## BELIZE: STAFF REPORT FOR THE 2025 ARTICLE IV CONSULTATION ## Source details **Canonical URL:** [BELIZE: STAFF REPORT FOR THE 2025 ARTICLE IV CONSULTATION](https://www.imf.org/-/media/files/publications/cr/2025/english/1blzea2025001-source-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2025/english/1blzea2025001-source-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2025/english/1blzea2025001-source-pdf.pdf.json) --- ### Recent developments - Real GDP grew by 8.1 percent in 2024, driven by tourism, wholesale and retail trade, and transport sectors. - Real GDP expanded cumulatively by 30.6 percent between 2021 and 2023, after contracting by 13.9 percent in 2020. - Real GDP grew by 2.0 percent y/y in 2025Q1 as growth in stayover visitor arrivals moderated and agricultural sector performance declined due to unfavorable weather conditions and a fungal disease affecting sugarcane. - Inflation decelerated to 1.0 percent in May 2025 from 4.0 percent in May 2024. - Unemployment declined from 3.1 percent in the first half of 2024 to 2.1 percent in the first half of 2025 (peak was 13.8 percent in the second half of 2020). - Primary balance shifted to a surplus of 1.7 percent of GDP in FY2024 from a deficit of 0.5 percent in FY2023. - Public debt declined from 67.2 percent of GDP in 2023 to 61.1 percent of GDP in 2024 (after peaking at 103.3 percent of GDP in 2020), supported by strong nominal growth, a debt-for-marine protection swap, and a negotiated discount on Petrocaribe debt. - Current account deficit widened to 1.5 percent of GDP in 2024 from 0.6 percent in 2023, mainly due to a narrower services balance amid higher payments and a slower cruise passenger recovery. ### Outlook and major risks - Growth and inflation projections: - Real GDP growth expected to decelerate to 1.5 percent in 2025 and gradually converge to potential of about 2 percent over the medium term, absent expanded hotel and flight capacity. - Inflation expected to converge to 1.3 percent over the medium term. - External sector and reserves: - Current account deficit expected to narrow to about 1.2 percent of GDP over the medium term from 1.5 percent in 2024. - International reserves expected to rise to about 4 months of imports (from 3.5 in 2024) but remain below the ARA metric by 2030; reserves projected in months of imports: 3.5 (2024), 3.7 (2025), 3.7 (2026), 3.8 (2027), 3.9 (2028), 4.0 (2029), 4.1 (2030). - Risk balance: - Downside risks: higher global policy uncertainty, increased trade barriers, higher-for-longer global interest rates, increased or sustained climate-related disasters. - Upside potential: successful implementation of several large infrastructure projects could push medium-term growth higher. ### Executive Board assessment and priority policy recommendations - Directors welcomed the strong recovery, improved social outcomes, and financial stability. - Key recommendations (selected): - Reduce public debt and accelerate reforms to unlock potential growth and build resilience to natural disasters. - Enhance revenue mobilization and reprioritize current expenditure, including through pension reform, to make space for priority spending on targeted social programs, crime prevention, and infrastructure. - Establish a medium term fiscal framework with clear targets and measures to improve credibility and pave the way for an effective Fiscal Responsibility Law. - Continue reserves accumulation to strengthen the credibility of the currency peg. - Further fiscal consolidation, structural reforms to enhance competitiveness, and efforts to reduce the central bank’s holdings of government securities. - Expedite operationalization of the Deposit Insurance Act. - Improve private sector access to financing and continue addressing remaining AML/CFT gaps. - Accelerate growth-enhancing structural reforms, increase female labor force participation, address tourism capacity constraints, and improve the business climate. - Continue measures to enhance resilience to natural disasters. ### Fiscal strategy and illustrative targets - Authorities aim to reduce public debt to 50 percent of GDP. - Achieving 50 percent of GDP by 2030 requires raising the primary surplus to 2 percent of GDP from FY2026 onwards, entailing an adjustment of 1.2 percent of GDP over 2 years through increased government revenues and reforming the Pensions Plan for Public Officials (PPPO). - FY2024 outturns (percent of fiscal year GDP): - Revenue and grants 24.0 percent; Current non-interest expenditure 16.2 percent; Interest payment 2.3 percent; Capital expenditure and net lending 6.1 percent; Primary balance 1.7 percent; Overall balance -0.5 percent. - Baseline public debt path (public debt in percent of calendar year GDP): 82.5 (2021), 66.8 (2022), 67.2 (2023), 61.1 (2024), 60.4 (2025), 59.3 (2026), 59.1 (2027), 58.7 (2028), 58.4 (2029), 58.0 (2030). ### Fiscal consolidation measures and revenue options - Recommended fiscal adjustment through FY2026: 1.2 percent of GDP (Text Table 1). - Package to fund priority expenditures totaling 2.3 percent of GDP includes: - Broadening GST base: taxing some non-first necessity items at the standard 12.5 percent GST rate could yield an additional 1.6 percent of GDP. - Raising excise taxes and fees (vehicle registrations, driver licenses; convert some per-unit excises to ad valorem; increase excises on fuel, cigarettes, beer, spirits, soft drinks) could raise 0.2 percent of GDP. - Improvements in tax administration (unified autonomous revenue authority incorporating stamp duties and land taxes into BTSD; improve tax arrears collection; risk-based tax audits; pass draft customs law) could raise 0.4 percent of GDP if fully implemented. - Text Table 1 selected entries (deviations from baseline in percent of GDP): - Revenue Measures: FY2025 annual yield 0.5; FY2026 annual yield 1.7; FY2025 cumulative 0.5; FY2026 cumulative 2.3. - General sales tax (GST): FY2025 annual yield 0.4; FY2026 annual yield 1.2; FY2025 cumulative 0.4; FY2026 cumulative 1.6. - Excises and fees: FY2025 annual yield 0.1; FY2026 annual yield 0.2; FY2025 cumulative 0.1; FY2026 cumulative 0.2. - Revenue administration: FY2025 annual yield 0.1; FY2026 annual yield 0.4; FY2025 cumulative 0.1; FY2026 cumulative 0.4. - Total Fiscal Consolidation: FY2025 annual yield 0.4; FY2026 annual yield 0.8; FY2025 cumulative 0.4; FY2026 cumulative 1.2. - Memorandum: Primary balance (baseline scenario) FY2025 1.1; FY2026 0.8. Primary balance (active scenario) FY2025 1.5; FY2026 2.0. - Other fiscal options if consolidation slows: - Tax more zero-rated items at the 12.5 percent GST rate; raise the GST rate; reduce nonpriority expenditure; update property valuations and adjust PIT exemption threshold. ### Reforming the Public Sector Pension Plan for Officials (PPPO) - Current issues: participants pay no contributions, early retirement age, generous pre-defined maximum replacement rate. - Illustrative reform package (example parameters): - Gradually introduce a contribution rate of 10 percent (split between employees and the government) over 10 years. - Raise retirement age from 55 to 65 for younger cohorts (phased increases: to 56 for employees aged 49, 57 for those aged 48, up to 65 for those that are 40 or younger). - Reduce maximum replacement rate from 67.5 percent to 50 percent (by 1 percentage point per year). - Estimated savings: could save 0.2 percent of GDP cumulatively in two years and improve long-run sustainability by reducing the present value of future deficits. - Alternative: raise contribution rates and retirement age over shorter horizons to avoid reducing replacement rate while achieving similar medium-term savings. - Contextual estimate: 2023 Selected Issues Paper, Chapter 2 estimated that absent reforms the annual deficit on the PPPO would rise to 4.1 percent of GDP by 2072 from 1.1 percent in 2022. ### Re-prioritized spending enabled by reforms (recommended allocations) - Targeted and temporary social transfers: 0.3 percent of GDP. - Subsidizing childcare, after-school programs, and training for vulnerable women: 0.3 percent of GDP. - Capacity building of law enforcement and procurement of equipment to deter and tackle crime: 0.1 percent of GDP. - Upgrading and expanding climate resilient infrastructure: 0.6 percent of GDP. ### Public investment financing and PPPs - Belize’s Third Nationally-Determined Contribution (NDC 3.0) estimates investment needs of US$1.6 billion over the coming decade for climate adaptation, mitigation, and AFOLU cross-cutting costs. - PPP priorities: establish a dedicated registry for PPPs, publish a pipeline of potential PPP projects, and set project selection criteria to ensure PPPs assist reaching the SDGs. ### Financial sector developments and stability - Aggregate nonperforming loans declined from 5.1 percent of gross loans to 3.6 percent between March 2024 and March 2025. - Domestic banks’ regulatory capital remained above the 9 percent regulatory requirement at 15.5 percent of risk-weighted assets. - Growth in credit to the private sector slowed to 3.2 percent y/y in April 2025 from 6.2 percent y/y in April 2024. - Financial soundness indicators (selected, percent): - Regulatory Capital to Risk Weighted Assets: 15.5 (2025 prelim.). - Non-Performing Loans to Total Gross Loans: 3.6 (Mar 2025 prelim.). - Return On Equity: 14.2 (Mar 2025 prelim.). - Liquid Assets to Total Assets: 36.9 (Mar 2025 prelim.). - Customer Deposits to total (Non-Interbank) Loans: 171.7 (Mar 2025 prelim.). - Central bank actions and priorities: - Central bank discontinued enhanced supervision of vulnerable banks after accumulation of additional tier 1 capital. - Recommendation to operationalize Deposit Insurance Act and establish Deposit Insurance Corporation funded primarily through bank and credit union contributions and annual premia. - Reduce central bank holdings of government securities (47 percent of total domestic government securities at May 2025) and develop a roadmap toward market-based Treasury issuance. ### Access to finance and market development - Measures to boost private sector access to financing: - Increase demand via formalization incentives and collateral registry. - Eliminate the 2½ percent floor on interest earned on savings deposits to allow lending rates to fall further while encouraging competition among domestic banks. - Introduce a savings bond for small retail investors and improve financial literacy. - Operationalize the credit bureau; develop framework for resolution or sale of NPLs. - Expand access to grants and non-debt instruments for early-stage firms. ### Growth, productivity, and labor force participation - Potential growth and productivity: - Belize’s potential growth has significantly declined over the past decade, driven by negative TFP growth in the period since the global financial crisis up to the COVID-19 pandemic (Annex VI). - Estimates suggest aggregate productivity could more than double if misallocation among firms was removed; resource misallocation among firms is one of the highest in the Caribbean. - Labor force participation and female participation: - Labor force participation rate declined from an average of 65 percent in the pre-pandemic period to 57 percent in 2024. - Belize has one of the largest gaps between male and female labor force participation rates among Caribbean countries. - Previous staff estimates: closing the gap in labor force participation rates between men and women relative to the level in 2022 could raise GDP level by 23 percent (2024 Article IV). - Staff estimate: an increase in the services employment share by one percentage point is associated with about half a percentage point lower gap between male and female labor force participation (Annex VII). - Policy implications: - Increase female labor force participation via improved accessibility, affordability, and quality of childcare services; expand training and job placement programs. - Address structural barriers: access to finance, business licensing and permits, tax administration, workforce education, and labor skill mismatch. ### Tourism sector bottlenecks and infrastructure needs - Tourism performance and constraints: - Belize outperformed the Caribbean in stayover arrivals growth in 2024. - Key bottlenecks: hotel capacity, flight capacity, road and airport infrastructure; more than three quarters of stayover tourists arrive via Belize City international airport, which has hotel capacity to accommodate only about 20 percent of them (staff estimates). - Flight capacity utilization is high, especially for European origin flights. - Priority actions: - Develop road infrastructure across districts; add flight capacity to Belize International Airport; develop domestic airstrips to cater to international flights. - Catalyze private sector investments in hotel capacity in districts with high visitor arrivals (examples: Orange Walk and Cayo). - Authorities’ tourism actions include abolishing border-crossing levies on Mexican tourists with short stays and planning new airport developments (San Pedro; possible international airport in Placencia). ### External sector assessment and reserves - External position and NIIP: - Staff assesses Belize’s external position in 2024 to be stronger than implied by fundamentals (Annex IX). - NIIP in 2024: -97 percent of GDP; Gross liabilities: 130 percent of GDP; External public debt: 39 percent of GDP; FDI: 81 percent of GDP; Gross assets: 34 percent of GDP. - Current account and reserves: - Current account balance: -1.5 percent of GDP in 2024; projected to converge to around -1.2 percent over the medium term. - Gross international reserves (US$ millions): 420 (2021), 482 (2022), 474 (2023), 498 (2024), 527 (2025), 566 (2026), 599 (2027), 637 (2028), 681 (2029), 721 (2030). - Reserves in months of imports: 3.2 (2021), 3.7 (2022), 3.3 (2023), 3.5 (2024), 3.7 (2025), 3.7 (2026), 3.8 (2027), 3.9 (2028), 4.0 (2029), 4.1 (2030). ### Illustrative Reform Scenario and macroeconomic impacts - Scenario summary (Text Table 3 outcomes): - Staff’s recommended fiscal adjustment (1.2 percent of GDP over two years) combined with structural reforms could reduce public debt to 50 percent of GDP by 2030. - Growth temporarily slows near-term from consolidation but accelerates to 2.5 percent from 2027 onward as reforms and infrastructure investments expand tourism and exports. - International reserves rise and settle around 5 months of imports by 2030 under the illustrative reform scenario. - Key numerical trajectories under Illustrative Reform Scenario (percent / months): - Growth (percent, 2022–2032): 9.7, 1.1, 8.1, 1.3, 2.0, 2.5, 2.5, 2.5, 2.5, 2.5, 2.5. - Public debt (percent of GDP, 2022–2032): 66.8, 67.2, 61.1, 60.1, 57.6, 55.5, 53.7, 51.9, 50.0, 48.1, 46.2. - International reserves (months of imports, 2022–2032): 3.7, 3.3, 3.5, 3.9, 4.2, 4.3, 4.5, 4.6, 4.7, 4.8, 5.0. - Primary fiscal balance (percent of GDP, 2022–2032): 0.9, -0.5, 1.7, 1.5, 2.0, 2.0, 2.0, 2.0, 2.0, 2.0, 2.0. ### Downside (global slowdown) scenario and policy guidance - Calibration based on April 2025 WEO Box 1.1 (Scenario A). - Impacts: - Belize’s real GDP growth could be lower by 1.6 percentage points in 2025 and 0.6 percentage points in 2026 relative to baseline. - Current account deficit would widen by 0.8 percentage points in 2025. - Lower government revenues would widen fiscal deficit and push public debt higher by 1.6 percent of GDP by 2026, relative to baseline. - Banking sector NPLs could rise, reducing profitability and capital. - Policy guidance if adverse scenario materializes: - Support vulnerable households and businesses with targeted transfers and worker training while preserving medium-term fiscal targets. - Offset support and lost revenue with additional revenue measures to still push public debt to 50 percent of GDP by 2030. - Central Bank should remain vigilant to financial stability risks and ensure banks have sufficient capital to facilitate credit expansion for recovery. ### Staff appraisal: performance, outlook, and consolidated policy priorities - Recent performance highlights: - Real GDP grew 8.1 percent in 2024; cumulative expansion 30.6 percent between 2021 and 2023. - Fiscal deficit narrowed to 0.5 percent of GDP in FY2024 from 9.9 percent in FY2020. - Public debt fell to 61.1 percent of GDP by end-2024 from 103.3 percent in 2020. - Financial stability risks declined with a drop in aggregate NPLs. - Consolidated policy priorities (selected): - Fiscal: reduce public sector debt below 50 percent of GDP by gradually increasing the primary surplus to 2 percent of GDP by FY2026 via revenue mobilization and reprioritization; adopt a medium-term fiscal strategy and Fiscal Responsibility Law. - Structural reforms: increase female labor force participation via childcare and education; address tourism bottlenecks (flight capacity, road and airport infrastructure); improve business climate (access to finance, licensing, tax administration, workforce education). - Disaster resilience: adopt a Disaster Resilience Strategy aligned with a multi-year macro-fiscal framework. - Reserves and financial sector: accumulate additional international reserves, reduce central bank’s stock of government securities, develop domestic capital market, operationalize deposit insurance, and enable SSB to shift away from cash instruments. - Access to finance: remove the 2½ percent floor on interest earned on savings deposits, encourage competition among banks, operationalize credit bureau, and expand non-debt financing for early-stage firms. ### Key selected statistics - Area (sq.km.): 22,860 - Human development index (rank), 2022: 118 - Population (thousands), 2024: 410.9 - GDP per capita (current US$), 2023: 7,587 - Multidimensional poverty (percent of population), 2024: 22.1 - Nominal GDP (BZ$ millions): 4,841 (2021); 5,693 (2022); 6,134 (2023); 6,847 (2024); 7,046 (2025); 7,356 (2026); 7,610 (2027); 7,867 (2028); 8,125 (2029); 8,392 (2030) - Money and quasi-money (M2) growth: 12.3 (2021), 4.7 (2022), 7.0 (2023), 9.4 (2024), 2.1 (2025), 4.4 (2026), 3.5 (2027), 3.4 (2028), 3.3 (2029), 3.3 (2030) - Gross international reserves (US$ millions): 420 (2021), 482 (2022), 474 (2023), 498 (2024), 527 (2025), 566 (2026), 599 (2027), 637 (2028), 681 (2029), 721 (2030) - Public debt (percent of GDP, baseline calendar): 82.5 (2021), 66.8 (2022), 67.2 (2023), 61.1 (2024), 60.4 (2025), 59.3 (2026), 59.1 (2027), 58.7 (2028), 58.4 (2029), 58.0 (2030) *Source: IMF staff report for the 2025 Article IV Consultation (Belize).* ### 30.6 percent between 2021 and 2023, real GDP grew by 8.1 percent in 2024, driven by ### BELIZE: STAFF REPORT FOR THE 2025 ARTICLE IV CONSULTATION ### Recent developments - Real GDP grew by 8.1 percent in 2024, driven by tourism, wholesale and retail trade, and transport sectors. - Real GDP expanded cumulatively by 30.6 percent between 2021 and 2023, after contracting by 13.9 percent in 2020. - Real GDP grew by 2.0 percent y/y in 2025Q1 as growth in stayover visitor arrivals moderated and agricultural sector performance declined due to unfavorable weather conditions and a fungal disease affecting sugarcane. - Inflation decelerated to 1.0 percent in May 2025 from 4.0 percent in May 2024, owing to broad-based slowdowns across all categories except clothing and footwear, and information and communication. - Unemployment declined from 3.1 percent in the first half of 2024 to 2.1 percent in the first half of 2025 (peak was 13.8 percent in the second half of 2020). - Primary balance shifted to a surplus of 1.7 percent of GDP in FY2024 from a deficit of 0.5 percent in FY2023. - Public debt declined from 67.2 percent of GDP in 2023 to 61.1 percent of GDP in 2024 (after peaking at 103.3 percent of GDP in 2020), supported by strong nominal growth, a debt-for-marine protection swap, and a negotiated discount on Petrocaribe debt. - Current account deficit widened to 1.5 percent of GDP in 2024 from 0.6 percent in 2023, mainly due to a narrower services balance amid higher payments and a slower cruise passenger recovery. ### Outlook and risks - Real GDP growth is expected to decelerate to 1.5 percent in 2025 and gradually converge to potential of about 2 percent over the medium term, absent expanded hotel and flight capacity. - Inflation is expected to converge to 1.3 percent over the medium term as inflationary pressures from key trading partners and global oil prices weaken. - Current account deficit is expected to narrow to about 1.2 percent of GDP over the medium term from 1.5 percent in 2024. - International reserves are expected to rise to about 4 months of imports (from 3.5 in 2024) but will remain below the ARA metric by 2030. - Downside risks are tilted to the negative and include: higher global policy uncertainty, increased trade barriers, higher-for-longer global interest rates, and increased or sustained climate-related disasters. - Upside potential: successful implementation of several large infrastructure projects could push medium-term growth higher. ### Executive Board assessment and policy priorities - Directors welcomed the strong recovery and improved social outcomes and financial stability. - Key recommendations from Directors: - Reduce public debt and accelerate reforms to unlock potential growth and build resilience to natural disasters. - Enhanced revenue mobilization and reprioritization of current expenditure, including through pension reform, to make space for priority spending on targeted social programs, crime prevention, and infrastructure. - Establish a medium term fiscal framework with clear targets and measures to improve credibility and pave the way for an effective Fiscal Responsibility Law. - Continued reserves accumulation to strengthen the credibility of the currency peg. - Further fiscal consolidation, structural reforms to enhance competitiveness, and continued efforts to reduce the central bank’s holdings of government securities. - Expedite the operationalization of the Deposit Insurance Act to enhance the financial safety net. - Improve private sector access to financing to boost investment. - Continue efforts to address remaining AML/CFT gaps. - Accelerate growth-enhancing structural reforms, address structural barriers, increase female labor force participation, address capacity constraints in the tourism sector, and improve the business climate. - Continue measures to enhance Belize’s resilience to natural disasters. ### Fiscal strategy and illustrative targets - Authorities aim to reduce public debt to 50 percent of GDP. - Achieving the 50 percent of GDP target by 2030 would require raising the primary surplus to 2 percent of GDP from FY2026 onwards, which entails an adjustment of 1.2 percent of GDP over 2 years through increased government revenues and reforming the Pensions Plan for Public Officials (PPPO). - FY2024 outturns: Revenue and grants 24.0 percent of fiscal year GDP; Current non-interest expenditure 16.2 percent; Interest payment 2.3 percent; Capital expenditure and net lending 6.1 percent; Primary balance 1.7 percent; Overall balance -0.5 percent. - Baseline public debt path (public debt in percent of calendar year GDP): 82.5 (2021), 66.8 (2022), 67.2 (2023), 61.1 (2024), 60.4 (2025), 59.3 (2026), 59.1 (2027), 58.7 (2028), 58.4 (2029), 58.0 (2030). ### Key statistics (selected) - Area (sq.km.): 22,860 - Human development index (rank), 2022: 118 - Population (thousands), 2024: 410.9 - GDP per capita (current US$), 2023: 7,587 - Under-five mortality rate (per thousand), 2021: 11.2 - Life expectancy at birth (years), 2021: 70.5 - Multidimensional poverty (percent of population), 2024: 22.1 - Nominal GDP (BZ$ millions): 4,841 (2021); 5,693 (2022); 6,134 (2023); 6,847 (2024); 7,046 (2025); 7,356 (2026); 7,610 (2027); 7,867 (2028); 8,125 (2029); 8,392 (2030) - Money and quasi-money (M2) growth: 12.3 (2021), 4.7 (2022), 7.0 (2023), 9.4 (2024), 2.1 (2025), 4.4 (2026), 3.5 (2027), 3.4 (2028), 3.3 (2029), 3.3 (2030) - Gross international reserves (US$ millions): 420 (2021), 482 (2022), 474 (2023), 498 (2024), 527 (2025), 566 (2026), 599 (2027), 637 (2028), 681 (2029), 721 (2030) - In months of imports: 3.2 (2021), 3.7 (2022), 3.3 (2023), 3.5 (2024), 3.7 (2025), 3.7 (2026), 3.8 (2027), 3.9 (2028), 4.0 (2029), 4.1 (2030) *Source: IMF staff report for the 2025 Article IV Consultation (Belize).* ### 6. Financial stability risks have declined. The central bank discontinued enhanced ### 6. Financial stability risks have declined. The central bank discontinued enhanced supervision of vulnerable banks following the accumulation of additional tier 1 capital. ### Financial sector developments and indicators - Aggregate nonperforming loans declined from 5.1 percent of gross loans to 3.6 percent between March 2024 and March 2025. - Domestic banks’ regulatory capital remained above the 9 percent regulatory requirement at 15.5 percent of risk-weighted assets. - Banks’ return on assets remained unchanged between March 2024 and March 2025. - Growth in credit to the private sector slowed to 3.2 percent y/y in April 2025 from 6.2 percent y/y in April 2024, largely due to the sale of loans related to underperforming projects. - Sources: Central Bank of Belize and IMF staff calculations. ### Outlook and risks - Growth projections: - Growth is expected to decline to 1.5 percent in 2025. - Growth is expected to recover to 2.4 percent in 2026. - Growth is then expected to moderate towards potential of 2 percent over the medium term. - Inflation and fiscal balances: - Inflation is expected to decline further to 1.3 percent over the medium term. - The primary fiscal balance is likely to fall to 1.1 percent of GDP in FY2025, before declining to 0.8 percent of GDP in FY2026. - Public debt and external sector: - In an unchanged policies scenario, public debt is expected to remain around 58 percent of GDP through 2030. - The current account deficit is expected to narrow to about 1.2 percent of GDP over the medium term. - Reserves are projected to increase to about 4 months of imports, albeit remaining below the ARA metric through 2030. - Downside and upside risks: - Downside: increased trade barriers and global trade policy uncertainty; global interest rates staying high; increased or sustained climate-related disasters (droughts, hurricanes, floods); economic slowdown reversing decline in banking sector NPLs and reducing profitability and capital, particularly for banks exposed to affected sectors. - Upside: implementation of several large infrastructure projects—particularly in energy, utilities, and transport—could push growth higher over the medium term. ### Authorities’ views on the outlook and risks - Authorities broadly shared staff’s views that near-term growth will likely be subdued and medium-term growth broadly in line with staff’s estimates. - Authorities emphasized commitment to undertake important reforms and advance large investment projects to boost medium-term growth. - Authorities highlighted tourism as a key driver for growth and noted positive developments in BPO and energy sectors. - Authorities see global policy uncertainty and a potential global slowdown as key risks to tourism and agree that climate-related disasters can cause severe damage, especially to agriculture, energy, and tourism. ### Policy discussions — key priorities - Primary objectives: - Reduce public debt to 50 percent of GDP by 2030 by raising the primary fiscal balance to 2 percent of GDP from FY2026 onwards. - Increase government revenues and reprioritize expenditures to support expansion of targeted social programs, crime prevention, and infrastructure. - Implement structural reforms to boost growth and resilience to natural disasters. - Improve public and private sector access to private finance, including reducing the stock of central bank credit to the government. ### Fiscal policy: strategy and required adjustment - Rationale: - Bringing public debt below 50 percent of GDP would build buffers against future shocks and align with the FY2025 budget target. - Achieving the 50 percent target by 2030 requires raising the primary balance to 2 percent of GDP by FY2026 and maintaining it beyond 2030 to provide further buffers. - A medium-term fiscal strategy with clear targets would support development of a Fiscal Responsibility Law (FRL) with a public debt anchor, a primary balance intermediate target, an escape clause, and an automatic adjustment mechanism. ### Revenue and expenditure measures to achieve consolidation - Recommended fiscal adjustment through FY2026: 1.2 percent of GDP (annual yields and cumulative yields shown in Text Table 1). - Measures totaling 2.3 percent of GDP (to fund priority expenditures) include: - Broadening the base of the General Sales Tax (GST): taxing some non-first necessity items at the standard 12.5 percent GST rate could yield an additional 1.6 percent of GDP. - Raising excise taxes and fees on vehicle registrations and driver licenses; converting some per-unit excises to ad valorem; increasing excise taxes on fuel, cigarettes, beer, spirits, and soft drinks; and increasing fees on vehicle registrations and driver licenses could raise 0.2 percent of GDP. - Improvements in tax administration (creating a unified and autonomous revenue authority incorporating stamp duties and land taxes into the Belize Tax Service Department (BTSD); improving tax arrears collection; developing a risk-based approach for tax audits; passing the draft customs law) could raise 0.4 percent of GDP if fully implemented. - Text Table 1 (selected entries, deviations from baseline in percent of GDP): - Revenue Measures: FY2025 annual yield 0.5; FY2026 annual yield 1.7; FY2025 cumulative 0.5; FY2026 cumulative 2.3. - Taxes on goods and services: FY2025 annual yield 0.5; FY2026 annual yield 1.4; FY2025 cumulative 0.5; FY2026 cumulative 1.8. - General sales tax (GST): FY2025 annual yield 0.4; FY2026 annual yield 1.2; FY2025 cumulative 0.4; FY2026 cumulative 1.6. - Excises and fees: FY2025 annual yield 0.1; FY2026 annual yield 0.2; FY2025 cumulative 0.1; FY2026 cumulative 0.2. - Revenue administration: FY2025 annual yield 0.1; FY2026 annual yield 0.4; FY2025 cumulative 0.1; FY2026 cumulative 0.4. - Total Fiscal Consolidation: FY2025 annual yield 0.4; FY2026 annual yield 0.8; FY2025 cumulative 0.4; FY2026 cumulative 1.2. - Memorandum: Primary balance (baseline scenario) FY2025 1.1; FY2026 0.8. Primary balance (active scenario) FY2025 1.5; FY2026 2.0. ### Reforming the Public Sector Pension Plan for Officials (PPPO) - Current issues: participants pay no contributions, retire at an early age, and benefit from a generous pre-defined maximum replacement rate. - Illustrative reform package (example savings and parameters): - Gradually introduce a contribution rate of 10 percent (split between employees and the government) over 10 years. - Raise the retirement age from 55 to 65 for younger cohorts (staff recommends phased increases: to 56 for employees aged 49, 57 for those aged 48, and so forth, up to 65 for those that are 40 or younger). - Reduce the maximum replacement rate from 67.5 percent to 50 percent (by 1 percentage point per year). - Estimated savings: could save 0.2 percent of GDP cumulatively in two years and improve long-run sustainability by reducing the present value of future deficits. - Alternative: raising contribution rates and retirement age over shorter horizons could avoid reducing the replacement rate while achieving similar medium-term savings. - Contextual estimate: 2023 Selected Issues Paper, Chapter 2 estimated that absent reforms the annual deficit on the PPPO would rise to 4.1 percent of GDP by 2072 from 1.1 percent in 2022. ### Re-prioritized spending enabled by reforms (recommended allocations) - Targeted and temporary social transfers (0.3 percent of GDP) to support vulnerable households and cushion the effects of GST base broadening and higher excise taxes and fees. - Subsidizing childcare, after-school programs, and training for vulnerable women (0.3 percent of GDP) to increase female labor force participation. - Capacity building of law enforcement and procurement of equipment to deter and tackle crime (0.1 percent of GDP). - Upgrading and expanding climate resilient infrastructure (0.6 percent of GDP) to enhance water and sewage in tourism districts, expand affordable housing stock, increase renewable energy generation capacity, and improve road connectivity. ### Other fiscal options and public investment financing - Additional revenue options if consolidation is slower or measures prove difficult to implement: - Tax more zero-rated items at the 12.5 percent GST rate. - Raise the GST rate (currently one of the lowest among Caribbean peers). - Reduce nonpriority expenditure. - Update valuation of properties for the Land Tax and Towns Property Tax and adjust the PIT exemption threshold. - Public Private Partnerships (PPPs): - PPPs can support additional infrastructure investment while minimizing fiscal risks. - Belize’s Third Nationally-Determined Contribution (NDC 3.0) estimates investment needs of US$1.6 billion over the coming decade for climate adaptation, mitigation, and AFOLU cross-cutting costs. - Immediate PPP priorities: establish a dedicated registry for PPPs, publish a pipeline of potential PPP projects, and set project selection criteria to ensure PPPs assist with reaching the SDGs. ### Public Financial Management (PFM) improvements - Priorities to strengthen fiscal credibility and support an FRL: - Improve multi-year budget preparations, fiscal risk assessment, public investment management, coverage of government accounts, accounting and fiscal reporting, and internal audit. - Enhance transparency and accountability by publishing procurement contracts and beneficial ownership information for awardees of public contracts. ### Authorities’ policy commitments and ongoing actions - FY2025 budget targets a public debt-to-GDP ratio of 50 percent by 2029, supported by primary surpluses of no less than 1.5 percent of GDP over the medium term. - Plans underway to shift collection of property taxes from the Land Department to the BTSD and to fully implement electronic invoicing. - Authorities remain committed to reforming the PPPO, better centralizing procurement, improving access to publicly-funded social services, and developing regulations to support PPP implementation. - Cabinet, in conjunction with the World Bank, has approved development of a Medium-Term Fiscal Framework and a Fiscal Strategy Plan Policy to support future fiscal rules. *Source: IMF staff and Central Bank of Belize material from the provided chapter.* ### 18. Accelerating the implementation of ### 18. Accelerating the implementation of ### Growth and productivity - Belize’s potential growth has significantly declined over the past decade, driven by negative growth in total factor productivity in the period since the global financial crisis up to the COVID-19 pandemic (Annex VI). - Labor productivity (output per worker) has improved on average in the post-pandemic period, but its level continues to lag significantly behind the regional average. - Belize’s medium-term growth is projected to be similar to regional peers—most of whom have higher GDP per capita—but well below the emerging markets average. - Estimates suggest that Belize’s aggregate productivity could more than double if misallocation among firms was removed (Annex VI). - Resource misallocation among firms in Belize is one of the highest in the Caribbean, resulting in lower aggregate productivity. ### Labor force participation and demographic trends - Expanding labor force participation would mitigate the expected slowdown in potential growth due to decelerating population growth (Annex VII). - Population growth estimated by the 2022 Census is now slower than previously projected. - Labor force participation rate declined from an average of 65 percent in the pre-pandemic period to 57 percent in 2024. - Belize has one of the largest gaps between male and female labor force participation rates among the Caribbean countries. - Previous staff estimates: closing the gap in labor force participation rates between men and women relative to the level in 2022 could raise GDP level by 23 percent (2024 Article IV). (Note: estimates are upper bounds of long-run gains; impact on GDP growth during transition depends on pace of transition.) - Staff estimate: an increase in the services employment share by one percentage point is associated with about half a percentage point lower gap between male and female labor force participation (Annex VII). Policy implications and measures - Increase female labor force participation via improving the accessibility, affordability, and quality of childcare services. - Continue and evaluate authorities’ initiatives to improve access to childcare, training programs, and entrepreneurship support; expand best practices across districts. - Support job placement and career development programs (example: partnership with a private BPO provider in Belize City providing training and workshops). ### Business climate, structural barriers, and BIBCAP Findings - Structural barriers that drive resource misallocation include limited access to finance, lengthy business license and permit processes, tax administration weaknesses, workforce education gaps, and labor skill mismatch (Annex VI). - Replacing ministerial discretion in business-related processes with more predictable, rules-based systems would enhance transparency and predictability. Authorities’ initiatives (BIBCAP) - In 2024, the authorities launched the Belize Investment and Business Climate Action Plan (BIBCAP), a unified single Action Plan to improve the business and investment climate. - Planned initiatives include: establishment of the digital single investment window, advancement in digitalization projects, easing the process for new business registrations. - Authorities accelerating renewable energy adoption and addressing infrastructure gaps: acquiring a Battery Energy Storage System (in partnership with WBG and Government of Canada), investing in solar energy, planned expansion of water supply in San Pedro (with WBG support), planned investments in road and highway infrastructure. Recommended complementary actions - Improve firms’ access to finance and streamline business registration and licensing processes. - Strengthen tax administration, improve workforce education, and reduce labor skill mismatch to reduce misallocation and improve productivity. ### Social programs, poverty, and inclusiveness - Incidence of multidimensional poverty decreased from 36.5 percent in 2021 to 22.1 percent in 2024. - Intensity of poverty: 38.0 percent in 2024 (vs. 39.2 percent in 2021). - Evaluate 2022 Census results to improve effectiveness and targeting of social transfer programs. - Future minimum wage increases should be aligned with productivity growth to mitigate tensions between tackling inequality and potential job losses. - Enhancing effectiveness and targeting of social programs would promote inclusive growth while supporting fiscal consolidation. ### Climate, disaster resilience, and climate-related investments - Belize is vulnerable to rising sea levels, hurricanes, floods, droughts, and coastal erosion, particularly affecting tourism, agriculture, and energy. - Authorities target 75 percent renewable energy generation by 2030 (NDC 3.0). - Authorities developing an integrated national financial framework to address the financing gap for development and climate goals. - Establishing and adopting a Disaster Resilience Strategy (DRS) based on a consistent multi-year macro-fiscal framework that incorporates natural disaster risks would complement the National Disaster Preparedness and Response Plan, improve structural/financial/post-disaster resilience, and facilitate coordination of donor support and concessional financing/grants. ### Tourism sector bottlenecks and infrastructure needs - Belize outperformed the Caribbean in stayover arrivals growth in 2024. - Key bottlenecks to medium-term tourism growth: hotel capacity, flight capacity, road and airport infrastructure. - Priority actions: develop road infrastructure across districts; add flight capacity to Belize International Airport; develop domestic airstrips to cater to international flights (see Annex VIII). - Catalyzing private sector investments in hotel capacity is critical for districts with high visitor arrivals (examples: Orange Walk and Cayo). - Authorities’ tourism actions include diversifying source markets (e.g., abolishing border-crossing levies on Mexican tourists with short stays) and planning new airport developments (San Pedro, possible international airport in Placencia), port modernization, and potential connections from Tren Maya. ### Monetary policy, reserves, and exchange rate - The pegged exchange rate has served as a pillar of stability; increasing reserves would further strengthen the currency peg. - Belize’s external position in 2024 is assessed to be stronger than implied by fundamentals (Annex IX). - FX reserves coverage of imports is expected to continue increasing, converging to the ARA metric by 2034. - Advancing fiscal consolidation, growth-enhancing structural reforms, and reducing the central bank’s stock of government securities are crucial to boost reserves. ### Central bank government securities and capital market development - The central bank held 47 percent of total domestic government securities at May 2025. - Central bank holdings crowded out investment opportunities from domestic banks and the Social Security Board and contributed to excess liquidity in the financial sector. - Recommendation: develop a careful roadmap of structural reforms and gradually introduce a fully market-based price auction for Treasury Notes, paired with outreach to improve financial literacy and inform domestic investors of fiscal plans, to develop a market-based government securities yield curve. - A more competitive market for treasury and other securities could put upward pressure on domestic interest rates; accompanying fiscal consolidation can reduce gross financing needs and mitigate adverse fiscal impacts. ### Social Security Board (SSB) investments and pension viability - Despite recent parametric reforms, GSSS pensions expenditures will start to exceed income in or after 2030, depending on the return of the investment portfolio. - Real rate of return on the SSB’s investment portfolio declined to 0 percent in 2023, down from 1.7 percent in 2019 and below the 3 percent average assumed in the 2023 actuarial report. - Decline driven by a sharp increase in low-yielding liquid assets held in domestic financial institutions and a decline in the share of long-term investments and investments in associates. - Reducing the share of cash instruments from 19 percent in 2023 is critical to increasing return on assets and improving capitalization of the SSB’s long-term pension branch. ### Financial stability, deposit insurance, and regulatory framework - Systemic financial stability risks have declined: banking sector capital is adequate, NPLs are declining, loan loss provisions relative to NPLs have increased, and credit gap reached its most negative level in over a decade in Q2 2024. - Pockets of vulnerability exist among some smaller credit unions; these have been placed under enhanced supervision by the central bank. - The Deposit Insurance Act (January 2020) provisions are yet to be operationalized. - Priorities: establish the Deposit Insurance Corporation, fund the deposit insurance fund primarily through bank and credit union contributions and annual premia to minimize fiscal costs of future banking sector resolutions. - Improve coordination across regulatory agencies and synchronize lending standards across banks and nonbank financial institutions to reduce regulatory arbitrage. ### Access to finance and credit market measures - Measures to boost private sector access to financing: - Increase demand for credit via formalization incentives and collateral registry. - Eliminate the 2½ percent floor on interest earned on savings deposits and encourage greater competition among domestic banks to allow lending rates to fall further and reduce cost of credit, without compromising banking sector capital accumulation (Annex X). - Introduce a savings bond for small retail investors and improve financial literacy to provide alternative household savings instruments and reduce reliance on central bank financing. - Ensure banks have sufficient capital above regulatory minimums; develop framework for resolution or sale of NPLs to accelerate private sector credit supply. - Operationalize the credit bureau to reduce information asymmetries. - Expand access to grants and non-debt instruments for early-stage firms to support development when cashflows are weak. ### AML/CFT assessment and next steps - Belize completed its AML/CFT assessment with the CFATF Mutual Evaluation Report published in January 2025 (Annex XII). - Authorities were assessed as compliant or largely compliant on all FATF 40 Recommendations and substantially effective in achieving several immediate outcomes. - Remaining priorities: (i) finalize and approve the National Risk Assessment; (ii) enhance risk-based supervision of financial institutions and designated non-financial businesses and professions; (iii) strengthen collection of beneficial ownership information of legal entities; (iv) continue improving money laundering investigations and prosecutions. ### Authorities’ views (summarized) - Authorities broadly concur with staff on policy priorities to boost growth potential and improve access to credit. - They are pursuing initiatives: intermediation services to match job seekers and vacancies, legislative amendments on seasonal migrant workers, enhancing childcare and education, advancing BIBCAP (single investment window), implementing Fiscal Incentives Act (2023) to encourage formalization, Climate Financing Strategy, and renewable energy investments. - Authorities support reducing the stock of government securities held by the central bank and developing the domestic yield curve and capital market; emphasize importance of improving financial literacy. - They are drafting a new Credit Unions Act to improve governance and capital requirements and to strengthen central bank regulatory and enforcement powers. - Authorities are assessing feasibility of deposit insurance but caution it could lead to higher interest rates and lower financial inclusion if banks pass on premium costs. *Source: IMF staff analysis and authorities’ views as presented in the chapter.* ### 34. The authorities acknowledge the substantial progress made in upgrading their ### 1blzea2025001-source-pdf - 34. The authorities acknowledge the substantial progress made in upgrading their ### AML/CFT framework progress and planned actions - Authorities acknowledge substantial progress upgrading their AML/CFT framework following the 4th round Mutual Evaluation. - Planned actions: - Develop an action plan to address remaining shortcomings identified in the 4th round Mutual Evaluation. - Pilot a tool to support enhanced risk-based supervision. - Issue beneficial ownership guidelines to supervised entities. - Finalize the draft National Risk Assessment by September 2025. - CFATF assessment: Belize was assessed as compliant or largely compliant on all of the FATF’s 40 Recommendations and substantially effective in achieving several immediate outcomes during its 4th round Mutual Evaluation. - Recommendation: Continue addressing remaining shortcomings in the AML/CFT framework. ### Illustrative Reform Scenario — macroeconomic impacts and assumptions - Scenario summary: - Staff’s recommended fiscal adjustment (Text Table 1) combined with structural reforms (Section B) could reduce public debt to 50 percent of GDP by 2030 (Text Table 3). - Recommended fiscal consolidation in 2025 and 2026 slows real GDP growth and narrows the current account deficit near-term due to reduced import demand. - Growth accelerates to 2.5 percent from 2027 onward as structural reforms and infrastructure investments expand tourism and export sectors, offsetting import rebounds. - Current account deficit remains modest over the medium-term; international reserves rise and settle around 5 months of imports by 2030. - By 2030, gross financing needs are about 1 percentage point below the baseline, and public debt falls from 58.0 percent of GDP under the baseline to 50.0 percent in the illustrative reform scenario. - Key numerical outcomes (selected from Text Table 3): - Growth (percent) under Illustrative Reform Scenario: 9.7, 1.1, 8.1, 1.3, 2.0, 2.5, 2.5, 2.5, 2.5, 2.5, 2.5 (for years 2022–2032). - Overall fiscal balance (percent of GDP) under Illustrative Reform Scenario: -0.8, -2.7, -0.5, -0.8, -0.3, -0.2, -0.1, 0.0, 0.1, 0.1, 0.2 (for years 2022–2032). - Primary fiscal balance (percent of GDP) under Illustrative Reform Scenario: 0.9, -0.5, 1.7, 1.5, 2.0, 2.0, 2.0, 2.0, 2.0, 2.0, 2.0 (for years 2022–2032). - Public debt (percent of GDP) under Illustrative Reform Scenario: 66.8, 67.2, 61.1, 60.1, 57.6, 55.5, 53.7, 51.9, 50.0, 48.1, 46.2 (for years 2022–2032). - Public sector GFN (percent of GDP) under Illustrative Reform Scenario: 7.7, 10.8, 7.4, 7.9, 7.0, 6.1, 5.6, 5.4, 6.2, 5.6, 6.5 (for years 2022–2032). - Current account balance (percent of GDP) under Illustrative Reform Scenario: -8.3, -0.6, -1.5, -1.2, -0.6, -0.5, -0.5, -0.4, -0.5, -0.4, -0.4 (for years 2022–2032). - International reserves (months of imports) under Illustrative Reform Scenario: 3.7, 3.3, 3.5, 3.9, 4.2, 4.3, 4.5, 4.6, 4.7, 4.8, 5.0 (for years 2022–2032). - Scenario assumptions (footnote 1/): - Implementation of 1.2 percent of GDP in fiscal consolidation over two years, raising the primary balance to 2 percent of GDP from FY2026 onwards. - Fiscal multiplier of -0.5 in the year of consolidation. - Rise in spending on infrastructure, targeted social programs, and crime prevention as in Text Table 1. - Implementation of structural reforms in Section B to increase real GDP growth to 2.5 percent from 2027 onward. ### Downside (global slowdown) scenario and impacts - Calibration: Based on April 2025 WEO Box 1.1 (Scenario A). - Growth impacts: - Belize’s real GDP growth could be lower by 1.6 percentage points in 2025 and 0.6 percentage points in 2026 relative to the baseline forecast, before recovering with US and advanced economies. - Effect driven largely by slowdown in tourism and lower export contribution. - Current account and remittances: - Current account deficit would widen by 0.8 percentage points in 2025. - Remittances (historically about 2 percent of GDP on average) could be affected. - Inflation and fiscal effects: - Net effect on inflation expected to be relatively limited. - Lower government revenues would widen the fiscal deficit and push public debt higher by 1.6 percent of GDP by 2026, relative to the baseline. - Banking sector NPLs could rise, reducing profitability and capital. - Policy guidance if adverse scenario materializes: - Support vulnerable households and businesses with targeted transfers and training for displaced workers, while preserving medium-term fiscal targets. - Offset support and lost revenue with additional revenue measures to still push public debt to 50 percent of GDP by 2030. - Central Bank should remain vigilant to financial stability risks and ensure banks have sufficient capital to facilitate credit expansion for recovery. ### Staff appraisal — recent performance, outlook, risks, and policy priorities - Recent performance: - Real GDP expanded by a cumulative 30.6 percent between 2021 and 2023; grew by 8.1 percent in 2024 driven by tourism, trade, and transport. - Fiscal deficit narrowed to 0.5 percent of GDP in FY2024 from 9.9 percent in FY2020. - Public debt fell to 61.1 percent of GDP by end-2024 from 103.3 percent in 2020, aided by a debt-for marine protection swap and a negotiated discount on Petrocaribe debt. - Financial stability risks declined with a drop in aggregate nonperforming loans. - Staff assesses Belize’s external position in 2024 to be stronger than the level implied by fundamentals and desirable policies. - Medium-term outlook: - Growth expected to decelerate to 1.5 percent in 2025 before converging to 2 percent over the medium term. - Inflation expected to converge to 1.3 percent over the medium term. - Current account deficit expected to moderate to about 1.2 percent of GDP over the medium term. - International reserves projected to increase to about 4 months of imports, albeit not reaching the ARA metric by 2030. - Risks tilted to the downside from global uncertainty and increased trade barriers. - Policy priorities and recommendations: - Fiscal: - Reduce public sector debt to below 50 percent of GDP by gradually increasing the primary surplus to 2 percent of GDP by FY2026 via revenue mobilization and reprioritization of current expenditure. - Complement adjustments with a broader medium-term fiscal strategy, clear targets and measures, improvements to public financial management, and development of a fiscal responsibility law with specific fiscal rules. - Structural reforms to raise potential growth: - Increase female labor force participation via enhanced childcare and education. - Address tourism bottlenecks: flight capacity, road and airport infrastructure. - Improve business climate: access to finance, business license and permits processes, tax administration, workforce education. - Disaster resilience: - Adopt a Disaster Resilience Strategy to complement the National Disaster Preparedness and Response Plan. - Reserves and financial sector: - Strengthen the currency peg by accumulating additional international reserves, reducing the central bank’s large stock of government securities, and developing the domestic capital market. - Enable the Social Security Board to reduce the share of cash instruments in their investment portfolio. - Improve private sector access to finance: remove the 2½ percent floor on interest earned on savings deposits, support greater competition among domestic banks, ensure banks have sufficient capital above regulatory requirement, operationalize the credit bureau, expand access to grants and non-debt instruments for early-stage firms. - Operationalize the deposit insurance framework and improve coordination across regulatory agencies. - Recent policy actions noted: - Improved tax administration measures. - Reduced reliance on central bank financing and increased international reserves. - Passage of the Fiscal Incentives Act. - Establishment of the collateral registry. - Central bank required vulnerable banks to accumulate additional tier 1 capital. - Reforms to the PPPO have been delayed. *Source: IMF Staff estimates and staff appraisal as presented in the provided content.* ### 47. It is recommended that the next Article IV consultation take place on the standard 12- ### BELIZE — Selected Developments and Outlook ### Real Sector Developments - Recovery since the pandemic largely driven by the services sector. - Growth drivers: - 2021 and 2022: led by private consumption. - 2023: driven by net exports. - Consumer confidence trending upward but stagnated below the neutral level in 2025. - Labor market: - Unemployment rate: April 2025 = 2.1 percent. - Participation rates fell even as unemployment declined. - Inflation: - Consumer prices (end of period): 2024 = 2.6; 2025 = 1.5; projections 2026–2034 = 1.3 (end of period for each year). - Consumer prices (average): 2024 = 3.3; 2025 = 1.4; projections 2026–2034 = 1.3 (annual averages). - Credit and money: - Private sector credit growth slowed but remained positive. - Credit to the private sector by commercial banks (percent): 2023 = 5.9; 2024 = 4.1; 2025 = 3.2; projected 2026–2030 = 3.0, 3.0, 3.0, 3.0, 3.0. - Money and quasi-money (M2) growth (percent): 2023 = 7.0; 2024 = 9.4; 2025 = 2.1; projected 2026–2030 = 4.4, 3.5, 3.4, 3.3, 3.3. ### Fiscal Developments - Public debt dynamics: - Public debt-to-GDP ratio declined in 2024 due to strong nominal GDP growth and a shift in the primary balance from deficit to surplus. - Public debt (percent of GDP): 2021 = 82.5; 2022 = 66.8; 2023 = 67.2; 2024 = 61.1; 2025 = 60.4; 2026 = 59.3; 2027 = 59.1; 2028 = 58.7; 2029 = 58.4; 2030 = 58.0. - Revenue and expenditure (calendar/fiscal data as presented): - Government revenue (percent of GDP): FY2024 = 23.2; FY2025 (projection) = 24.0. - Tax composition (percent of GDP, FY24): Taxes on income and profits = 5.7; Taxes on goods and services = 12.1; Taxes on international trade & transactions = 3.4. - Government non-interest expenditure (percent of GDP, FY24): Wages & Salaries = 7.6; Pensions = 1.7; Goods & Services = 4.1; CAPEX = 7.3. - FY2024 fiscal outcomes (selected levels, in BZ$ millions): - Revenue and grants = 1,320; Revenue = 1,292; Tax revenue = 1,186. - Total expenditure = 1,368; Current expenditure = 1,049; Capital expenditure and net lending = 319. - Primary balance (BZ$ millions) = -31 in 2023/24; Primary balance (percent of GDP) = 0.9 for 2023/24 in projection tables. - Overall balance (BZ$ millions) = -48 in 2023/24; Overall balance (percent of GDP) = -0.8 for 2023/24. - Notable fiscal specifics: - Tax revenues rose sharply in FY2024, primarily due to higher taxes on income and profits, offsetting higher spending on goods and services and pensions. - The sharp increase in wages and salaries in 2025/26 partly reflects the reclassification of BZ$80 million from transfers. - Public sector debt levels (BZ$ millions): 2023 (calendar) = 3,765; 2024 = 4,080; projections rise to 4,830 by 2030/31. ### External Sector Developments - Current account: - Current account (percent of GDP): 2021 = -6.5; 2022 = -8.3; 2023 = -0.6; 2024 = -1.5; projections 2025–2034 = -1.5 to -1.2 (persistently near -1.2 percent of GDP in later years). - Slight deterioration in 2024 due to higher services payments and lower free-zone-related goods net exports. - Trade and FDI: - Trade balance (percent of GDP): 2021 = -22.1; 2022 = -24.8; 2023 = -25.3; 2024 = -25.7. - Exports of goods and services (percent of GDP): 2021 = 43.1; 2022 = 48.1; 2023 = 50.1; 2024 = 47.9; projected 2025 = 47.3. - Foreign Direct Investment, net (US$ millions, selected years): 2021 = 124; 2022 = 140; 2023 = 1; 2024 = 4 (Table 3a shows net FDI volatility). - Composition and links with the US: - Share of goods exports to the US has continued to come down over the past decade. - Dependence on imports from the US has grown over the same period. - External positions: - Net international investment position continues to improve. - External public debt keeps declining as a share of GDP. - Reserves and financing: - Gross international reserves (US$ millions): 2021 = 420; 2022 = 482; 2023 = 474; 2024 = 498; projected 2025 = 527; projected 2030 = 721. - Reserves in months of imports: 2021 = 3.2; 2022 = 3.7; 2023 = 3.3; 2024 = 3.5; projected 2025 = 3.7; projected 2030 = 4.1. ### Social and Key Economic Indicators - Population and social metrics: - Area (sq.km.) = 22,860. - Population (thousands), 2024 = 410.9. - GDP per capita (current US$), 2023 = 7,587. - Human Development Index (rank), 2022 = 118. - Life expectancy at birth (years), 2021 = 70.5. - Under-five mortality rate (per thousand), 2021 = 11.2. - Multidimensional poverty (percent of population), 2024 = 22.1. - Economic projections (selected): - GDP at constant prices (annual percent change): 2023 = 1.1; 2024 = 8.1; 2025 = 1.5; projections 2026–2034 = 2.4, 2.2, 2.1, 2.0, 2.0, 2.0, 2.0, 2.0, 2.0. - Nominal GDP (BZ$ millions): 2024 = 6,847; 2025 = 7,046; projected 2030 = 8,125. ### Central Government Operations (Tables 2a and 2b) - Fiscal levels (BZ$ millions, selected): - Revenue and grants: 2022/23 = 1,136; 2023/24 = 1,320; 2024/25 = 1,462; 2025/26 (proj) = 1,653. - Total expenditure: 2022/23 = 1,201; 2023/24 = 1,368; 2024/25 = 1,633; 2025/26 (proj) = 1,690. - Interest payments (BZ$ millions): 2022/23 = 64; 2023/24 = 100; 2024/25 = 141; 2025/26 (proj) = 157. - Capital expenditure and net lending (BZ$ millions): 2022/23 = 262; 2023/24 = 319; 2024/25 = 463; 2025/26 (proj) = 419. - Primary balance (BZ$ millions): 2022/23 = -152; 2023/24 = -31; 2024/25 = 121; 2025/26 (proj) = 75. - Overall balance (BZ$ millions): 2022/23 = -66; 2023/24 = -48; 2024/25 = -171; 2025/26 (proj) = -37. - Fiscal ratios (percent of GDP, selected): - Revenue and grants: 2022/23 = 22.5; 2023/24 = 22.8; 2024/25 = 23.2; 2025/26 = 24.0. - Total expenditure: 2022/23 = 23.8; 2023/24 = 23.6; 2024/25 = 25.9; 2025/26 = 24.5. - Primary balance (percent of GDP): 2022/23 = 0.0; 2023/24 = 0.9; 2024/25 = -0.5; 2025/26 = 1.7. ### Balance of Payments and External Financing (Tables 3a–3b) - Current account and trade (US$ millions and percent of GDP): - Current account balance (US$ millions): 2021 = -158; 2022 = -236; 2023 = -20; 2024 = -52; projection 2025 = -52. - Trade balance (US$ millions): 2021 = -534; 2022 = -706; 2023 = -777; 2024 = -880. - Total exports, f.o.b. (US$ millions): 2021 = 422; 2022 = 518; 2023 = 484; 2024 = 848 (table shows fluctuations and classification notes). - Total imports, f.o.b. (US$ millions): 2021 = 956; 2022 = 1,224; 2023 = 1,265; 2024 = 1,362. - Capital and financial account: - Capital and financial account balance (US$ millions): 2021 = 192; 2022 = 217; 2023 = 628; 2024 = 980. - Foreign Direct Investment, net (US$ millions): 2021 = 124; 2022 = 140; 2023 = 1; 2024 = 4. - Reserve and liquidity metrics: - Gross international reserves (US$ millions): see External Sector Developments above. - Gross international reserves in percent of next year's gross external financing needs: 2021 = 150; 2022 = 625; 2023 = 370; 2024 = 409; 2025 = 431. ### Banking System and Financial Soundness - Monetary and banking aggregates (Table 4, selected levels, BZ$ millions): - Base money: 2021 = 1,159; 2022 = 1,331; 2023 = 1,434; 2024 = 1,480; 2025 (proj) = 1,512. - Money and quasi-money (M2): 2021 = 3,969; 2022 = 4,155; 2023 = 4,447; 2024 = 4,864; 2025 (proj) = 4,967. - Credit to the private sector (by commercial banks): 2021 = 2,312; 2022 = 2,413; 2023 = 2,556; 2024 = 2,661; 2025 (proj) = 2,746. - Gross international reserves (CBB net international reserves in Table 4): 2021 = 848; 2022 = 967; 2023 = 949; 2024 = 1,001; 2025 (proj) = 1,058. - Financial soundness indicators (Table 6, in percent, selected): - Regulatory Capital to Risk Weighted Assets: Mar 2019 = 22.8; 2020 = 19.8; 2021 = 19.2; 2022 = 15.1; 2023 = 16.1; 2024 = 17.1; 2025 (prelim.) = 15.5. - Non-Performing Loans to Total Gross Loans: Mar 2019 = 5.1; 2020 = 7.7; 2021 = 5.3; 2022 = 6.9; 2023 = 5.2; 2024 = 4.4; 2025 (prelim.) = 3.6. - Return On Equity (Net Income to Average Capital): Mar 2019 = 13.3; 2020 = 3.2; 2021 = 5.7; 2022 = 2.9; 2023 = 14.0; 2024 = 13.3; 2025 (prelim.) = 14.2. - Liquid Assets to Total Assets: Mar 2019 = 24.3; 2020 = 28.1; 2021 = 33.8; 2022 = 34.3; 2023 = 32.9; 2024 = 32.0; 2025 (prelim.) = 36.9. - Customer Deposits to total (Non-Interbank) Loans: Mar 2019 = 128.4; 2020 = 138.1; 2021 = 155.1; 2022 = 152.1; 2023 = 152.3; 2024 = 161.6; 2025 (prelim.) = 171.7. ### Baseline Medium-Term Outlook (Table 5, selected projections) - Growth and prices: - GDP at constant prices (annual percent change): 2024 = 8.1; 2025 = 1.5; 2026 = 2.4; 2027 = 2.2; 2028 = 2.1; 2029–2034 = 2.0 each year. - GDP deflator (percent): 2024 = 3.3; 2025 = 1.4; projections 2026–2034 = 1.9 or 1.3 (table shows 1.9 in 2026 and 1.3 thereafter). - External and fiscal medium-term: - Current account balance (percent of GDP): 2024 = -1.5; 2025 = -1.5; 2026 = -1.4; 2027 = -1.3; 2028–2034 ≈ -1.2. - Gross official reserves (in months of imports): 2024 = 3.5; 2025 = 3.7; 2026 = 3.7; 2027 = 3.8; 2028 = 3.9; 2029 = 4.0; 2030 = 4.1; 2031 = 4.2; 2032 = 4.4; 2033 = 4.5; 2034 = 4.6. - Public debt (percent of GDP): 2024 = 61.1; 2025 = 60.4; 2026 = 59.3; 2027 = 59.1; 2028 = 58.7; 2029 = 58.4; 2030 = 57.5; 2031 = 57.1; 2032 = 56.6; 2033 = 56.6; 2034 = 56.0. *Source: IMF staff compilation of Belize country tables, figures, and projections as presented in the provided content.* ### Annex I. Country Engagement ### Annex I. Country Engagement ### Overview: Government objectives and recent political developments - The incumbent People’s United Party won the March 2025 general elections, securing 26 of 31 seats in the House of Representatives. - The government’s medium-term goals center on ensuring fiscal prudence and boosting per capita incomes. - The government has committed to continue pursuing prudent fiscal policies to reduce the public debt-to-GDP ratio to 50 percent of GDP, while making key investments in education, health, and energy and other utilities. - The public debt-to-GDP ratio has declined substantially since the pandemic. - Authorities are pursuing efforts to accelerate adoption of renewable energy, address infrastructure gaps, enhance female labor force participation, and improve the business climate. ### Constraints to achieving medium-term goals - Financing priority investments will require increasing government revenues beyond 24 percent of GDP, currently below the Caribbean median. - Eligibility to IDA funding has expanded the range of available financing, but attracting additional local currency financing will require: - Reforms to the domestic government securities market. - Initiatives to enhance the private sector’s access to finance. - Capacity constraints in the public sector and a shortage of skilled labor in the private sector may limit policy and project execution. - The government is planning a salary review to realign public sector wages. - Expanding the pool of skilled labor depends on improving female labor force participation and expanding access to professional and vocational training. - Political economy considerations may limit the timing and scope of policy options. ### IMF staff engagement and technical assistance - Staff agrees with the authorities’ medium-term objectives and continues to support them through policy recommendations and analytical work. - Over the previous 4½ years, implemented policies were broadly in line with staff advice and TA, though somewhat less ambitious in specific cases. - Authorities benefit heavily from technical assistance from CARTAC and IMF headquarters, including on: - Introduction of a unified, autonomous tax department (FAD/CARTAC). - Public financial management reforms (CARTAC). - Strengthening risk-based supervision of financial institutions (CARTAC). - These efforts complement support from the CDB, IDB, and World Bank. ### Implementation of 2024 Article IV Consultation recommendations — Key outcomes and indicators - Fiscal targets and fiscal stance - Recommendation: Raise the primary balance to 2.0 percent of GDP by FY2025 and maintain it to reduce public debt to 50 percent of GDP by 2030. - Implementation status: Some Progress. - Outcome: The primary balance strengthened in FY2024, rising to 1.7 percent of GDP, from –0.5 percent of GDP one year earlier, driven by buoyant revenue growth despite higher spending on pensions and goods and services. - Public investment and social spending - Recommendation: Increase spending on infrastructure and targeted transfers (food insecurity, childcare, after-school programs, training for vulnerable women), and crime prevention. - Outcome: Capital expenditure increased to 6.0 percent of GDP in FY2024, from 5.5 percent of GDP in FY2022 and is budgeted to increase further to 7.3 percent of GDP in FY2025. - Financing: Authorities secured financing from the World Bank Group to upgrade Belize City’s wastewater treatment plant and expand water supply in San Pedro. - Revenue measures and administration - Recommendation: Broaden the GST base, standardize PIT exemption thresholds, raise excise taxes and fees, rebalance manufacturing taxes and reform the PPPO. - Outcome: Authorities increased the PIT exemption threshold and exempted some financial instruments from stamp duty. Implementation of some revenue measures and reforms to the PPPO have been delayed. - Recommendation: Strengthen revenue administration. - Outcome: Authorities are strengthening revenue administration in line with TA from CARTAC and FAD, including efforts to transform the BTSD into a semi-autonomous agency. - Structural reform progress - Recommendation: Expand conditional cash transfers to promote school attendance, improve school curriculums, and expand technical and “soft skill” vocational training programs. - Outcome: Some Progress — projects underway to improve access to childcare and training programs to increase female labor force participation. - Recommendation: Set up a credit bureau and collateral registry. - Outcome: Moveable Property Security Rights Act enacted in 2024 and collateral registry launched; central bank licensed a credit bureau in June 2025. The DFC secured additional financing from the CDB to improve access to credit to key sectors, including MSMEs. - Recommendation: Replace ministerial discretion in business processes, enhance judiciary capacity, and increase access to legislation and judicial decisions. - Outcome: Draft Insolvency and Bankruptcy legislation introduced to the National Assembly in 2025; more remains to be done to replace ministerial discretion. Senior Courts launched a new website in 2024. - Recommendation: Advance digitalization of the land and business registries. - Outcome: Authorities announced plans to digitize the land registry and the land tax unit. - Recommendation: Adopt a disaster resilience strategy based on a multi-year macro-fiscal framework. - Outcome: Authorities are attracting private investment through a PPP to build a utility-scale solar plant and acquiring a 40 MW Battery Energy Storage System; secured financing from the World Bank Group and the Canada Clean Energy and Forests Climate Facility for battery energy storage systems. A comprehensive disaster resilience strategy has not yet been developed, but a climate finance strategy and a national disaster preparedness and response plan have been adopted. - Monetary and financial sector policies - Recommendation: Gradually reduce government financing by the central bank to lower excess liquidity and help develop the local capital market. - Implementation status: Progress — Net central bank credit to the government continued to trend downward through May 2025, but domestic banks’ excess liquidity ratio remained elevated. - Recommendation: Increase international reserves to strengthen the currency peg. - Outcome: International reserves increased to 3.5 months of imports of goods and services in 2024 but remain below the level implied by the ARA metric. - Recommendation: Keep vulnerable financial institutions under enhanced supervision and recapitalize when needed. - Outcome: Domestic banks’ financial soundness indicators improved in 2024 as vulnerable institutions injected tier 1 capital in 2024 and have been released from enhanced supervision. Central bank announced plans to update credit union legislation and liquidate 19 defunct credit unions. - AML/CFT - Recommendation: Use results of the ongoing Mutual Evaluation to guide AML/CFT strengthening. - Outcome: Substantial Progress — Authorities completed their AML/CFT Mutual Evaluation with the Caribbean Financial Action Task Force and were assessed as compliant or largely compliant in all of the FATF’s 40 Recommendations and substantially effective in achieving several immediate outcomes. ### Integrating surveillance and capacity development — Areas of CD and recent actions - Core CD areas supported by IMF and CARTAC: - Tax Policy and Administration. - Public Financial Management (PFM). - Structural reforms to raise medium-term growth. - Financial Sector Stability and Supervision. - Improving the accuracy and timeliness of statistics and macroeconomic analysis. - Cooperation with other multilaterals: - World Bank: Public Expenditure Review in 2023; support for disaster risk financing policy and capacity building for a medium-term fiscal framework; financing and support for energy projects. - CDB: Assistance to improve public procurement, disaster preparedness in rural communities, multi-hazard forecasting and early warning systems. - IDB: Review of the public wage bill in 2025; support for Ministry of Finance central executing unit, PFM, and financing to promote digitalization. - Selected recent CD actions and TA (illustrative highlights) - Tax policy and administration: FAD and CARTAC TA on revenue and customs administration, creation of a unified, semi-autonomous tax department, Property Transactions Tax TA in 2023, and Property Tax Reform assistance in 2024. - PFM: CARTAC and FAD TA on transition to accrual accounting and improving financial reporting in 2023; CARTAC mission in 2024 on restructuring the Treasury; gap analysis identified reform needs in legal framework, cash management, fiscal reporting, and staffing. - Structural reforms: Climate Change Policy Assessment completed in 2018 recommending a Disaster Resilience Strategy. - Financial sector: CARTAC TA on implementation of Basel II-III, risk-based supervision, stress testing, LCR, IRRBB, intragroup exposures; MCM TA on cybersecurity, bank resolution, NPL management, FX regulatory framework, and FX reserve management; FY2025 CARTAC support on supervision for e-money issuers, risk-based supervision for securities firms, enhanced corporate governance, and risk-based supervision for money lenders (January 2025); May 2025 follow-up on forecasting and nowcasting. - Statistics: CARTAC TA on rebasing national accounts and back casting GDP by expenditure in 2020; STA TA on Financial Soundness Indicators in 2022 and BOP/IIP in 2023; CARTAC support on producer price index and macro forecasting in 2025; external sector mission in 2025 on IIP/BOP consistency and statistical methods. - CD delivery and resource allocation - CD delivery by workstream is tracked in millions of USD with FY25 calculated as the sum of current outturns and remaining expected outturns from the workplan. - FY25, FY24, FY23, FY22 activity levels are recorded across workstreams including Central Bank Operations, Domestic Revenue Mobilization, Financial and Fiscal Law Reform, Financial Sector Stability, Macro programming and analysis, PFM and Expenditure Policy, and Statistics. - Going-forward CD priorities (selected) - PFM and revenue administration: - Deliver an SOE fiscal risk mission in 2025. - Continue work to establish a semi-autonomous revenue authority (support on HR, structure, strategic planning and change management). - Strengthen core functions: arrears management and audit capacity, compliance risk management, and review of VAT performance. - Financial sector supervision and stability: - Finalize recommendations from previous CARTAC missions and align with the new operational structure of the supervision department. - Enhance systemic risk monitoring. - CARTAC support to the Financial Services Commission on supervision of virtual asset service providers, implementation of risk-based supervision, and drafting regulations on capital requirements for securities exchanges, broker-dealers, and other securities market participants. - Statistics: - Continue assistance to develop the producer price index. - Conduct an initial mission on developing high frequency indicators (HFI) to support the Statistical Institute of Belize’s efforts to compile and publish a monthly index of economic activity. *Source: Annex I, Annex II, and Annex III of the provided IMF country documents.* ### Annex IV. Public Debt Sustainability Analysis ### Annex IV. Public Debt Sustainability Analysis ### DSA Summary Assessment and Overall Risk - Overall risk of sovereign stress: Moderate. - Public debt projection: Public debt is projected to fall to 58 percent of GDP by 2030 under the baseline. - Gross financing needs (GFNs): Expected to remain below 10 percent of GDP under the baseline but could exceed that level after a natural disaster. - Liquidity and financing: Domestic currency liquidity in the financial system remains ample and the authorities continue to maintain access to official sector financing. - Vulnerabilities: Public debt and GFNs are vulnerable to natural disasters, but the vulnerability is not judged sufficient to change the overall assessment. - Debt stabilization in the baseline: Yes. - Note on assessment scope: The risk of sovereign stress is broader than debt sustainability; a sovereign can face stress without debt being unsustainable. ### Baseline Medium-Term Projections (selected values from Figure 4) - Public debt (percent of GDP), actual and projections: - Actual 2024: 61.1 - 2025: 60.4 - 2026: 59.3 - 2027: 59.1 - 2028: 58.7 - 2029: 58.4 - 2030: 58.0 - 2031: 57.5 - 2032: 57.1 - 2033: 56.6 - 2034: 56.0 - Change in public debt (percent of GDP): -6.1, -0.7, -1.1, -0.3, -0.3, -0.4, -0.4, -0.4, -0.5, -0.5, -0.5 (for 2024–2034 respectively). - Contribution of identified flows (percent of GDP): -5.8, -1.1, -1.2, -0.5, -0.6, -0.6, -0.6, -0.6, -0.7, -0.7, -0.7 (2024–2034). - Primary deficit (percent of GDP): -1.2, -1.2, -0.9, -0.6, -0.7, -0.8, -0.8, -0.8, -0.8, -0.8, -0.8 (2024–2034). - Noninterest revenues (percent of GDP): 23.4, 24.6, 24.9, 24.3, 24.0, 24.0, 24.0, 24.0, 24.0, 24.0, 24.0 (2024–2034). - Noninterest expenditures (percent of GDP): 22.2, 23.3, 24.0, 23.7, 23.3, 23.2, 23.2, 23.2, 23.2, 23.2, 23.2 (2024–2034). - Automatic debt dynamics (percent of GDP): -4.6, 0.1, -0.3, 0.1, 0.1, 0.2, 0.2, 0.2, 0.1, 0.1, 0.1 (2024–2034). - Real interest rate and relative inflation: 0.7, 1.0, 1.1, 1.4, 1.3, 1.4, 1.3, 1.3, 1.3, 1.2, 1.2 (2024–2034). - Real interest rate: 0.4, 1.5, 1.2, 1.6, 1.6, 1.6, 1.5, 1.5, 1.5, 1.4, 1.4 - Relative inflation: 0.3, -0.5, -0.1, -0.2, -0.3, -0.2, -0.2, -0.2, -0.2, -0.2, -0.2 - Real growth rate (percent): -5.0, -0.9, -1.4, -1.3, -1.2, -1.2, -1.1, -1.1, -1.1, -1.1, -1.1 (2024–2034 table indicates negative growth in early years; see extended projection below). - Contribution of residual (percent of GDP): -0.2, 0.5, 0.1, 0.2, 0.3, 0.2, 0.2, 0.2, 0.2, 0.2 (2024–2033). - Gross financing needs (GFNs, percent of GDP): 7.7, 8.5, 9.3, 8.6, 7.8, 7.6, 7.9, 7.4, 8.1, 8.0, 8.1 (2024–2034). - Of which: debt service: 8.9, 9.8, 10.2, 9.2, 8.5, 8.4, 8.7, 8.2, 8.9, 8.8, 8.9 - Local currency component: 5.2, 6.3, 6.8, 5.8, 5.1, 5.1, 5.5, 5.1, 5.0, 5.1, 5.2 - Foreign currency component: 3.7, 3.4, 3.4, 3.4, 3.4, 3.4, 3.2, 3.1, 3.9, 3.8, 3.7 Memo (selected): - Real GDP growth (percent): 8.1, 1.5, 2.4, 2.2, 2.1, 2.0, 2.0, 2.0, 2.0, 2.0, 2.0 (2024–2034). - Inflation (GDP deflator; percent): 3.3, 1.4, 1.9, 1.3, 1.3, 1.3, 1.3, 1.3, 1.3, 1.3, 1.3. - Nominal GDP growth (percent): 11.6, 2.9, 4.4, 3.5, 3.4, 3.3, 3.3, 3.3, 3.3, 3.3, 3.3. - Effective interest rate (percent): 3.9, 3.9, 4.0, 4.1, 4.1, 4.1, 4.0, 4.0, 3.9, 3.8, 3.8. Extended projection context: - Staff projects the primary surplus to gradually narrow to 0.8 percent of GDP over the medium-term. - Real GDP growth: After expanding by 8.1 percent in 2024, real GDP growth is expected to slow to 1.5 percent in 2025, and converge to 2.0 percent over the medium-term. - On this path, public debt is projected to fall to 58 percent of GDP by 2030. ### Debt Structure and Financing Patterns - After the debt-for-marine protection swap in 2021, the government has relied increasingly on official sector debt to meet gross financing needs. - Medium-term reliance is likely to persist on: - Official sector debt, - Domestic market borrowing where borrowing costs are low and excess liquidity is high. - Residual maturity: 7.4 years (noted in public debt structure indicators). - Debt composition notes (figures indicate consolidated public sector basis): - Debt by currency: foreign currency and local currency series shown (projection 2015–2033). - Public debt by holder and governing law breakdowns presented (consolidated public sector). ### Medium- and Long-Term Risk Analysis - Medium-term risks: Assessed as moderate. - GFNs expected to remain below 10 percent of GDP under baseline but could exceed 10 percent after a natural disaster. - Domestic financial system capacity to provide additional financing is significant. - Long-term risks: Assessed as moderate. - GFNs and public debt are resilient to slower growth and a smaller primary balance, even after principal payments commence on the blue loan. - GFNs and debt are more vulnerable to additional spending on climate adaptation absent revenue-raising measures and stronger long-term growth from adaptation investments. - Long-term scenario assumptions (Figure 7 custom scenario and averages): - Real GDP growth: 2.0% (2030), 2.0% (2034 to 2038 average), 1.5% (custom scenario). - Primary Balance-to-GDP ratio: 0.8% (2030), 0.8% (2034–2038 average), 0.5% (custom). - Real depreciation: -1.2% in all scenarios listed. - Inflation (GDP deflator): 1.3% in all scenarios listed. - Climate adaptation scenarios: - Both GFNs and public debt are vulnerable to higher investment associated with climate adaptation but stabilize over the long run. - Assessment does not include yields from adaptation investments. ### Stress Tests and Natural Disaster Impact - Stress test indication: GFNs could exceed 10 percent of GDP after a natural disaster. - Natural disaster vulnerability: - Public debt could remain higher than expected in the event of a natural disaster. - Assessment notes domestic liquidity and official financing access mitigate but do not eliminate disaster risk. ### Realism of Baseline Assumptions and Historical Context - The realism toolkit highlights complications from the sharp COVID-related contraction and subsequent recovery. - The rise in debt between 2017 and 2021 attributed mainly to economic contraction, deterioration in fiscal balances, and low inflation. - Nominal GDP growth strong since then but expected to slow in 2025. - Forecast track record and distributional indicators are provided to assess realism (figures and percentile ranks shown). ### Risk Assessment Matrix (Annex V) — Key Country-Specific Risks and Policy Responses - Trade policy and investment shocks - Relative likelihood: High - Impact: High - Policy response: Diversify trade partners; structural reforms to boost growth and reserve accumulation; monitor banks’ balance sheets; allow fiscal stabilizers to work. - Tighter financial conditions and systemic instability - Relative likelihood: Medium - Impact: Medium - Policy response: Structural reforms; fiscal consolidation to reduce GFNs; monitor banks’ balance sheets; central bank tools available. - Commodity price volatility - Relative likelihood: Medium - Impact: Medium - Policy response: Reprioritize spending to support vulnerable, avoid broad subsidies, invest in renewable energy and domestic food production; monitor banks’ balance sheets. - Natural disasters - Relative likelihood: Medium - Impact: High - Policy response: Enhance ex-ante preparedness and risk reduction; invest in resilient infrastructure and weather-resistant seed technology; strengthen financial and post-disaster resilience. - Social discontent and political instability - Relative likelihood: Medium - Impact: Low - Policy response: Implement targeted support measures for vulnerable households and businesses. ### Structural Constraints and Business Climate (Annex VI) - Growth and productivity context: - Despite a strong post-pandemic recovery, Belize suffers from low productivity and lackluster medium-term growth prospects. - Estimates suggest potential growth in Belize declined significantly from the 1990s to the pandemic period, driven in part by sluggish total factor productivity (TFP) growth. - Recent TFP growth rose markedly but from a low base; potential growth expected to fall over the medium term as capacity constraints bind. - Firm-level evidence (IFPG survey, 2020; 157 firms in Belize): - Misallocation: Amundsen et al. (Forthcoming) analysis using Hsieh and Klenow (2009) framework suggests Belize could achieve an estimated potential aggregate TFP gain of over 100 percent should all misallocation be removed. - GDP per capita gap impact: A back-of-the-envelope calculation indicates removing firm-level misallocation could reduce the GDP per capita gap relative to the US by about 16 percentage points. - Reported obstacles most frequently cited by Belizean firms as very severe: - Inadequately-educated workforce - Corruption - Access to and cost of finance - Customs and trade regulations - Business licensing and permits - Access to digital payment - Administrative burden: - Senior management in Belize reported spending over 9 percent of their time dealing with requirements imposed by government regulations vs. the Caribbean average of under 6 percent. - Informality and governance: - Shares of firms reporting an informal gift expected or requested to obtain import license, construction-related permit, and operating license are much higher relative to the Caribbean average. - Policy implications from Annex VI: - Enhance education and training programs aligned with labor demand. - Strengthen governance and reduce corruption. - Expand private sector access to financing. - Improve the overall business climate and reduce structural barriers to reduce misallocation and bolster medium-term growth. *Source: IMF staff (Annex IV, V, and VI of the provided document).* ### 5. Evidence from cross-Caribbean ### 5. Evidence from cross-Caribbean ### Structural obstacles and firm TFP - Cross-Caribbean regressions (firm TFP regressed on dummy variables for obstacles, firm controls, and industry/country fixed effects) imply the presence of structural barriers is associated with lower firm TFP. - Estimated impacts on firm TFP from removing specific obstacles: - Improving workforce skills: increase in firm TFP of 5 percentage points. - Addressing obstacles related to business licensing and permits: raise firm TFP by about 9 percentage points. - Addressing tax administration obstacles: raise firm TFP by about 10 percentage points. - Removing obstacles related to cost of finance: associated with an improvement in firm TFP of over 10 percentage points. - Mapping the estimated regression results to Belizean firms in the survey implies removing these four obstacles could increase aggregate TFP level by over 20 percent. - Note: Impact on growth during the transition depends on the duration of the transition period. *INTERNATIONAL MONETARY FUND — 5. Evidence from cross-Caribbean* ### Drivers of labor force participation (Annex VII): overview and magnitude - Long-run change in gender LFP gap: - Gap fell from about 45 percentage points in 1991 to about 26 percentage points in 2024. - Previous staff analysis (2024 Article IV) suggests fully closing the gap in LFP between men and women relative to 2022 level could boost GDP level by over 20 percent. - Impact on GDP growth during the transition period depends on the pace of transition. - Labor market tightness: - Unemployment rate in September 2024 fell to 2.1 percent from 3.9 percent in September 2023. ### Geographic heterogeneity in LFP gaps - District-level patterns (data up to 2023): - Corozal, Orange Walk and Stann Creek (together slightly more than a third of Belize working age population): gaps on average 40 percent higher than country-wide aggregate gap in 2023 and have deteriorated over the past decade (except Orange Walk which improved slightly). - Belize City and Cayo (about 56 percent of Belize’s population): gaps about one third lower on average vs. the country aggregate and have improved over the past decade. - Toledo (less than 10 percent of the population): biggest improvement over the past decade; gap broadly in line with the aggregate as of 2023. ### Role of sectoral composition, services and tourism - Female employment by sector (October 2022 labor force survey): - Services account for 88 percent of all female employment in 2022. - Tourism accounts for about 19 percent of female employment and 16 percent of male employment in the services sector (based on 2021 data). - Regression evidence (district-level): - A one percentage point increase in the share of services employment is associated with a decline in the LFP gap of about half a percentage point. - Key regression coefficients (Table 1): - Services employment share: -0.463** (0.190). - Tourism employment share in 2013: -1.369*** (0.192). - Non-tourism services employment share in 2013: -0.114 (0.090). - Share of tourism in services employment in 2013: -0.627*** (0.173). - Interpretation: - Within services, tourism provides an especially large contribution to reducing the male–female LFP gap. - Districts with higher share of tourism in total services employment tend to have lower gaps in employment between men and women. - Continued tourism growth presents opportunities to encourage female LFP, conditional on addressing education and childcare constraints. ### Education, age cohorts, and LFP gaps - Education effects (Table 2): - Advanced education dummy: -31.703*** (2.248) in column (1); -29.699*** (3.088) in column (2). - Intermediate education dummy: -21.761*** (2.007) in column (1); -13.627*** (2.567) in column (2). - Basic education dummy: -5.162** (2.007) in column (1); -2.995 (2.755) in column (2). - Rural dummy: 11.699*** (1.666). - Key facts: - Female LFP rates increase with higher education levels in both urban and rural areas. - Controlling for age groups and time fixed effects, the gap in LFP rates among those with advanced education is about 32 percentage points lower than those with less than basic education level. - LFP gaps between men and women are also about 30 percentage points lower for advanced education compared to basic when controlling for rural/urban location and time fixed effects. - Implication: Increasing educational attainment among younger cohorts could facilitate female labor force participation and lower the gap in LFP. ### Wage disparities, representation, and childcare - Wage disparities (ILOSTAT, regression results): - After controlling for level of education, regression estimates suggest women tend to earn almost BZ$200, or about 20 percent, less than men on average. - Table 3 regression highlights: - Female dummy in level regressions: -197.230*** (20.202) and -196.661*** (52.723). - Female dummy in ln(real wage) regressions: -0.199*** (0.022) and -0.198*** (0.042). - Representation in firms: - About 25 percent of surveyed firms reported owners/shareholders who are all women or predominantly women; nearly 60 percent indicated owners/shareholders are all men or predominantly men. - About 36 percent of firms reported management group all or predominantly women; 42 percent reported management group all or predominantly men. - Female unemployment rates tend to be higher than corresponding male rates despite lower average wages. - Childcare constraints: - WBL 2024 indicates Belize’s legal framework establishes provision of childcare services in center-based settings but lacks provisions for support to families for childcare services, support to non-state childcare providers, and quality standards; no published reports on childcare quality within the last 3 years. - Expanding access to affordable, high-quality early childcare could significantly ease caregiving burdens and reduce opportunity costs of employment for women. ### Policy-relevant implications and priority actions - Address structural obstacles to raise firm-level and aggregate TFP: - Improve workforce skills. - Simplify and improve business licensing and permits. - Strengthen tax administration efficiency. - Improve access to finance / reduce cost of finance. - Boost female labor force participation to unlock potential growth: - Promote services and tourism-led job creation in districts with high tourism potential (notable districts include Orange Walk, Corozal and Stann Creek) while ensuring education and childcare availability. - Invest in education and upskilling, especially for younger cohorts, to narrow LFP gaps (advanced education associated with ~32 percentage points lower gap vs. less than basic). - Address wage disparities and occupational segregation to improve women’s returns to labor market participation. - Expand access to affordable, high-quality childcare and clarify financial support mechanisms and quality standards. ### Tourism carrying capacity (Annex VIII): short summary - Tourism is a key growth driver: - Tourism directly contributes about 12 percent of the economy (Tourism Satellite Account by SIB). - Belize outperformed the Caribbean in growth in stayover arrivals in 2024 and could increase market share if momentum is maintained and diversification to new source markets is pursued. - Carrying capacity indicators: - Belize’s large land area and population imply more room for tourism carrying capacity compared to Caribbean peers. - The ratio of total stayover and cruise tourists to Belize population and the ratio of total tourists per land area are quite low compared to Caribbean peers. - Aggregate hotel capacity is almost double actual stayover nights, though district distribution may not align with visitor flows to key sites. - Flight capacity utilization is relatively high compared to peers, particularly in the European flight segment. - Improvements in infrastructure: electricity access approaching 100 percent from about 75 percent three decades ago. - Policy note: Cost competitiveness across travel, sightseeing, transportation and food could support continued growth in stayover arrivals. *INTERNATIONAL MONETARY FUND — 5. Evidence from cross-Caribbean* ### 3. While country-wide estimates suggest ample hotel capacity, there is substantial ### 1blzea2025001-source-pdf - 3. While country-wide estimates suggest ample hotel capacity, there is substantial ### Hotel capacity: national vs. district-level findings - Country-wide hotel capacity estimates suggest Belize can accommodate a sustained rise in tourist arrivals overall. - Substantial heterogeneity across districts: - Belize District: capacity oscillating around 100 percent of total Belize tourist nights. - Orange Walk, Corozal, and Toledo: capacity typically about 10 percent. - More than three quarters of stayover tourists arrive via Belize City international airport, which has hotel capacity to accommodate only about 20 percent of them (staff estimates). - Staff method: hotel capacity in each district = number of rooms per city/district × average number of beds per room × number of days per year, divided by total number of tourist nights per year. - Caveat: These estimates do not include short-term villa rentals which could potentially increase capacity within each district. ### Geographic misalignment and transport bottlenecks - Distribution of hotel capacity is not necessarily geographically aligned with the number of visits to tourist sites, implying potential transport bottlenecks. - Belize’s relatively large land area means some key touristic sites are more than 2-hours’ drive from the international airport. - Cayo and Orange Walk districts: several touristic sites receive a significant proportion of tourist visits annually, yet their hotel capacity is either at or below the aggregate number of visits—highlighting potential local accommodation bottlenecks. - Policy implication: Increasing investments in hotel capacity, including short-term villa rentals in districts with identified bottlenecks, is key to accommodate growth in stayover tourists going forward. ### Flight capacity utilization and source-market constraints - Belize has one of the highest flight capacity utilization rates across the Caribbean, which could further limit tourist growth over the medium term. - Staff compared capacity estimates of persons on board each flight arriving to Belize International Airport (FlightRadar24) with actual stayover arrivals; Belize shows one of the highest arrivals-to-flight capacity ratios in the region. - High flight capacity utilization is mainly attributed to flights from Europe, which is consistently higher than for the US and Canada, suggesting growth from European source markets could be constrained without additional flights. - Authorities have been adding flights to the international airport; this contributed to somewhat lower capacity utilization in 2024 relative to 2019 (pre-pandemic). - Note on adjustments: Flight capacity utilization by origin country within Belize is adjusted for actual stayover arrivals via the international airport and further adjusted using IATA and US census shares to account for transit and non-US citizens originating from the US. ### Cost competitiveness - Belize has a cost competitiveness advantage relative to the Caribbean according to Budget Your Trip survey results (data accessed on April 23, 2025). - The survey suggests Belize is significantly lower-cost across sightseeing, cost of food at restaurants, and transportation—indicating cost is not a key constraint and could boost stayover arrivals if other bottlenecks are addressed. - Staff caveat: Results depend on the accuracy and comprehensiveness of the Budget Your Trip survey and should be complemented with other data sources for robust results. ### External sector assessment: key metrics and outlook - Overall assessment: Belize’s external position in 2024 was stronger than the level implied by fundamentals and desirable policies. - Estimated current account (CA) gap in 2024: 2.8 percent of GDP (slightly lower than 3.1 percent of GDP estimated for 2023). - International reserves projected to gradually increase from 3.5 months of imports (below the ARA metric) to reach the ARA metric by 2034 under the baseline scenario. - Net international investment position (NIIP) in 2024: -97 percent of GDP (broadly stable vs. -104 percent in 2023). - Gross liabilities: 130 percent of GDP. - External public debt: 39 percent of GDP. - FDI: 81 percent of GDP. - Gross assets: 34 percent of GDP (reserve assets: 14 percent of GDP; other investments: 16 percent of GDP). - 2024 (% of GDP) snapshot: NIIP: -97; Gross Assets: 34; Debt Assets: 16.7; Gross Liab.: 130; Debt liab.: 49.6. - Current account balance (CAB) movements: - CAB worsened from -0.6 percent of GDP in 2023 to -1.5 percent of GDP in 2024. - Drivers: lower net services balance (0.9 percent of GDP), deterioration in goods trade deficit (0.4 percent of GDP) amid lower free zone net exports, slight deterioration in primary income balance (0.2 percent of GDP); offset by improvement in secondary income balance (0.5 percent of GDP). - Projection: CAB is projected to improve slightly towards –1.2 percent of GDP led by a gradual pickup in tourism receipts and lower oil imports. - EBA-lite model results, 2024: - CA-Actual: -1.5 - Cyclical contributions (from model) (-): -0.3 - Adjusted CA: -1.2 - CA Norm (from model): -4.0 - Adjusted CA Norm: -4.0 - CA Gap: 2.8 - o/w Relative policy gap: 0.8 - Elasticity: -0.3 - REER Gap (in percent): -8.3 (REER model gap listed as -9.9 elsewhere) - Real effective exchange rate (REER): - REER appreciated by 1.1 percent in 2024 as a 1.2 percent nominal effective exchange rate appreciation was only slightly offset by marginally lower inflation in Belize than in its trading partners. - REER gap estimated at 9.9 percent; CA gap using the REER model estimated at 3.3 percent. - Capital and financial accounts: - Capital and financial accounts balance increased from 2.0 percent of GDP in 2023 to 2.6 percent in 2024, mainly due to FDI flows rising to 3.7 percent of GDP from 0.4 percent in the prior year. - Expected stabilization at 2.3 percent of GDP over the medium term. - International reserves projected to hover around 4.1 months of imports by 2030, up from 3.5 months in 2024. - FX intervention and reserves level: - Gross international reserves at end-2024: US$498 million or 3.5 months of imports. - Reserves are US$221 million above the level in 2019. - Assessment: Raising reserves closer to the ARA metric would strengthen the currency peg; projected to reach ARA metric by 2034. - Potential policy responses recommended: - Accelerate convergence of international reserves to the ARA metric via fiscal consolidation and structural reforms that increase competitiveness and exports and attract FDI. - Invest in climate-resilient infrastructure and road connectivity to support growth in agriculture and tourism and strengthen interconnection. ### Access to credit (introductory findings) - Private sector credit from banks as a share of GDP has trended downward in Belize since the global financial crisis, constrained by demand and supply factors. - Constraints on credit demand: high degree of firm informality, difficult collateral and loan application processes, relatively high lending rates. - Constraints on credit supply: insufficient regulatory capital and a history of large loan losses. - Sectoral lending patterns: - By end-2024, loans to the government accounted for less than 1 percent of total loans. - Lending concentrated in building and construction, individuals, real estate, and tourism. - Historical context: private sector credit peaked in 2009; rapid expansion prior to the global financial crisis was led by building and construction, household, real estate, and distribution sectors; since then lending slowed with sharp declines in mining and exploration, marine, and distribution sectors. *Source: 1blzea2025001-source-pdf - 3. While country-wide estimates suggest ample hotel capacity, there is substantial* ### 2. Financial inclusion has increased but firms cite access to finance as among the major ### 2. Financial inclusion has increased but firms cite access to finance as among the major constraints to business development. ### Overview and system structure - Since the pandemic, access to credit for firms and households has increased, with the number of loans owed by individuals, Micro, Small and Medium-sized enterprises (MSMEs) and corporates increasing between 2020 and 2024. - Firms cite the access to and cost of finance as among the most severe obstacles to growth (Compete Caribbean, 2020). - Domestic banks dominate Belize’s financial system: - Domestic banks hold about two-thirds of the financial system’s assets, totalling 75 percent of GDP in 2024. - Credit unions hold 19 percent of financial system assets and have almost doubled in share over the last decade and a half; the largest credit union accounts for over half of the sector’s assets and is larger than the two smallest domestic banks. - International banks’ assets declined to 5 percent of total assets, from 28 percent in 2014. - The Development Finance Corporation (DFC) accounts for 2 percent of financial system assets. - The Social Security Board’s assets were 12 percent of GDP in 2023 (excluded from financial sector aggregates). ### The Development Finance Corporation (DFC) — characteristics and metrics - History and mandate: - Originally incorporated in 1963; became state owned about a decade later. - Temporarily closed in 2005 due to insolvency; reopened in 2009 under the Development Finance Corporation Act, 2009. - Loan portfolio composition (Gross Loans - March 2025, percent of total gross loans): - Agriculture: 22% - Tourism: 10% - Building and Construction: 26% - Professional Services: 13% - Student Loans: 11% - Other: 18% - Terms and conditions: - Offers grace periods on loan repayments of up to 5 years. - Requires at least 15 percent in equity investment from borrowers for several facilities (in the form of property, cash and/or labor). - Offers 100 percent financing for projects related to sustainable energy. - Performance and funding: - Share of non-performing loans was 15 percent in 2023 (a large proportion concentrated in loans to commercial fishing and agriculture), the lowest level since 2009. - Funding comes largely from regional and international financial institutions, with long-term loans—mostly from the Caribbean Development Bank (CDB)—guaranteed by the Government of Belize. - Recent facilities from the IDB and International Cooperation and Development Fund (ICDF) Taiwan Province of China targeted MSMEs (with emphasis on women and green financing); two 2023 CDB lines of credit aimed at students and MSMEs. - The Social Security Board approved a BZ$20 million facility in December 2023 to support the DFC’s mortgage program. ### Concentration, capitalization, and liquidity in domestic banking - Concentration: - Domestic banking system became increasingly concentrated: number of domestic banks reduced to 4 in March 2025 from 6 a decade earlier. - Belize Bank and Atlantic Bank together hold approximately four-fifths of total banks’ assets and gross loans. - The degree of concentration may help explain aggregate private sector lending patterns and lending spreads; the difference between average residential mortgage rates and average fixed deposit rates is widest for the largest institutions. - Capital and liquidity (system-wide and regulatory minima): - Aggregate capital adequacy ratio (CAR) has exceeded the regulatory minimum of 9 percent of risk-weighted assets since 2007, falling only to as low as 14.9 percent in the aftermath of the pandemic. - As of March 2025: - Domestic banks’ system-wide regulatory capital accounted for 15.5 percent of risk-weighted assets. - 45 percent of deposits were held as liquid assets. - Regulatory minimums: CAR minimum is 9 percent; liquid assets minimum is 21 percent. - Distributional concerns: - Only one bank holds capital at or above 15.5 percent. - More than 80 percent of the system’s capital and excess liquidity are concentrated in two institutions. - Interest rates and liquidity paradox: - Weighted average lending rate has trended downward since 2000, falling faster than deposit rates; lending spreads close to historical low. - Despite banks holding twice the share of liquid assets required, average deposit rates remain around 1 percent. - A 2½ percent floor is imposed on savings deposits, which affects deposit rate behaviour. ### Trends and metrics on credit and non-performing loans - Outstanding credit and loan counts increased 2020–2024 across Individuals, MSMEs, Corporates (Central Bank of Belize data). - Historical NPL dynamics: - Gross NPLs surged and peaked at 21 percent of gross loans in March 2011. - 69 percent of NPLs were concentrated in the largest bank at that peak, where NPLs rose to 38 percent. - Loan loss provisions peaked at 8.8 percent in June 2015. - These high NPLs and loan losses constrained credit growth following the global financial crisis, with lending deceleration led by the largest bank’s slowdown. ### Obstacles to demand for credit (firms and borrowers) - Key demand-side constraints: - Challenges related to business creation and a high degree of firm informality. - Onerous collateral and administrative requirements. - High interest rates and perceived high administrative costs. - MSME survey findings (IDB, 2024): - Some firms opt not to apply for credit from domestic financial institutions due to perceived high interest rates, administrative costs, manual application processes, and onerous collateral requirements. - Suggested demand-side alleviation measures: - Encourage formalization of firms (authorities’ efforts referenced in Annex XI). - Support potential entrepreneurs with preparation of business plans or grants for nascent businesses to increase eligibility for borrowing. - Establish a collateral registry. - Automate the application process for credit. - Reduce lending rates across lending institutions. ### Monetary policy, deposit floor, and interest rate dynamics — empirical evidence - Empirical strategy and findings: - Local projection impulse response analysis (quarterly data Q1 2000 to Q4 2024) estimates cumulative responses over an 8 quarter horizon to changes in average interest rate on savings deposits (denoted SSSD_t in the paper). - A 1 percentage point cut in the interest rate on savings deposits reduces both the weighted average lending and deposit rates over the next 8 quarters, with the impact being greater on deposit rates than on lending rates. - Consequence: private sector borrowing costs decline, but banking sector lending spreads widen initially, likely increasing net interest margins over the medium-term and potentially boosting banking sector profitability and capital accumulation. - Differential effects across loan types: - Interest rates on personal loans are more sensitive to cuts in the interest rate on savings deposits than rates on commercial loans and those for residential construction, reflecting shorter average duration of personal loans. - Policy implication: - Reducing or eliminating the floor on savings deposits (currently 2½ percent) could reduce lending rates further but may increase banks’ net interest margins in the near- to medium-term. ### Obstacles to supply of credit (banks) - Supply-side constraints: - Legacy impacts and risk aversion stemming from past losses on high non-performing loans. - Insufficient regulatory capital above the minimum requirement among some institutions, limiting their capacity to expand lending. - Empirical assessment of capital and credit growth: - Linear and nonlinear panel regressions estimate the impact of expansions in real GDP on domestic banks’ loan portfolios using specifications (2a) and (2b) as provided, where: - ln(GROSS_LOANS) is the natural log of domestic banks’ gross loans deflated by the quarterly CPI. - ln(GDP) is the natural log of quarterly, real seasonally adjusted GDP. - CAR is domestic banks’ total regulatory capital ratio (total regulatory capital as a share of risk-weighted assets). - LEXCESSLIQUIDITY is domestic banks’ excess liquidity ratio (stock of eligible liquid assets in excess of regulatory requirement as a share of average deposits). - LLPROVISIONS is stock of loan loss provisions as a share of total gross loans. - Series detrended using a Hodrick-Prescott (HP) filter to ensure stationarity. - The analysis tests whether the relationship between credit growth and economic activity depends on banks’ pre-existing stock of capital via threshold models with 푥 as the lagged unfiltered capital adequacy ratio and ∅ as the threshold. ### Policy recommendations and avenues to accelerate private sector credit - Demand-side: - Foster business creation and formalization to increase the pool of eligible borrowers. - Provide technical assistance for business plan preparation and consider grants for nascent businesses. - Implement a collateral registry and automate loan application procedures to lower administrative barriers. - Financial system and regulatory adjustments: - Consider reducing or eliminating the 2½ percent floor on savings deposits to lower lending rates, recognizing potential short- to medium-term increases in net interest margins and profits that could strengthen bank capital positions. - Strengthen capitalization in banks with CARs near or below regulatory minima to unlock lending capacity. - Address legacy NPLs and improve provisioning practices to reduce risk aversion and encourage credit growth. *Source: IMF staff compilation and analysis as presented in the chapter “2. Financial inclusion has increased but firms cite access to finance as among the major constraints to business development.”* ### 15. The analysis includes an unbalanced panel which covers the period 2007Q1 through ### 1blzea2025001-source-pdf - 15. The analysis includes an unbalanced panel which covers the period 2007Q1 through ### Data and sample - Panel coverage: 2007Q1 through 2024Q4 (unbalanced panel). - Banks included: Atlantic Bank, Belize Bank, FirstCaribbean International Bank, Heritage Bank, National Bank of Belize, and Scotiabank. - Data sources: - Bank-specific data: Central Bank of Belize’s quarterly publication of domestic bank financials. - Seasonally adjusted real GDP and consumer price index: Statistical Institute of Belize. - Unit-root testing: The Im-Peseran-Shin unit root tests rejected the null that all panels contain unit roots at the 1 percent level for all detrended variables. ### Regression specification and estimation - Estimators used: Random Effects (RE), Arellano-Bond, Arellano-Bover. - Threshold analysis: Threshold (∅) = 13 (interpreted as a capital adequacy ratio threshold). - Observations reported: 329 (Baseline, RE), 323 (Baseline, Arellano-Bond), 329 (Baseline, Arellano-Bover), 329 (Threshold, RE). - Note: Each regression includes dummy variables capturing effects of large changes in gross loans, including those due to bank acquisitions. - Standard errors: robust standard errors to correct for potential heteroskedasticity and autocorrelation. - Significance notation: *, **, *** indicate statistical significance at the 10%, 5% and 1% levels respectively. ### Key regression estimates (Dependent Variable = ln(LLL) [퐥퐥퐥퐥 (푳푳퐋퐋퐋퐋퐋퐋)]) - Lagged ln (gross loans) coefficients: - ln(LLL)it−1: 0.978*** (se 0.078) [Baseline, RE]; 0.970*** (se 0.047) [Arellano-Bond]; 0.953*** (se 0.035) [Arellano-Bover]; 0.974*** (se 0.076) [Threshold, RE]. - ln(LLL)it−2: -0.159** (se 0.063) [Baseline, RE]; -0.153*** (se 0.047) [Arellano-Bond]; -0.150*** (se 0.035) [Arellano-Bover]; -0.159** (se 0.063) [Threshold, RE]. - Real GDP (lagged 4 quarters) and threshold interactions: - ln(GDP)t−4: 0.093** (se 0.046) [Baseline, RE]; 0.094* (se 0.049) [Arellano-Bond]; 0.148*** (se 0.043) [Arellano-Bover]. - ln(GDP)t−4 · I(x ≤ ∅): -0.098 (se 0.070) [Threshold specification]. - ln(GDP)t−4 · I(x > ∅): 0.119*** (se 0.038) [Threshold specification]. - Other controls: - CCSS_i,t−4: 0.000 (se 0.000) across specifications. - Liquid_u_i,t−4: 0.000*** (se 0.000) [Baseline, RE]; 0.000* (se 0.000) [Arellano-Bond]; 0.000*** (se 0.000) [Arellano-Bover]; 0.000*** (se 0.000) [Threshold, RE]. - LLPR_i,t−4: -0.002*** (se 0.001) [Baseline, RE]; -0.002** (se 0.001) [Arellano-Bond]; -0.002*** (se 0.001) [Arellano-Bover]; -0.002** (se 0.001) [Threshold, RE]. - Constant: -0.001 (se 0.001) across specifications. ### Main empirical findings - Real GDP and capital adequacy interaction: - An expansion in real GDP and lower loan loss provisions can spur additional credit growth, particularly when banks are well capitalized. - Below a capital adequacy ratio of 13 percent (4 percentage points above the regulatory minimum), an expansion in real GDP induces a negative but statistically insignificant impact on credit—interpreted as banks having limited capacity to expand risk-weighted assets without breaching regulatory requirements. - Above the 13 percent threshold, the positive relationship between real GDP growth and credit is stronger than under the baseline. - This result is consistent with Kopp (Forthcoming): banks’ lending space is constrained by capital ratios at levels potentially above the regulatory minimum. - Other controls: - Higher excess liquidity has a statistically significant impact on credit, but effects are economically modest. - An increase in capital adequacy above its long-term trend in itself has no impact on bank credit. - Robustness: Results are qualitatively and quantitatively similar across Random Effects, Arellano-Bond, and Arellano-Bover estimators. ### Conclusions and policy-relevant implications - Trends and constraints: - Private sector credit to GDP in Belize has trended downward since 2009. - Firms cite access to finance as among the major constraints to business development. - Private credit is concentrated in the banking sector, which has become more concentrated over time; lending spreads are highest among the largest banks. - Demand- and supply-side constraints to credit growth: - Demand-side: high firm informality, onerous collateral and application processes, and the high cost of credit restrict firms’ demand for finance. - Supply-side: legacy high NPLs and loan losses and insufficient regulatory capital above the regulatory minimum have limited banks’ expansion of credit in the past. - Policy measures and potential supports for credit expansion: - Recent efforts could support faster credit expansion: incentives for formalization, establishment of the collateral registry, and future implementation of the credit bureau. - Fiscal Incentives Act (March 2023) measures to encourage MSME formalization: extends access to incentives for MSMEs, waives penalties or interest related to past unpaid business taxes, and exempts payment of business taxes for up to one year for unregistered firms who register with the Belize Companies and Corporate Affairs Registry and the Belize Tax Service Department before a pre-defined date—if successfully implemented, this initiative could help reduce informality and improve firms’ access to finance. *Source: IMF staff analysis as presented in the supplied content unit.* ### 2. The authorities have substantially strengthened Belize’s AML/CFT framework. Belize ### 2. The authorities have substantially strengthened Belize’s AML/CFT framework. Belize ### Major findings from the CFATF 2024 Mutual Evaluation - Belize was assessed as compliant with 38 of the FATF’s 40 recommendations, and largely compliant with the remaining two recommendations. - Belize was assessed as substantially effective in several pillars of its AML/CFT framework, including: - understanding of ML/TF risks; - the investigation and prosecution of TF; - the implementation of TF and PF-related targeted financial sanctions; - international cooperation. - This assessment reflects a substantial improvement from the previous 2011 mutual evaluation, when Belize was assessed as noncompliant with FATF recommendations in several areas including: - transparency and beneficial ownership of legal persons and arrangements; - customer due diligence by financial institutions; - regulation, supervision, and monitoring of designated non-financial businesses and professions (DNFBPs); - and was placed in enhanced follow-up. ### Priority actions remaining - Finalize the National Risk Assessment. - Ensure effective risk-based AML/CFT supervision of financial institutions and DNFBPs. - Strengthen the collection of beneficial ownership information through improved sanctioning of non-compliance. - Ensure that law enforcement agencies are appropriately staffed and undertake money laundering investigations and prosecutions in line with Belize’s risk profile. ### Quantitative and categorical ratings cited - Technical Compliance Ratings: 38 Compliant; 2 Largely Compliant. - Effectiveness Ratings descriptors shown in source: Low, Moderate, Substantial, High. - Data Adequacy Assessment for Surveillance: - Data Adequacy Assessment Rating: B - Questionnaire Results: Assessment by sector (Median Rating): National Accounts C; Prices B; Government Finance Statistics C; External Sector Statistics C; Monetary and Financial Statistics B; Inter-sectoral Consistency B; Median Rating C B C C B B C - Detailed questionnaire results (Data Quality Characteristics): - Coverage: B B C C B - Granularity 3/: C (and additional cells showing C B B ... B B in source) - Consistency: B C B - Frequency and Timeliness: C A C B A - Note: “When the questionnaire does not include a question on a specific dimension of data quality for a sector, the corresponding cell is blank.” - Footnotes in source: - 1/ The overall data adequacy assessment is based on staff's assessment of the adequacy of the country’s data for conducting analysis and formulating policy advice, and takes into consideration country-specific characteristics. - 2/ The overall questionnaire assessment and the assessments for individual sectors reported in the heatmap are based on a standardized questionnaire and scoring system (see IMF Review of the Framework for Data Adequacy Assessment for Surveillance, January 2024). *Source: CFATF and IMF staff calculations (as presented in the CFATF 2024 Mutual Evaluation and IMF staff materials).* ### Appendix I). ### Appendix I) ### Data adequacy assessment and rationale - Staff assessment: "The data provided to the Fund have some shortcomings but are broadly adequate for surveillance." (Assessment letter: B) - Key points on macroeconomic data: - National accounts: quarterly supply-side data available with one quarter lag and sufficient granularity; expenditure-side GDP data only available annually, with a long lag and sometimes large discrepancies relative to supply-side data. - Nominal GDP and GDP deflator: available only annually. - Prices data: available monthly and adequate for surveillance. - External sector: - Balance of payments and goods trade: sufficient granularity; BoP available quarterly (Central Bank of Belize) and trade available monthly (Statistical Institute of Belize). - International Investment Position (IIP): available annually; inconsistencies between financial account components in the IIP and respective flows in the BoP somewhat hamper surveillance. - Fiscal data: - Published by the central bank, but often with a long lag and with unexplained revisions. - Data on the consolidated operations of the public sector are unavailable. - Social Security Board: not treated as part of the general government; classified by the Central Bank as other non-financial public corporation and included in broad money via its claims (deposits) on the banking system. - Difficulties in capital expenditure compilation: Capital II items that started as fixed-term project contributions have become permanent funding allocations. - Current accounting practices follow neither a cash basis nor an accrual basis, contributing to inconsistent accounting and reporting of assets, liabilities, revenues, and expenses. - Data on domestic debt and domestic debt service need improvement, particularly regarding amortization. - Monetary and financial statistics: - Published frequently with significant coverage of the banking sector (accounts for two-thirds of financial sector assets). - Less coverage of non-bank financial institutions, including the insurance sector; insurance sector coverage limited compared to domestic banks and credit unions. - Staff assesses overall coverage of monetary and financial statistics as “B” given the small size of the insurance sector relative to banks and credit unions and the publication of balance sheet and financial soundness indicators for banks and credit unions. ### Changes since last Article IV consultation - None. ### Corrective actions and capacity development priorities - National accounts: - Increase the frequency and timeliness of GDP data on the expenditure side. - Improve consistency between quarterly and annual GDP data. - Authorities have requested CARTAC assistance to develop new producer price indices and international trade price indices to deflate nominal output and improve measurement of GDP in volume terms and provide standalone inflation indicators. - Fiscal: - Improve coverage of government accounts, accounting, and fiscal reporting. - External sector: - Improve timeliness of the balance of payments and international investment position data, which are published with a significant lag. - Improve compilation of foreign direct investment data. - Improve granularity of tourism data. - Other data gaps: - More frequent publication of labor statistics, including unemployment. - Publication of consistent time series on wages, labor market statistics, inequality, poverty, and literacy-related social indicators. - Public sector consolidation priorities: - Prepare a comprehensive list of institutions comprising the central government, general government, and public sector including extra-budgetary units. ### Data Standards Initiatives - Belize participates in the Enhanced General Data Dissemination System (e-GDDS) and first posted its metadata in September 2006. - Belize is yet to disseminate the data recommended under the e-GDDS and is in the process of doing so with support from the IMF’s Statistics Department. ### Table of Common Indicators (select metadata and timeliness notes) - Frequency and timeliness codes used in tables: “D” daily; “W” weekly or with a lag of no more than one week after the reference date; “M” monthly or with a lag of no more than one month after the reference date; “Q” quarterly or with a lag of no more than one quarter after the reference date; “A” annual; "SA" semiannual; "I" irregular; "NA" not available or not applicable; "NLT" not later than. - Footnotes excerpted: - Includes reserve assets pledged or otherwise encumbered, as well as net derivative positions. - Both market-based and officially determined, including discount rates, money market rates, rates on treasury bills, notes and bonds. - Foreign, domestic bank, and domestic nonbank financing. - The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments. - Including currency and maturity composition. - Encouraged frequency of data and timeliness of reporting under the e-GDDS and required frequency of data and timeliness of reporting under the SDDS and SDDS Plus. ### Fund relations, commitments, and recent technical assistance (selected items) - Membership Status: Joined: March 16, 1982; Article VIII. - Quota: 26.70 SDR Million (100.00 percent of quota). - IMF’s Holdings of Currency (Holdings Rate): 20.49 SDR Million (76.73). - Reserve Tranche Position: 6.21 SDR Million (23.27). - SDR Department net cumulative allocation: 43.49 SDR Million (100.00); Holdings: 37.28 SDR Million (85.72). - Outstanding Purchases and Loans: None. - Latest Financial Commitments: Stand-By arrangement dated Dec 03, 1984 to Jun 01, 1986; Amount Approved 7.13 SDR Million; Amount Drawn 7.13 SDR Million. - Overdue Obligations and Projected Payments to Fund (Charges/Interest): - 2025: 0.09 SDR Million - 2026: 0.18 SDR Million - 2027: 0.18 SDR Million - 2028: 0.18 SDR Million - 2029: 0.18 SDR Million - Exchange Rate Arrangement: conventional peg; Belize dollar pegged to the U.S. dollar at the rate of BZ$ 2 per U.S. dollar since 1976. - Last Article IV consultation concluded by the Executive Board on May 15, 2024; Belize is on the standard 12-month consultation cycle. - Recent technical assistance highlights (selection of dates and topics): - STA advised on financial soundness indicators in January 2019. - MCM advised on contingency planning in March 2019; on cyber risk supervision framework in April 2019; on banking supervision and regulation in May 2019. - FAD advised on tax and customs administration reform in April 2019; on tax reform policy options in May 2020; on modernization of BTSD and BCED in October-November 2022; on implementation of accrual accounting in March 2023. - STA advised the Central Bank of Belize on external sector statistics in October 2023. - MCM advised on implementing Basel Pillar III in April 2024. - CARTAC Technical Assistance FY2021-FY2025 includes assignments on Customs and Tax Administration, Public Financial Management, Statistics (Updating CPI 02/06/2023–02/17/2023; External Sector Statistics 10/16/2023–10/27/2023; Developing new PPI 03/03/2025–03/14/2025), and Financial Markets topics such as RBS Implementation, Basel II-III implementation, Macro stress testing, and E-Money Supervision up to 01/27/2025–01/31/2025. ### Collaborations with other international financial institutions - As of June 30, 2025, collaborations with The World Bank Group, Inter-American Development Bank, Caribbean Development Bank, and Central American Bank for Economic Integration. ### Statement by Belize authorities (summary of authorities' views and macroeconomic indicators) - Authorities express broad agreement with staff’s assessment of the economic outlook, risks, and policy priorities. - Recent developments and macroeconomic outlook (authorities' figures): - Real GDP decline in 2020: 13.9 percent. - Cumulative rebound in real GDP between 2021 and 2023: 30.6 percent. - Growth in 2024: 8.1 percent. - Primary balance: shifted from -8.3 percent of GDP in 2020 to a surplus of 1.7 percent of GDP in 2024. - Public debt: fell from 103.3 percent of GDP in 2020 to 61.1 percent in 2024. - Inflation: decelerated to 1 percent in 2025, down from 4 percent last year. - Incidence of multi-dimensional poverty: decreased from 26.5 percent in 2021 to 22.1 percent in 2024. - Medium-term growth expectation: growth expected to slow to 2 percent; inflation converging to 1.3 percent. - Fiscal policy commitments: - FY2025 Budget target: reduce debt-to-GDP ratio to 50 percent by 2029. - Achieve primary surpluses of no less than 1.5 percent of GDP over the medium-term. - Implement legislative amendments for electronic tax invoicing and new penalties for non-compliance. - Streamlining Property Transactions Bill to address inefficiencies in taxation of property transfers. - Transform the Belize Tax Services Department (BTSD) into a semi-autonomous revenue authority; transfer responsibility for land tax collection to BTSD. - Reform the Pension Plan for Public Officials: phased implementation of a new contributory pension scheme beginning with new entrants to the public service. - Prepare and publish an annual detailed Fiscal Strategy Plan as part of concessional financing through the World Bank’s Catastrophe Deferred Drawdown Option; plan to include a Medium-Term Fiscal Framework integrating disaster risk contingencies. - Structural reforms and resilience: - Pipeline of infrastructure projects including a new airport in San Pedro and a possible international airport in Placencia. - Launched the Belize Investment and Business Climate Action Plan (BICAP) including a digital single investment window and easing business registration processes. - Fiscal Incentives Act (passed in 2023) supporting formalization of micro, small and medium-sized enterprises. - Initiatives to improve access to childcare and training programs to support greater female labor force participation. - Investments in renewable energy and climate-resilient infrastructure; announced a new Battery Energy Storage System in partnership with the World Bank and Government of Canada. - Developing an integrated national financial framework to address the financing gap for development and climate goals. - Monetary and financial policies: - Authorities committed to maintaining the currency peg as a macroeconomic anchor. - Commit to additional fiscal consolidation and growth-enhancing structural reforms to help increase international reserves. - Central Bank of Belize committed to enhancing the monetary policy framework, ensuring financial sector stability, and expanding private sector access to financing. - Amended Securities Industry Act to attract institutional capital; new credit bureau and collateral registry to improve firms’ access to credit. - Substantial progress on AML/CFT: successful Caribbean Financial Action Task Force Mutual Evaluation assessed Belize as compliant or largely compliant with all forty recommendations; authorities committed to addressing remaining shortcomings through an action plan. *Source: Appendix I) — Belize: Staff Report for the 2025 Article IV Consultation — Informational Annex (as provided).* --- _Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1blzea2025001-source-pdf.pdf_