
equipment inventory.

* Pension scheme procedures and financial controls.

* Cash account operations.


The Unit also performed routine checking of
stocktaking exercises, currency destruction
procedures, information systems backup processes
and the Bank's vacation leave policy.

Support was provided to the Audit Committee (a
sub committee of the Central Bank's Board of
Directors), which carried out a review of the Central
Bank's annual audited financial statements and
management letter for the 2005 financial year.

In 2006, the first meeting of central bank heads of
internal audit was jointly hostedby Mexico and the
Bank of International Settlements (BIS). The Chief
Internal Auditor joined delegates from central banks
in Latin America and the Caribbean in discussions
that focused on a review of recent developments
in the area of internal audit, evolving standards and
best practices.



Human Resources

The Organizational Review of the Central Bank that
commenced in 2005 continued during 2006.
Among its goals were the strengthening of the
Central Bank's operating methods, procedures and
processes, improvement of information flow and
development of an optimal structure and action
plan for the Bank. A Committee, led by the Deputy
Governor, was mandated to create an operational
strategy and effect the recommended changes. A
Health & Safety Committee was also formed as
the Bank sought to take a proactive approach in
creating a healthy and safe environment throughout
the Bank.


~ss








2006 ANNUAL REPORT


CENTRAL BANK OF BELIZE


The Bank held its Annual Employee Recognition
Ceremony on 31 March, during which employees
with ten, fifteen, twenty and twenty-five years of
service were recognized. The coveted "Governor's
Choice" award of a fully paid scholarship to the
University of Belize, was presented to Miss Patricia
Waight, a Senior Clerical Officer in the Banking and
Currency Department, on the basis of her proven
dedication to the job, sixteen years of service and
exemplary job performance.

Staffing

At the end of the year, Central Bank staff totaled
145, of which 106 were established positions and
33 were contract officers. Additionally, six persons
were recruited on a temporary basis to assist with
special projects and to ensure the smooth flow of
operations. During2006, the Bank's retention efforts
yielded an improvement in the staff turnover rate.
Over the previous 10 years, the average staff
turnover rate stood at 12.3% (ofwhich professionals
and clerical officers accounted for 24.0% and 33.0%
respectively). In comparison, the turnover rate for
2006 was 4.8% with 7 separations occurring and 2
new positions being created.

Bereavement

On 18 July 2006, the Bank mourned the sudden
passing of its Chief of Security, Mr. Kent Haylock.
Mr. Haylock had been working in that capacity with
the Bank for eleven years.


Staff Development & Training


A primary focus of the Bank's 2006 training
programme was on strategically preparing
managerial staff to meet the changing needs of
the organization. In this regard, customized training
was facilitated by the University of the West Indies
School of Continuing Studies (Belize) in
0 -:..'.:, .'..'Development& Transformation, Strategic
Management, Project Management, and Team Building.
Significant efforts were also made to strengthen the
professional, technical and administrative staff Over
a four week period in the months of June andJuly,
CARTAC and CEMLA assisted by conducting
training in financial programming and tourism
indicators methodology. Other support staff also
benefited from customized training courses in
Advanced Microsoft Excel, Access, Quickdata XLS
and records management through the auspices of
the University of Belize, an international consultant
and in-house personnel. In addition, managerial
and professional staff attended several international
workshops and courses geared toward meeting the
evolving demands of the financial industry. The Bank
continued its policy of supporting and encouraging
staff members who took the initiative for further
self development to upgrade job performance.


Community Service

In support of the University of Belize's Internship
Programme, 1 student was accepted as an intern to
meet the core requirements for graduation. In








ADMINISTRATION
~II


addition, 9 senior secondary school students
undertook work-study for an average of two
weeks, and a nine-week Summer Employment
Programme provided opportunity for 9 tertiary
level students to be paid while developing practical
workplace skills.

In collaboration with the HIV/AIDS Workplace
Education Project launched by the Government of
Belize in partnership with the International Labour
Organization (ILO) and the United States
Department of Labor (USDOL), fifty members
of staff participated in an Impact Survey as a


follow-up to the Baseline Survey conducted in
2004. The Bank's "peer educators" also attended
several seminars andworkshops to ensure that staff
was kept abreast of new information relating to
the disease.

In early September, the Bank participated in the
Belize Blood Donor Membership Drive. Staff
members and the Central Bank continued to support
other social projects during the year including
contributions to the Salvation Army's Annual
Christmas Appeal and participation in the Belize
Cancer Society's Annual Walk.


~ss









APPENDICES


A. Monetary Policy Developments


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

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

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

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

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








APPENDICES




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

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

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








M2006 ANNUAL REPORT
CENTRAL BANK OF BELIZE


B. Statistical Appendix

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

Primary Industries 245.6 292.7 310.1 279.8
Agriculture & forestry 173.1 185.5 206.8 197.5
Fishing 63.5 98.0 93.5 72.1
Mining 9.0 9.2 9.8 10.3
Secondary Industries 306.8 288.7 312.0 326.7
Manufacturing 154.1 153.7 164.9 173.1
Electricity & Water 64.1 59.7 64.7 70.9
Construction 88.6 75.3 82.4 82.8
Tertiary Industries 1,122.6 1,212.7 1,293.9 1,404.2
Wholesale & retail trade 301.8 305.1 304.7 329.7
Hotels & restaurants 68.4 83.6 97.5 103.5
Transport & Communications 199.1 204.5 225.5 246.7
Finance intermediation 133.3 163.7 173.1 188.2
Real estate & business services 124.9 129.3 141.5 160.3
Community, social & other services 107.4 120.4 136.7 146.0
General government services 187.7 206.2 214.9 229.6
Less: Financial Services Indirectly Measured 74.4 91.3 94.6 101.7
All Industries at basic prices 1,600.6 1,702.8 1,821.5 1,909.0
Taxes less subsidies on products 263.7 272.4 289.0 300.9
GDP at market prices 1,864.3 1,975.2 2,110.4 2,209.9
Source: Central Statistical Office
(1) At the time of publication, GDP figures from the C.S.O were not available.

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

Primary Industries 13.2 14.8 14.7 12.7
Agriculture & forestry 9.3 9.4 9.8 8.9
Fishing 3.4 5.0 4.4 3.3
Mining 0.5 0.5 0.5 0.5
Secondary Industries 16.5 14.6 14.8 14.8
Manufacturing 8.3 7.8 7.8 7.8
Electricity & Water 3.4 3.0 3.1 3.2
Construction 4.8 3.8 3.9 3.7
Tertiary Industries 60.2 61.4 61.3 63.5
Wholesale & retail trade 16.2 15.4 14.4 14.9
Hotels & restaurants 3.7 4.2 4.6 4.7
Transport & Communications 10.7 10.4 10.7 11.2
Finance intermediation 7.2 8.3 8.2 8.5
Real estate & business services 6.7 6.5 6.7 7.3
Community, social & other services 5.8 6.1 6.5 6.6
General government services 10.1 10.4 10.2 10.4
Less: Financial Services Indirectly Measured 4.0 4.6 4.5 4.6
All Industries at basic prices 85.9 86.2 86.3 86.4
Taxes less subsidies on products 14.1 13.8 13.7 13.6
GDP at market prices 100.0 100.0 100.0 100.0
Source: Central Statistical Office
(1) At the time of publication, GDP figures from the C.S.O. were not available.








APPENDICES



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

Primary Industries 252.9 348.0 380.7 393.4 443.3
Agriculture & forestry 183.9 212.4 237.6 236.1 239.2
Fishing 60.3 126.8 133.8 146.9 122.0
Mining 8.8 8.8 9.3 9.5 9.6
Petroleum 1.0 72.5
Secondary Industries 306.3 295.0 316.7 314.0 330.5
Manufacturing 159.0 158.2 177.7 178.0 174.4
Electricity & Water 60.2 65.3 64.3 63.9 86.0
Construction 87.0 71.5 74.7 72.2 70.1
Tertiary Industries 1,086.4 1,175.2 1,213.7 1,290.2 1,340.9
Wholesale & retail trade 301.8 306.0 305.9 323.0 350.0
Hotels & restaurants 68.0 77.9 84.0 87.4 84.4
Transport & Communications 176.4 191.5 201.1 216.7 227.9
Finance intermediation 131.1 172.5 181.8 205.3 211.2
Real estate & business services 121.7 123.0 129.9 142.3 150.0
Community, social & other services 106.2 111.5 115.8 117.8 120.5
General government services 181.2 192.7 195.3 197.7 197.0
Less: Financial Services Indirectly Measured 73.4 97.3 101.3 113.9 124.5
All Industries at basic prices 1,572.3 1,720.9 1,809.8 1,883.8 1,990.2
Taxes less subsidies on products 262.4 285.0 289.0 288.6 308.2
GDP at market prices 1,834.6 2,005.9 2,098.8 2,172.4 2,298.4
Source: Central Statistical Office

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


Primary Industries 0.3 37.6 9.4 3.3 12.7
Agriculture & forestry 3.3 15.5 11.9 -0.7 1.4
Fishing -7.0 110.3 5.5 9.8 -17.0
Mining -5.7 0.5 4.9 2.5 1.1
Secondary Industries 2.4 -3.7 7.4 -0.9 5.2
Manufacturing 1.5 -0.5 12.3 0.1 -2.0
Electricity & Water 2.7 8.4 -1.5 -0.6 34.6
Construction 3.7 -17.9 4.6 -3.4 -2.9
Tertiary Industries 8.0 8.2 3.3 6.3 3.9
Wholesale & retail trade 4.0 1.4 0.0 5.6 8.4
Hotels & restaurants 2.5 14.5 7.8 4.1 -3.4
Transport & Communications 11.3 8.6 5.0 7.8 5.2
Finance intermediation 26.4 31.5 5.4 12.9 2.9
Real estate & business services 9.7 1.1 5.6 9.6 5.4
Community, social & other services 3.9 5.0 3.9 1.7 2.3
General government services 3.9 6.3 1.3 1.3 -0.4
Less: Financial Services Indirectly Measured 40.8 32.6 4.1 12.4 9.3
All Industries at basic prices 4.4 9.4 5.2 4.1 5.7
Taxes less subsidies on products 9.3 8.6 1.4 -0.2 6.8
GDP at market prices 5.1 9.3 4.6 3.5 5.8
Source: Central Statistical Office








M2006 ANNUAL REPORT
CENTRAL BANK OF BELIZE


Table 5: GDP by Expenditure in Current Prices


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

Percent Distribution of GDP
Govt. final consumption expenditure 14.3 14.7 14.0 14.4
Private final consumption expenditure 78.5 77.4 75.1 71.8
Gross capital formation 22.6 19.0 17.7 18.8
Exports: goods & services 52.6 53.3 50.7 55.3
Imports: goods & services 66.2 66.1 58.7 62.8
Net Exports -13.6 -12.8 -8.0 -7.5
GDP market prices 100.0 100.0 100.0 100.0
Source: Central Statistical Office
(1) At the time of publication, GDP figures from the C.S.O were not available.

Table 6: GDP by Expenditure in Constant 2000 Prices



GDP in $mn
Gov't. final consumption expenditure 257.8 271.5 269.0 276.7
Private final consumption expenditure 1,441.3 1,487.3 1,485.1 1,453.0
Gross capital formation 423.3 364.0 344.4 372.6
Changes in inventories including discrepancy 19.7 31.1 46.9 16.7
Gross Domestic Expenditure 2,142.1 2,153.9 2,145.4 2,119.0
Exports: goods & services 996.1 1,125.8 1,171.9 1,319.9
Imports: goods & services 1,248.1 1,274.5 1,179.4 1,252.0
Net Exports -252.0 -148.7 -7.6 67.9
Discrepancy -55.5 0.7 -39.0 -19.4
GDP market prices 1,834.6 2,005.9 2,098.8 2,167.5

Percent Distribution of GDP
Gov't. final consumption expenditure 14.1 13.5 12.8 12.8
Private final consumption expenditure 78.6 74.1 70.8 67.0
Gross capital formation 23.1 18.1 16.4 17.2
Exports: goods & services 54.3 56.1 55.8 60.9
Imports: goods & services 68.0 63.5 56.2 57.8
Net Exports -13.7 -7.4 -0.4 3.1
GDP market prices 100.0 100.0 100.0 100.0
Source: Central Statistical Office
(1) At the time of publication, GDP figures from the C.S.O were not available.









APPENDICES



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

$mn





PRIMARY SECTOR 145.1 141.7 155.8 14.1
Agriculture 96.2 95.9 106.5 10.6
Sugar 9.9 9.5 11.5 2.0
Citrus 19.0 16.0 19.4 3.4
Bananas 52.9 58.0 64.4 6.4
Other 14.4 12.4 11.2 -1.2
Marine Products 25.1 19.6 15.2 -4.4
Forestry 1.8 1.7 2.0 0.3
Mining & Exploration 22.0 24.5 32.1 7.6

SECONDARY SECTOR 357.0 381.6 373.2 -8.4
Manufacturing 14.9 19.2 24.6 5.4
Building & Construction 276.5 300.8 316.5 15.7
Utilities 65.6 61.6 32.1 -29.5

TERTIARY SECTOR 476.8 472.4 539.3 66.9
Transport 38.7 33.3 45.8 12.5
Tourism 84.5 71.5 79.3 7.8
Distribution 165.2 157.6 173.8 16.0
Other(1' 188.4 210.0 240.4 30.4

Personal Loans 197.1 259.0 322.2 63.2
TOTAL 1176.0 1254.7 1390.5 135.8
(1) 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 15.5 16.0 16.3 0.3

Commercial Loans 14.0 14.2 13.8 -0.4

Residential Construction 12.6 13.1 13.1 0.0

Other 10.1 12.2 12.4 0.2

Weighted Average 14.0 14.3 14.2 -0.1

Weighted Deposit Rates

Demand 0.5 0.7 0.7 0.0

Savings/Cheque 5.1 5.3 5.3 0.0

Savings 5.1 5.2 5.2 0.0

Time 7.6 7.8 8.2 0.4

Weighted Average 5.2 5.5 5.8 0.3

Weighted Average Spread 8.8 8.8 8.4 -0.4








2006 ANNUAL REPORT
CENTRAL BANK OF BELIZE


Table 9: Balance Of Payments Summary

$mn

CURRENT ACCOUNT -311.7 -320.9 -48.9
Goods: Exports f.o.b. 614.9 650.5 852.9
Goods: Imports f.o.b. -961.4 -1,112.4 -1,223.9
Trade Balance -346.5 -462.0 -370.9
Services: Credit 470.6 584.6 710.8
Transportation 54.8 59.4 57.1
Travel')1 336.1 408.3 505.2
Other Goods & Services 56.0 81.3 100.9
Gov't Goods & Services 23.8 35.6 47.6
Services: Debit -294.2 -317.2 -300.3
Transportation -89.2 -100.2 -109.1
Travel -85.2 -83.3 -82.1
Other Goods & Services -103.5 -110.5 -91.4
Gov't Goods & Services -16.3 -23.2 -17.7
Balance on Goods & Services -170.0 -194.5 39.5
Income: Credit 8.7 13.6 20.0
Compensation of Employees 4.9 7.5 11.9
Investment Income 3.8 6.0 8.1
Income: Debit -242.2 -242.4 -256.3
Compensation of Employees -12.4 -11.7 -11.4
Investment Income -229.7 -230.7 -245.0
Balances on Goods, Services & Income -403.5 -423.4 -196.8
Current Transfers, n.i.e.: Credit 121.5 136.7 184.3
Current Transfers: Debit -29.7 -34.3 -36.4
CAPITAL ACCOUNT, n.i.e. 19.6 5.9 18.3
Capital Account, n.i.e.: Credit 21.2 7.9 20.5
Capital Account: Debit -1.5 -2.0 -2.2
FINANCIAL ACCOUNT, n.i.e. 234.9 349.7 77.1
Direct Investment Abroad -0.1 -2.0 -1.1
Direct Investment in Belize, n.i.e. 223.0 253.8 145.9
Portfolio Investment Assets -0.5 -0.4 -0.5
Portfolio Investment Liabilities, n.i.e. 153.8 36.1 -47.7
Financial Derivatives Assets 1.1 0.5 0.0
Financial Derivatives Liabilities 0.0 -11.1 0.0
Other Investment Assets -8.8 -17.2 -61.5
Other Investment Liabilities -133.5 90.0 42.1
NET ERRORS & OMISSIONS -5.2 1.9 18.9
OVERALL BALANCE -62.3 36.6 65.4
RESERVE ASSETS (Minus = increase) 62.3 -36.6 -65.4
(1) Tourism earnings for 2005 were based on actual inflows into the banking system 2005,
while estimates for 2004 & 2006 were based on Visitor Expenditure Surveys.










APPENDICES



Table 10: Gross Imports (CIF) by SITC Categories

$mn


0 Food and Live Animals 107.8 118.7 109.2 120.7 118.2
1 Beverages and Tobacco 8.3 8.9 9.8 10.5 11.2
2 Crude Materials 7.5 6.7 7.3 9.1 10.9
3 Fuels and Lubricants 139.3 161.2 184.3 236.0 246.5
Of which electricity 23.8 28.4 29.7 40.3 33.2
4 Animal and Vegetable Oils 3.1 3.3 3.2 3.2 3.9
5 Chemicals 85.0 82.7 76.3 88.7 93.6
6 Manufactured Goods 128.2 128.7 136.8 138.9 164.2
7 Machinery and Transport Equipment 208.5 203.7 175.9 199.8 219.1
8 Miscellaneous Manufactured Goods 80.4 103.2 81.8 101.1 102.4
9 Commodities not classified elsewhere 0.2 0.9 0.0 0.0 0.0
Export Processing Zones 221.3 130.7 113.8 124.7 157.9
Personal Goods 3.2 3.4 2.6 2.7 3.4
Total 992.9 952.1 901.1 1,075.7 1,131.4
CFZ Direct Imports 79.9 180.5 156.6 190.7 222.6
Grand Total 1,072.8 1,132.6 1,057.7 1,266.5 1,354.0
Sources: Central Statistical Office, Central Bank of Belize

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




Overdraft 96,317 0 0 13,331 -7,221 89,096
Central Bank 89,642 0 0 13,331 -791 88,851
Com m ercial Ban ks 6,675 0 0 0 -6,430 245

Treasury Bills 100,000 0 0 3,215 0 100,000
Central Bank 73,185 0 0 1,681 12,552 85,737
Com m ercial Ban ks 23,840 0 0 1,385 -11,876 11,964
Other 2,975 0 0 149 -676 2,299

Treasury Notes (1)(2) 24,000 31,800 0 1,304 31,800 55,800
Central Bank 9,000 31,500 0 417 35,243 44,243
Com m ercial Banks 14,269 0 0 815 -4,269 10,000
Other 731 300 0 72 826 1,557

Defence Bonds 15,000 0 0 1,250 0 15,000
Central Bank 10,000 0 0 815 0 10,000
Co m ercial Banks 100 0 0 63 0 100
Other 4,900 0 0 372 0 4,900

Loans 44,121 225 4,382 4,066 0 39,964
DFC (Debt Restructuring) 7,398 0 577 539 0 6,821
BSSB (Housing) 662 0 18 52 0 644
GOB/US DebtSwap 10,140 0 1,203 273 0 8,937
Reconstruction & Developm en 2,403 0 344 343 0 2,059
BBL (Infrastructure dev) 21 ,819 0 1,666 2,717 0 20,153
Guardian Life Bze 1,000 0 0 90 0 1,000
Atlantic Bank Ltd (Airstrip Loan 699 0 412 52 0 287
Belize Tourist Village (3 0 225 162 0 0 63

TOTAL 279,438 32,025 4,382 23,166 24,579 299,860
(1) Since October of 1998 $1 Omn in Treasury Notes held by Provident Bank w ere being subscribed to in $US They are
considered as part of Foreign Liabilities
(2) In 1993 Loans ($2 Omn) w as issued to NDFB from reflow s to 'commercial discountfund' as per USAID/CBB agreement and
in 2003 shortterm creditfacility ($27 5mn) w as extended to DFC, maturing June 2006 Both these loans were recorded as
government contingent liabilities and w ere repaid August 2006 by GOB w ith the issuance of $31 5mn in new Treasury Notes to
CBB
(3) A Promissory Note made to Belize Tourist Village reimbursing them for cost of dredging the Belize Harbour This loan is
interest free










M2006 ANNUAL REPORT
CENTRAL BANK OF BELIZE


Table 12: Government of Belize Revenue and Expenditure

$'000



TOTAL REVENUE & GRANTS (1+2+3) 564,626 598,048 513,781 536,653 605,254
1) Current revenue 529,838 562,345 451,933 511,461 565,953
Tax revenue 474,746 513,902 408,418 457,833 514,441
Income and profits 129,458 135,067 97,962 120,291 136,625
Taxes on property 5,519 6,115 4,226 5,979 4,393
Taxes on goods and services 181,834 202,292 143,802 175,155 207,875
Int'l trade and transactions 157,935 170,428 162,429 156,408 165,548

Non-Tax Revenue 55,092 48,443 43,514 53,628 51,512
Property income 8,588 4,500 6,419 8,338 1,355
Licenses 10,247 11,180 9,867 11,842 10,499
Transfers from NFPE's 20,720 15,938 17,513 19,923 19,642
Repayment of old loans 5,833 6,478 893 3,900 4,578
Rent & Royalties (1) 9,703 10,348 8,822 9,624 15,437

2) Capital revenue 7,150 7,173 26,478 6,390 9,988
3) Grants & Debt Service Receipts (2) 27,638 28,531 35,370 18,802 29,313

TOTAL EXPENDITURE (1+2) 640,340 667,943 647,356 688,239 649,584
1) Current Expenditure 548,723 561,685 474,150 561,151 548,093
Wages and Salaries 222,884 223,565 207,925 221,264 218,078
Pensions 40,102 39,802 31,087 39,756 39,016
Goods and Services (3) 95,048 103,120 80,421 115,512 101,989
Interest & Other Payments 153,740 145,572 122,416 149,523 141,916
Subsidies & current transfers (4) 36,949 49,626 32,300 35,097 47,093

2) Capital Expenditure 91,617 106,258 173,206 127,087 101,491
Capital II (local sources) 54,472 54,199 55,357 49,657 67,869
Capital III (foreign sources) 27,765 48,851 82,463 54,852 24,188
Capital Transfer & Net Lending 9,380 3,208 1,387 8,578 4,435
Unidentified Expenditure 0 0 34,000 14,000 5,000

CURRENT BALANCE -18,884 660 -22,217 -49,691 17,861
OVERALL BALANCE -75,713 -69,895 -133,575 -151,586 -44,329

PRIMARY BALANCE 78,026 75,677 -11,159 -2,063 97,587

FINANCING 75,713 133,575 151,586 44,329
Net Privatization Proceeds 15,391 -10,000 44,391 0

Domestic Financing 269,632 -36,163 -19,623 -10,936
Central Bank 249,724 76,938 -10,161 58,788
Net Borrowing 32,074 -241 16,534 47,003
Change in Deposits 217,650 77,179 -26,695 11,785
Commercial Banks 20,337 20,000 -19,685 -26,976
Net Borrowing -8,189 26,564 -14,217 -24,679
Change in Deposits 28,526 -6,564 -5,468 -2,297
Other Domestic Financing -429 -3,101 10,223 -11,281
Transaction with Gov't Guaranteed Debt 0 -130,000 0 -31,467

Financing Abroad -209,934 179,863 126,950 55,578
Disbursements () 118,454 439,181 427,779 169,400
Amortization (6) -327,852 -248,865 -300,345 -123,260
Change in Foreign Assets -535 -10,454 -484 9,438

Other 624 -125 -132 -312
Sources Ministry of Finance, Central Bank of Belize
(1) Rent and royalties included $4 8mn in royalties from Belize Natural Energy Ltd
(2) Debt receipts of $4 7mn annually were payments of external debt obligation by other public sector organization acquired in the name of Government of
Belize
(3) In 2005, goods & service category was bumped up by expenditures pertaining to prepaid insurance and financial fees amounting to $25 3mn associated with
the new Bear Stearns bond offering
(4) In FY2006/07 the KHMH was classified as a statutory body and wage, salaries, and pension of its employees were removed from this line item and placed
under subsidies and transfers largely accounting for the $12 Omn increase
(5) 2006 disbursements included proceeds of $2 2mn from the sale of petroleum oil imported from Venezuela Also included are capitalized interest of $4 4mn
of which $3 5mn was a promissory note from The International Bank of Miami
(6) 2006 amortization included $1 5mn as 60% part payment for petroleum oil imported form Venezuela

70









APPENDICES



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





CENTRAL GOVERNMENT 1,772,403 167,230 121,349 118,875 3,029 1,821,313
Banco Nacional de Comercio Exterior 8,999 0 0 546 0 8,999
Fondo de Financ. de las Exportaciones 762 0 218 42 0 544
Government of Great Britain 7,772 0 3,591 0 873 5,054
Government of Peoples Rep. of China 58 0 58 0 0 0
Government of the United States 6,375 0 1,465 231 0 4,910
Government of Trinidad and Tobago 20 0 4 1 0 16
Government of enezuela 1,546 100,000 0 0 0 101,546
Kuwait Fund for Arab Economic Dev 19,631 0 1,643 794 225 18,213
Republic of China 246,076 30,000 14,688 13,441 0 261,388
Allfirst Bank of Maryland 2,100 0 840 107 0 1,260
KBC Bank NV 11,738 0 5,869 560 0 5,869
Manufacturers & Traders Trust Co. 7,056 1,594 865 402 0 7,786
Belize Bank Ltd. 12,668 0 12,668 2,456 0 0
Bear Stearns & CO. Inc. 709,072 0 28,589 46,859 0 680,483
BWS Finance Limited 19,844 0 4,961 1,984 0 14,883
Russer Financial Ltd. 10,000 0 10,000 252 0 0
Citibank, Trinidad & Tobago 8,571 0 3,429 762 0 5,143
Citicorp Merchant Bank Ltd. 45,714 0 7,857 4005 0 37,857
International BankofMami 1) 101,737 3,509 0 9,102 0 105,246
Provident Bank& Trust of Belize (' 1,117 0 117 96 0 1,000
Royal Mbrchant Bank 220,183 0 2,977 20,874 0 217,206
Belize Estate and Co. Ltd. 326 0 326 78 0 0
Caterpillar Financial Services Corp. 850 0 663 46.8 0 188
Export Import Bank of the United States 187 0 187 10 0 0
Caribbean Development Bank 99,824 7,424 3,324 5,215 0 103,923
European Economic Community 16,688 0 736 126 1,777 17,729
European Investment Bank 752 0 186 17 81 647
Inter-American Development Bank 141,715 24,625 7,310 7,270 0 159,030
International Fund for Agric. Dev. 2,003 20 392 89 73 1,704
Intl. Bank for Reconstruction & Dev. 61,820 58 7,653 3,161 0 54,225
Opec Fund for Int'l. Development 7,199 0 733 348 0 6,466

NON-RNANCIAL PUBLIC SECTOR 46,387 0 5,517 2,082 97 40,968
Kuwait Fund for Arab Economic Dev 7,532 0 695 296 79 6,916
Amtrade International Bank of Georgia 2,060 0 1,051 103 0 1,009
CIBC Bank& Trust Company 2,338 0 1,844 191 0 494
Caribbean Development Bank 34,457 0 1,927 1,492 18 32,549

FNANCIAL PUBLIC SECTOR 121,199 0 13,942 7,735 827 108,084
Paine VVebber Real Estate Securities Inc 1,600 0 200 88 0 1,400
N.V De Smet S.A Engineers 1,695 0 1,130 98 0 565
Government of the United States 1,737 0 415 49 0 1,322
Caribbean Development Bank 39,678 0 3,638 1,567 10 36,050
European Economic Community 535 0 34 5 56 557
European Investment Bank 9,757 0 625 314 761 9,892
Belize Ibrtgage Company 66,198 0 7,900 5,614 0 58,298
GRAND TOTAL 1,939,990 167,230 140,808 128,692 3,953 1,970,364
Outstanding external debt of private entities remained as a contingent liability of Central Governrent.
(1) Rornissory Note of $3.5rm is for interest capitalized on loan of $31.2rm utilized to finance general activities of DFC
(2) $1.0rm in Treasury Nates.
(3) BMC is the issuer of DFOIC/rth American Securitization Loan through the Bank of N\w York the loan was recorded as a contingent liability of
Central Governrent. H-bwever, in accordance with GODC guidelines, this transaction is now included as part of public financial sector stock of
external debt obligation.







FINANCIAL STATEMENTS


CENTRAL BANK OF BELIZE

2006 FINANCIAL STATEMENTS



CONTENTS


PAGE


Auditors' report

Balance sheet

Statement of income

Statement of changes in equity

Statement of cash flows

Notes to the financial statements


1

2-3

4

5

6-7

8 -23










Horwath


timdl i tiaw i
1ts'lne 5' '(i t& s
35 k 7-c. 2 .)N 7
UcItrr IsY is:
Rell isan..s''C .>1P
leal 51) 1 60,8t- 662
vvua ., 1 72I~:IL.("


Page 1


AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF
( 1' I RAL BANK OF BE LIZE


We have audited the accompanying balance sheet of Central Bank of Belize as of 31 December ':. '. and
ili: related statements of income, cash flows and changes in equit.;i for the year then ended. These
financial statements are the responsibility of the Bank's m iim !-:;ii i Our responsibility is to express an
opinion on these lin rl. ri.cjl statements based on our audit.

We conducted our audit in accordance with International v ..i.:-,l 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 ') i-.. evidence supporting :ic,
amounts and disclosures in the :in.i.il statements. An audit also includes .ji.r.-i. '-. accounting
principles used and significant estimates made by min.i ~iII. 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 :-;iin. al position of Central Bank
of Il.. c. as of 31 December 2-,ii and .-1I ri' results of its operations and its cash flows for the year then
ended in accordance with int.-ri.tr. iral Financial Repili ii- Standards.


14 February 2007


5lrscr~n rsitr, (5, sr isssr . ~ as I' s.


'I"*ji-










Page 2


CENTRAL BANK OF BELIZE
BALANCE SHEET
At 31 December 2006
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
6
7,2k


2006


39,709,976

18,505,883
129,000,000
798,866

2,000,000

190,014,725

139,979,534


77,215,718


LOANS TO PUBLIC SECTOR


BALANCES WITH LOCAL BANKERS AND CASH
ON HAND


OTHER ASSETS


PROPERTY AND EQUIPMENT


13,2f


TOTAL ASSETS


153,314



7,126,279


30,083,887


2005


63,882,197

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

2,000,000

115,171,765

92,184,594


88,536,782


27,521,712


68,795



8,496,710


30,633,964


444,573,457 362,614,322


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







Page 3
CENTRAL BANK OF BELIZE
BALANCE. SHEET
At 31 December 2II (h (Continued)
In Belize dollars.


LIA BI CITIES, CAPITAL AND RE SERVES

DEMP AND 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 ClENTIRAL BANKS

OTHER LIABILI IL ;


COIMM I IFRCIAL BAN K DS1 COUNT FUND


NOTES


TOTAL LIA lLITIES


REVALUATION ACCOL NT

CAPITAL ACCOUNT
Paid up CjpiLal (A uilt ri/cd capital $1(i linilj.1 1y0)


GENERAL RESERVE FUND

TOTAL LIABILITIES, CAPITAL AND RESERVES


18,2i


2006


169,354,339
152,283,691

85,031,994
2,1 s ;1I

4In 858,335
197 S;,i

4,1 -1,765


2,745,321


415,99, .301

3,011,360




15,576,796ll
15,576,796


GOVERNOR

DI E F C- TOR

DEPUTY GOVERNOR


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


2(I00


14' 1: ,348
112,341,444

73,41 i 16 7
2,440,333

"l.7s',I92
295,942

3,.1'.l518

1,4-S .663


33i. 4S ,15


14.2S4.083


444,573,457 362,614,322







Page 4


CENTRAL BANK OF BELIZE
STATEMENT OF INCOME
For the year ended 31 December 2006
In Belize dollars.


NOTES


2006


2005


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


5,856,110
13,330,420
2,803,990


5,019,698
9,497,530


954,282


697,900

21,990,520 16,169,410
2,183,670 2,100,659
1,608,139 1,481,748

25,782,329 19,751,817

(1,642,742) (832,743)

24,139,587 18,919,074


(1,547,726) (1,361,288)

(5,884,117) (5,698,289)
(1,111,255) (860,755)
(2,669,362) (2,548,460)

(11,212,460) (10,468,792)


12,927,127 8,450,282

12,927,127 8,450,282


(1,292,713) (845,028)


11,634,414 7,605,254


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







Page 5


CENTRAL BANK OF BELIZE
STATEMENT OF CHANGES IN EQUITY
At 31 December 2006

In Belize dollars.


Share
capital


At 1 January 2005
Net profit
Loss on revaluation
Transfer to Government of Belize
Transfer to General Reserve Fund

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


At 31 December 2006


10,000,000


Revaluation
account

3,658,886


General
reserve


Accumulated
profits


13,439,055


8,450,282


- (1,576,962)


(7,605,254)
845,028 (845,028)


10,000,000


2,081,924


14,284,083


12,927,127


- 929,436


10,000,000


3,011,360


(11,634,414)
1,292,713 (1,292,713)
15,576,796


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 2006
In Belize dollars.


2006


2005


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

Net cash provided by/(used in) 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
Collateral deposits with foreign bankers

Net cash provided by/(used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes and coins in circulation
Deposits by licensed financial institutions
Deposits by and balances due to Government and Public Sector
entities
Government sinking fund
Deposits by international agencies
Balances due to Caricom central banks
Commercial Bank Discount Fund
Belize credit facility
Loan repayment made to foreign institutions

Net cash provided by financing activities


1,292,713


57,815
1,111,255
14,326

1,312,616
999,247
929,436


845,028


57,815
860,755
16,327

(1,755,056)
(797,180)
(1,576,962)


5,717,408 (2,349,273)


11,321,064 (7,877,207)
27,521,712 5,000,000
(580,155) (412,204)
4,651 43,726
(633,737) 1,043,772
24,303,115 (61,255,724)

61,936,650 (63,457,637)


26,264,991 1,139,664
39,942,247 24,447,792

11,615,927 59,669,184
(20,210,971)
(252,022) (263,441)
(98,062) 208,025
1,264,658 (175,461)
(8,653,769)
(2,500,000)

78,737,739 53,661,023


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







Page 7


CENTRAL BANK OF BELIZE
STATEMENT OF CASH FLOWS
For the year ended 31 December 2006 (Continued)

In Belize dollars.


2006


2005


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

CASH AND CASH EQUIVALENTS, END OF YEAR


CASH AND CASH EQUIVALENTS COMPRISE THE
FOLLOWING:

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




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


146,391,797


124,113,252


(12,145,887)


136,259,139


270,505,049 124,113,252






4,757,367 4,626,473
129,000,000 20,800,000
798,866 11,401,682
5,815,968 5,031,708

140,372,201 41,859,863



153,314 68,795
85,736,534 73,184,594
44,243,000 9,000,000
270,505,049 124,113,252


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







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

1. GENERAL INFORMATION

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

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Following is a summary of the more significant accounting policies adopted by the Bank
in preparing its financial statements which accord with International Financial Reporting
Standards and the Central Bank of Belize Act. Certain prior year amounts have been
reclassified to conform with the 2006 presentation.

a. Measurement base

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

b. Revenue and expenses

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

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

Miscellaneous income and expenses are recognized on an accrual basis.

c. Inventories

Inventories are carried at lower of cost or net realizable value. Cost is determined on a
first-in- first-out basis.







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


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

d. Changes in accounting policies

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

e. Financial instruments

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

International Monetary Fund balances

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

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

Foreign marketable securities

These consist of debentures issued by the Government of Dominica and are classified as
held-to-maturity based on the Bank's positive intent and ability to hold these securities to
maturity.

Belize government securities

The Bank's investment portfolio includes treasury bills, treasury notes and Belize
Defense Bonds purchased from Government of Belize all of which the Bank has the
positive intent and ability to hold to maturity. Treasury bills are carried at amortized
cost. All other investments are carried at cost which approximates market value.

Loans to government

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







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


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

e. Financial instruments (continued)

Loans to public sector

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

Other financial assets and liabilities

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

f. Property, plant and equipment, depreciation and amortization

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

Depreciation is charged at the following rates:


Building and improvements
Office furniture
Equipment
Vehicles


1%, 5%
10%
10% 25%
20%







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


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

g. Employee benefits

Pension

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

Gratuity

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

h. Sale of special coins

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







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


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

i. Foreign currency translation and exchange gains and losses

i. Assets and liabilities

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

ii. Income and expenses

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

iii. Revaluation

Section 49 of the Act stipulates that gains or losses from any revaluation of the
Bank's net assets or liabilities in gold, special drawings rights (SDR), foreign
exchange or foreign securities as a result of any change in the par value of the
Belize dollar or any change in the par value of the currency unit of any other
country shall be excluded from the computation of the annual profits and losses
of the Bank. All such gains or losses are credited in a special account called
Revaluation Account. Profit is not carried to the General Reserve Fund or paid
to the Government under Section 9 (see note 19) when the Revaluation Account
shows a net loss, but is first credited to the Revaluation Account in an amount
sufficient to cover the loss.

j. Valuation of securities

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

k. Accrued interest and cash intransit

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







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


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

1. Taxation

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

m. Cash and cash equivalents

The Bank classifies as cash equivalents financial instruments with an original maturity of
three months or less, and deposits and other balances that are readily marketable or
convertible. The Banks' cash management and investment policies restrict investments
to investment grade highly liquid securities. The carrying value of cash and cash
equivalents approximates fair value.


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 2006 and 2005 total approved external assets approximated 46 percent
and 35 percent of such liabilities respectively.


4. BALANCES AND DEPOSITS WITH FOREIGN BANKERS

Included in foreign deposits is $36,952,609 (2005 $61,255,724) of restricted collateral
deposits which are held in designated reserve accounts with Bank of New York and are
primarily used to secure payments on notes payable to international lenders by
Government of Belize.







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


5. INTERNATIONAL MONETARY FUND RESERVE TRANCHE

Belize became a member of the International Monetary Fund in 1982 with a subscription
of
SDR 7,200,000 of which SDR 1,320,600 was paid in foreign currency (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 2006, Belize's subscriptions to the International Monetary Fund
amounted to SDR 1,932,986 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$3.0088 to SDR 1.0 at 31
December 2006 (2005 BZ$2.8585 to SDR 1.0).


6. OTHER FOREIGN CREDIT INSTRUMENTS

These instruments comprise overnight deposits held with the Federal Reserve Bank.


7. ACCRUED INTEREST AND CASH TRANSIT

Accrued interest and cash intransit consist of:
2006 2005

Accrued interest 331,190 277,201
Cash intransit 467,676 11,124,481

798,866 11,401,682



8. MARKETABLE SECURITIES ISSUED OR GUARANTEED BY FOREIGN
GOVERNMENTS AND FOREIGN FINANCIAL INSTITUTIONS

These securities, which are carried at cost, consist of 3.5% debentures issued by the
Government of Dominica and maturing in 2034. The Bank has the positive intent and
ability to hold these securities to maturity.




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