1. Restoring Debt Sustainability through Debt Restructuring Presented by: Zita Magaña Perez Ministry of Finance and Economic Development June 17-18 2013 1

2. 1 Belize's Debt Profile 2 Debt Crisis 3 2006-2007 Debt Restructuring 4 Post Restructuring 5 2012-2013 Debt Restructuring 6 Reforms 2

3. Evolution of Total External Public Sector Debt (US$MN) 3

4. Debt Crisis Significant increase in public debt stock during 2000-2005 Use of Funds 4

5. Debt Crisis By mid-2006 public debt burden was approximately US$1.1 billion, over 90% of estimated GDP 5

6. Debt Crisis Composition of external commercial debt RBTT –Royal Bank of Trinidad and Tobago IBOM –International Bank of Miami 6

7. Debt Crisis Repayment terms of external commercial debt Interest payments absorbed 30% of fiscal revenues 7

8. Debt Crisis Weakening foreign exchange reserve position and successive downgrades from the international credit rating agencies It became increasingly expensive to access international funds to meet its debt obligations To prevent a possible default of payments and a balance of payment crisis, GoB embarked on a comprehensive restructuring of its direct external commercial debt 8

9. 2006-2007 DEBT RESTRUCTURING 9

10. 1 st Debt Restructuring In August 2006, debt stock was of US$1.1 bn, 90% of which was external Belize officially announced its intention to restructure its external commercial debt, US$565 mn Belize’s strategy included : Full and early engagement of creditors Support of the IMF, IADB, and the CDB Disseminating data and assumptions through the Central Bank of Belize Website 10

11. 1 st Debt Restructuring (Cont’d) On December 18 the Debt Exchange Offer was launched Temporary suspension of debt service payments until the time of exchange closed 11

12. 1 st Debt Restructuring (Cont’d) Features of the new bond included: 4.25 % in the first 3 yrs. 6.00% in the next 2 yrs. 8.50% thereafter Step-up Coupon Structure 20 equal, semi-annual installments beginning August 2019, and maturing February 2029 Repayment 12

13. 1 st Debt Restructuring (Cont’d) Debt Exchange Offer expired on January 26, 2007 and closed on February 20, 2007 Various instruments were substituted for a single one, US Dollar Bond due 2029 “Superbond” 98.1% of the affected debt was restructured, (currently 99%) Highest recorded sovereign debt exchange Use of Collective Action Clause (CAC) 13

14. 1 st Debt Restructuring (Cont’d) The new debt service profile provided cash flow relief over an extended period of time 14

15. 1 st Debt Restructuring (Cont’d) The overall debt dynamics improved 15

16. The restructuring provided short-term debt relief Belize’s medium and long-term macroeconomic outlook remained a source of concern GoB’s concerns included: Level of public debt remained high Projected Decline in oil revenue Exacerbated by the global financial crisis Nationalization of public utilities 16

17. Key Indicators for the period 2007 - 2011 17

18. Belize faced a negative external climate and a heavy strain on public finances With projected financing gaps from 2013 onwards GoB was determined to put public debt on a sustainable path 18

19. 2012-2013 DEBT RESTRUCTURING 19

20. On March 16, 2012 a debt restructuring team was appointed On June 20, 2o12 GoB formally announced its intention to restructure its US 2029 Bond On August 8 GoB published 3 indicative restructuring scenarios on the Central Bank of Belize website 20

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22. On August 14 GoB announced it was unable to meet its second annual payment of US$ 23.2mn due August 20, 2012 On September 20, 2012 a partial payment of US$11.6mn was made On October 2 GoB began debt negotiations with a Creditors Coordinating Committee 22

23. In November the Coordinating Committee presented preferred restructuring proposals to GoB On November 21 GoB rejected proposals as they only provided short-term relief GoB then published its second set of indicative scenarios 23

24. GoB then publishes second set of indicative scenarios on November 21, 2012 24

25. In December negotiations result in agreement on Net Present Value for the restructuring On February 12, 2013 GoB sought the approval of the Parliament for the financial terms of an Offer to Exchange its US Dollar Step-Up Bonds due 2029 GoB received that approval on the same day 25

26. On February 13, 2013 GoB launched its Debt Exchange Offer to exchange US$547,522,200 with the following agreed terms: 5.0000 % thru' August 2017 6.6780 % thereafter Step-up Coupon Structure 38 equal, semi-annual installments beginning August 2019, and maturing February 2038 Repayment 26

27. On March 8 GoB announced the success of the Debt Exchange Offer with 86% participation Use of Collective Action Clause On March 20 Belize closed the Exchange of its US Dollar Bonds due 2029 for a new US Dollar Bond due 2038 27

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29. The below table shows the coupon payments made under the first and second bond restructure 29

30. Under the new US 2038 Bond, debt relief will be: 1 US$11mn in 2012 2 US$33mn in 2013 3 US$118 mn the 5 yr period to 2017 4 US$247 mn over the coming decade 30

31. When discounted on a net present value basis, the new bonds represent a reduction of more than 43% as compared to the current terms 31

32. Reform of Public Debt Management GoB has committed to the following initiatives with a view to improve the management of its public debt Formulate Medium Term Debt Management Strategy Establish a Debt Management Committee Enact a new Public Debt Management Act Enact New Securities and Capital Market Act Modernize the process for Securities Trading Adopt other improvements for the management of Public Sector Debt 32

33. References Central Bank of Belize www.centralbank.og.bz Houlihan Lokey Investment Banking Services Belize’s Debt Restructuring Process, February 2007 Ministry of Finance www.mof.gov.bz 33

34. Thank You