The government of Belize will not make the next coupon payment on the nation’s foreign debt, commonly known as the super bond. The announcement was made today via a press release by the Ministry of Finance. As we have reported previously, the first coupon payment on the stepped up interest payment plan is for forty six million dollars and becomes payable on Monday of next week. In today’s statement, the Minister of Finance, Prime Minister Dean Barrow says, quote: the step-up bond alone represents approximately one half of Belize’s total recorded public indebtedness. The annual interest rate on this bond stepped up earlier this year to eight point five percent. We simply cannot afford this coupon payment given the financial shortfall and other challenges we face,” end of quote. The official statement ends by saying that it is the hope of the government of Belie that, quote: we can move quickly toward a sensible restructuring of the instrument,” end of quote. While the first public reaction to the news on social media is an expression of concern for Belize’s economy, one observer we spoke with believes that the announced super bond default has no implications outside of the process of renegotiating the super bond. The thinking, according to the observer, is that the government cannot mislead the bond holders into thinking that it can make the step up coupon payment, thereby falsely holding out expectation that it will continue to scrape together scare funds to meet these burdensome payments. The super bond interest payment is due on Monday of next week, but there is a thirty day grace period, and it is during this window of opportunity that negotiators of the super bond are hoping that the creditors will realize that the government of Belize is serious about the restructuring exercise and getting more favorable terms. The government of Belize last week released its offer to bond holders, indicating that it is willing to repay the debt; but at a much lower rate and over a much longer period of time. Bond holders have so far not been welcoming of the government’s offer, and a prediction on Monday of a so-called “threat of a credit event” has now come to pass. Analysts with the US-based Citigroup are predicting a protracted negotiation process and described the government’s offer last week as a threat of a credit event rather than a willingness to negotiate. The Opposition People’s United Party this evening issued a brief statement on the bond coupon default. The statement says that the PUP views the decision with grace concerns. Furthermore, it says, the Leader of the Opposition Francis Fonseca was neither consulted or informed of this very critical decision, which the PUP says has very serious implications for Belize’s economy and development. The PUP statement goes on to say that during the 2012-2013 Budget debate the Prime Minister led the Nation was led to believe that the government had budgeted for this payment and would be honoring the August 20 payment. The PUP statement ends by calling on Prime Minister Dean Barrow who is also the Minister of Finance to immediately address and inform the Nation on the specific reasons for the decision to default on the coupon payment and to outline the consequences and implications expected to follow. The opposition party says it remains hopeful that the Super Bond restructuring exercise currently underway is successful.
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