Central Bank Governor Discusses Belize’s Foreign Exchange Situation

Foreign Exchange is an important part of any country’s economy.  Foreign exchange is affected by imports, exports, overseas remittances, and other factors.  During this week’s press conference with the Central Bank of Belize, the Governor, Kareem Michael, broke down the country’s current foreign exchange situation.

Kareem Michael, Governor, Central Bank of Belize: “If we know that there are limited earners of foreign exchange within the country, and we know that we don’t produce our own goods and services but we have to import for us to be, for the economy to maintain a level of activity, we have to focus on managing that limited pool of foreign exchange. Where does the foreign exchange come from? So for the first half of the year, January to June, loan disbursements have amounted to $141 million. Simply guys divide it by 2 and that’s the US dollars that have added to reserves. Tourism $763.1 million, foreign direct investment around $124.8 million, exports $504 million and this includes re-exports from the commercial free zone. Now these are the inflows side. What drains the foreign exchange, what it is used for, debt servicing $95.9 million imports, $1.2 billion for the first half of the year and several entities who are who ultimate beneficial owners are non-residents have repatriated a sizable amount of $124.5 million. We know SIB in latest statistics and press release often talks about the size of the merchandise trade deficit it’s clear to be seen here. Imports minus your exports that’s a huge amount that needs to be financed for us to maintain our economy.”

With an obligation to ensure that a certain threshold is set aside for foreign exchange, Governor Michael explained how important it is to monitor the country’s economic activity.  This, he says, includes the measured exchanges of foreign currency.

Kareem Michael, Governor, Central Bank of Belize: “Where does that additional foreign exchange come from? And you can clearly see remittances adds quite a bit tourism adds foreign direct investment supplies. So the Central Bank has to manage this dynamic. And what we like to think about it is that it’s a faucet and we want to control the valve. How much water we let out in certain times when there’s shortages and if there’s sufficient in the system then there’s no need for the Central Bank to adjust its policy or the administration of its exchange control framework. So there are authorized dealers. Authorized dealers are largely the commercial banks. And the Central Bank looks at these flows and through its permit application which is largely for us to keep an eye on where we are with these inflows versus outflows then gives that authority back to the commercial bank. The commercial bank uses its pool of foreign exchange to then sell to the everyday person or the person that is requiring the foreign exchange.”