## Towards Achieving Sustained Economic Growth in Small Developing States: A Primer on Belize

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---

### Introduction — context and scope
- Small developing states (SDS) face distinctive constraints from "smallness": limited economies of scale, capacity constraints, and amplified vulnerability to economy-wide shocks (IMF, 2013a; IMF, 2024).
- Paper focus for Belize (a tourism-dependent SDS):
  - Improving access to finance.
  - Exploring drivers of labor force participation to raise labor’s contribution to growth.
  - Assessing the tourism sector’s capacity constraints.
- Synergies highlighted:
  - Access to finance supports private initiative and tourism capacity expansion.
  - Tourism is a key job generator and can raise labor force participation.
  - Stronger private sector activity broadens demand for credit.

### Improving access to finance — SDS-wide observations
- Determinants limiting access (Wong, 2017):
  - Eligibility, affordability, and physical access.
  - Large collateral requirements relative to loan size.
  - Onerous financial sector requirements.
  - High intermediation costs.
  - Limited physical access to bank branches and ATMs.
- Aggregate trends:
  - Fewer borrowers per 1,000 adults in SDS relative to global averages.
  - Banking systems in small states supply less credit as a share of GDP than other countries (IMF 2025 Financial Access Survey; World Bank WDI).
  - Private sector credit in many SDS peaked in 2009 and, after adjusting for Covid-19 effects, has trended downward as a share of GDP.
  - Concentrated banking systems often exhibit excess liquidity and lower credit activity (IMF, 2013a; Ghossoub and Reed, 2015).

### The Belize financial system — structure and assets (2024/2025)
- Distribution of financial sector assets - 2024 (percentage of total):
  - Domestic Banks: 68 percent
  - International Banks: 5 percent
  - Credit Unions: 19 percent
  - Domestic Insurance Companies: 6 percent
  - DFC: 2 percent
- Additional facts:
  - Domestic banks hold about two-thirds of the financial system’s assets, totaling 75 percent of GDP in 2024.
  - Credit unions hold 19 percent of financial system assets and almost doubled their 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, following loss of correspondent banking relationships and closure of two large banks.
  - Domestic insurance companies and the Development Finance Corporation account for 6 percent and 2 percent of financial system assets, respectively.

### Credit trends and market structure in Belize
- Pre-2009 expansion:
  - Private sector credit expanded rapidly in the decade prior to the global financial crisis, driven by building and construction, households, real estate, and distribution sectors.
- Post-crisis and subsequent 15 years:
  - Domestic bank lending slowed considerably, with sharp declines in lending to mining and exploration, marine, and distribution sectors—coinciding with weaker growth, successive debt restructurings, and fiscal consolidation.
- By end-2024:
  - Loans to the government accounted for less than 1 percent of total loans.
  - Lending remained concentrated in building and construction, individuals, real estate, and tourism.
- Bank concentration:
  - Number of domestic banks fell to 4 in March 2025 from 6 a decade earlier.
  - Belize Bank and Atlantic Bank hold approximately four-fifths of total banks’ assets and gross loans.
  - Concentration may explain constrained aggregate private sector lending and higher spreads; the difference between average residential mortgage rates and fixed deposit rates is widest for the largest institutions.

### Banking system metrics, liquidity, and capital (selected exact values)
- Aggregate sector capital and liquidity:
  - Aggregate sector capital ratio referenced at 14.9 percent in the aftermath of the pandemic.
  - As of March 2025, domestic banks’ system-wide regulatory capital = 15.5 percent of risk-weighted assets.
  - 45 percent of deposits were held as liquid assets as of March 2025.
  - Regulatory minimums: capital minimum = 9; liquid assets regulatory minimum = 21 percent.
  - Only one bank holds capital at or above 15.5 percent; more than 80 percent of the system’s capital and excess liquidity concentrated in two institutions.
- Banks’ holdings:
  - Banks’ holdings of central government Treasury Bills and Treasury Notes accounted for 8 percent of their total assets at end-2024.
- Interest rate and liquidity dynamics:
  - Weighted average lending rate has trended downward since 2000 and fallen faster than deposit rates; lending spreads close to their historical low.
  - Despite high excess liquidity (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 (noted as a binding feature affecting deposit rates).
- Nonperforming loans and legacy losses:
  - Gross NPLs peaked at 21 percent of gross loans in March 2011.
  - 69 percent of NPLs were concentrated in the largest bank, where NPLs rose to 38 percent.
  - Loan loss provisions peaked at 8.8 percent in June 2015.

### Empirical findings: savings-floor cuts and interest-rate pass-through (Q1 2000–Q4 2024)
- Local-projection result on 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.
  - Impact is greater on deposit than on lending rates over the 8-quarter horizon.
  - Banking sector lending spreads widen in the near- to medium-term, as deposit rates fall more than lending rates.
  - Net interest margins likely increase over the medium term, potentially increasing banking sector profitability and capital accumulation.
  - Personal loan rates are more sensitive to cuts in the interest rate on savings deposits than commercial or residential construction loan rates.

### Panel-regression evidence on credit supply, capital, and activity (2007Q1–2024Q4; six domestic banks)
- Regression highlights and threshold result:
  - Regression specification includes ln(Loans), ln(GDP) (lagged), CAR (lagged), Liquidity (lagged), Loan Losses (lagged).
  - Key threshold: ∅ = 13 (CAR threshold).
  - Below CAR = 13, an expansion in real GDP induces a negative but statistically insignificant impact on credit; above this threshold, the positive relationship between real GDP and credit is stronger.
- Selected coefficients and statistics (as reported):
  - ln(Loans)it−1 = 0.978*** (Baseline, RE)
  - ln(Loans)it−2 = −0.159** (Baseline, RE)
  - ln(GDP)t−4 = 0.093** (Baseline, RE)
  - ln(GDP)t−4 I(x>∅) = 0.119*** (Threshold specification)
  - CARit−4 coefficients reported as 0.000 (standard errors 0.000 across estimators)
  - Liquidityit−4 = 0.000*** (Baseline, RE)
  - Loan Lossesit−4 = −0.002*** (Baseline, RE)
  - Threshold (∅) = 13
  - Observations = 329 (Baseline, RE); other estimators report 323 and 329 observations.
- Interpretation:
  - Higher excess liquidity has a statistically significant but economically modest impact on credit.
  - Increasing capital adequacy above its long-term trend alone has no direct impact on bank credit in these specifications.
  - Evidence suggests private sector credit growth is constrained by supply factors (capital and legacy loan losses).

### Obstacles to credit demand and supply — firm-level perspectives and measures
- Demand-side observations:
  - Financial inclusion increased since the pandemic; number of loans for individuals, MSMEs and corporates increased between 2020 and 2024.
  - Firms cite access to finance and cost of finance among the most severe obstacles.
  - IDB survey of MSMEs (Interamerican Development Bank, 2024): some firms do not apply for credit due to perceived high interest rates and administrative costs, manual application processes, and onerous collateral requirements.
- Recommended demand-side measures (as identified in the text):
  - Encourage formalization of firms.
  - Support entrepreneurs with business-plan preparation and grants for nascent-stage businesses to increase eligibility for borrowing.
  - Automate application processes and improve collateral infrastructure (collateral registry noted as a recent effort).
- Supply-side policy implications:
  - Reduce or eliminate the savings deposit floor to lower deposit and lending rates (empirical evidence: a 1 percentage point cut reduces lending and deposit rates over 8 quarters).
  - Address legacy NPLs and strengthen regulatory capital buffers above regulatory minimums to enable lending expansion.
  - Complement rate reforms with collateral registry and automation to improve credit access.

### Labor force participation (LFP), gender gaps, and drivers
- Magnitude and trends:
  - Gap between male and female LFP in Belize narrowed from about 45 percentage points in 1991 to about 26 percentage points in 2024.
  - Closing the LFP gap between men and women relative to 2022 levels could boost GDP level by over 20 percent (International Monetary Fund, 2024a reference in the text).
- Regional heterogeneity:
  - Corozal, Orange Walk and Stann Creek districts (≈ one third of working-age population) have LFP gaps on average 40 percent higher than the country-wide aggregate gap in 2023 and mostly deteriorated over the past decade (except Orange Walk slight improvement).
  - Belize City and Cayo (≈56 percent of population) have gaps about one third lower than aggregate and improved over the past decade.
  - Toledo (<10 percent of population) recorded the biggest improvement over the past decade; gap broadly in line with aggregate for Belize as of 2023.
- Sectoral composition and tourism’s role:
  - Women are less represented in agriculture and manufacturing; services account for 88 percent of all female employment in 2022.
  - Empirical district-level regressions:
    - A one percentage point increase in the share of services employment is associated with a decline in the LFP gap of about 0.5 percentage point (Services employment share coefficient = −0.463**).
    - Tourism employment share in 2013 coefficient = −1.369***.
    - Share of tourism in services employment in 2013 coefficient = −0.627***.
- Education and LFP:
  - Regression estimates (Table 3):
    - Basic education dummy = −5.162** (column 1).
    - Intermediate education dummy = −21.761*** (column 1).
    - Advanced education dummy = −31.703*** (column 1).
    - Advanced education dummy = −29.699*** (column 2, controlling for rural/urban).
    - Rural dummy = 11.699*** (column 2).
  - Caveat: associations are not strictly causal; higher education may induce emigration when local opportunities are insufficient.
- Wage and employment disparities:
  - After controlling for education (and occupation), women tend to earn almost BZ$200, or about 20 percent, less than men on average (Female dummy = −197.230*** in Real wage; Female dummy = −0.199*** in ln(Real wage)).
  - Female unemployment rates tend to be higher than male rates across recent survey snapshots.
- Policy levers:
  - Promote growth in tourism and services that disproportionately demand female labor.
  - Increase educational attainment among women and young cohorts while ensuring domestic demand for higher-skilled labor to avoid emigration.
  - Address gender wage gaps and promote female representation in ownership/shareholder and management roles (survey evidence: ∼25 percent of firms reported owners/shareholders all or predominantly women; nearly 60 percent reported owners/shareholders all or predominantly men).

### Tourism sector capacity, competitiveness, and constraints
- Importance and vulnerabilities:
  - Tourism directly accounts for about 12 percent of the economy (SIB May 2025); indirect footprint is larger.
  - Physical risks: floods, droughts, tropical storms.
  - High source-market concentration: United States ≈ 70 percent of arrivals in 2024.
- Recent performance and segmentation:
  - Stayover arrivals in 2024 broadly in line with Caribbean average; Belize described as a “late boomer” outperforming some peers in 2024.
  - Cruise passenger segment underperformed regional peers post-pandemic, attributed to lack of a mainland docking facility for large cruise ships.
- Capacity and infrastructure readiness:
  - Belize has low ratios of total tourists per population and per land area compared to Caribbean peers, implying capacity to receive considerably more tourists.
  - Electricity access improved from about 75 percent three decades ago to approaching 100 percent.
- Hotel capacity and geographic misalignment:
  - Calculated hotel capacity implies Belize can accommodate more than 1.5 times the number of stayover tourist nights in 2024 (overall).
  - Cross-district variation:
    - Belize District capacity oscillates around 100 percent of total Belize tourist nights.
    - Orange Walk, Corozal, and Toledo typically have hotel capacity about 10 percent of aggregate needs.
  - Over three quarters of stayover tourists arrive via the single international airport in Belize City; hotel capacity in Belize City can accommodate only about 20 percent of those arrivals.
  - Misalignment between hotel capacity distribution and visits to key tourist sites implies potential transport bottlenecks; many famous sites are more than 2 hours’ drive from the international airport.
  - Short-term villa rentals are not included in primary hotel-capacity estimates and could increase capacity in some districts.
- Flight capacity and utilization:
  - Belize has one of the highest arrivals-to-flight capacity ratios in the region, indicating limited room for further growth without additional flights.
  - High flight capacity utilization from Europe suggests growth from European source markets could be constrained absent additional flights.
  - Belize added flights to the international airport; this contributed to somewhat lower capacity utilization in 2024 relative to 2019.
- Cost competitiveness:
  - Snapshot from Budget Your Trip (April 2025) indicates Belize has a significantly lower cost of travel compared to Caribbean peers across categories: transportation, food/restaurants, sightseeing, and hotel costs.
- Policy priorities for tourism:
  - Expand hotel capacity (including short-term villa rentals) in districts with bottlenecks (Cayo, Orange Walk, Corozal, Toledo).
  - Improve air connectivity and add flights, especially from Europe and other non-U.S. markets.
  - Invest in transport links to reduce travel times from the international airport to key sites.
  - Invest in infrastructure resilience (utilities, environmental systems, social systems).
  - Consider cruise infrastructure development (mainland docking) to support cruise passenger recovery.
  - Leverage cost competitiveness to diversify source markets.

### Concluding synthesis and policy recommendations (selected)
- Improve access to finance:
  - Reduce or eliminate the floor on the interest rate charged on savings deposits (empirical evidence: a 1 percentage point cut reduces lending and deposit rates over 8 quarters).
  - Complement rate reforms with a collateral registry, automation of credit application processes, and measures to reduce lending rates across institutions.
  - Address legacy NPLs and strengthen regulatory capital buffers (noting CAR threshold ∅ = 13 above which GDP expansions more reliably translate to credit growth).
- Boost labor force participation (focus on female LFP):
  - Leverage tourism and services-sector growth to create demand for female labor.
  - Promote higher educational attainment for women and youth and ensure domestic absorption of higher-skilled labor to limit emigration.
  - Address gender wage gaps and underrepresentation in ownership/management roles.
- Alleviate tourism capacity constraints:
  - Expand geographically distributed hotel capacity and short-term rentals where bottlenecks exist.
  - Improve air connectivity and add flights to relieve high arrivals-to-flight capacity ratios.
  - Invest in transport links and infrastructure resilience.
  - Consider cruise infrastructure (mainland docking) to support cruise segment recovery.
- Emphasize complementarities across policies:
  - Combining improved access to finance, higher female labor force participation, and scaled, sustainable tourism development can generate synergies for sustained growth and job creation in Belize.
- Cautions:
  - Findings are context-specific to Belize though they have broader relevance to SDS; country-specific diagnostics remain essential.

*Source: IMF Working Paper — Towards Achieving Sustained Economic Growth in Small Developing States: A Primer on Belize (selected chapters and empirical results provided in the supplied content).*

### Introduction ...........................................................................................................

### Introduction

### Context and scope
- Small developing states (SDS) share distinctive constraints stemming from "smallness" that limit economies of scale, raise capacity constraints, and amplify vulnerability to economy-wide shocks (IMF, 2013a; IMF, 2024).
- The paper focuses on three interrelated challenges for Belize, a tourism-dependent SDS:
  - Improving access to finance.
  - Exploring drivers of labor force participation to raise labor’s contribution to growth.
  - Assessing the tourism sector’s capacity constraints.
- These three areas can generate synergies: access to finance supports private initiative and tourism capacity expansion; tourism is a key job generator and can raise labor force participation; stronger private sector activity can broaden demand for credit.

### Linkages and policy relevance
- High fixed costs and market concentration in small economies contribute to:
  - Cost disadvantages and concentrated market structures with lower competition (IMF, 2013a).
  - Concentrated banking systems with elevated credit risk, high operational costs, weak efficiency, and limited financial inclusion—resulting in expensive and limited credit supply.
- Small size and high fixed costs also constrain opportunities to use specialized skills, contributing to higher outward migration (especially among the highly educated) and lower labor force participation rates (IMF, 2013a; IMF, 2024).
- Narrow economic bases in SDS often mean reliance on a single sector; IMF (2024) reports about two thirds or 21 out of 34 SDS rely on a single sector, with tourism critical for many including Belize.
- Tourism competitiveness is commonly constrained by high access costs, limited connectivity, and infrastructure bottlenecks (Craigwell, 2007).

### Organization of the paper (as presented)
- Section II: evolution of credit to the private sector in Belize; obstacles to credit demand and supply.
- Section III: labor market challenges, with a focus on female labor force participation in Belize.
- Section IV: tourism sector capacity.
- Section V: concluding remarks on relevance for other SDS.

---

### Improving Access to Finance

### Access to finance in small developing states
- Access to finance and financial inclusion support household and firm investment, job creation, and consumption smoothing (Wong, 2017).
- Compared to global averages:
  - Fewer borrowers per 1,000 adults in SDS.
  - Banking systems in small states supply less credit as a share of GDP than in other countries (IMF 2025 Financial Access Survey; World Bank WDI).
- IMF (2013a) and Ghossoub and Reed (2015) note concentrated banking systems often exhibit excess liquidity and lower credit activity.
- Wong (2017) for the Caribbean highlights primary determinants limiting access: eligibility, affordability, and physical access. Specific constraints include:
  - Large collateral requirements relative to loan size.
  - Onerous financial sector requirements.
  - High intermediation costs.
  - Limited physical access to bank branches and ATMs.
- Alleviating these constraints could yield substantial GDP gains and reduce inequality (Wong, 2017).

### Recent trends in private sector credit for SDS
- Private sector credit in many SDS declined after the global financial crisis: after peaking in 2009 and adjusting for Covid-19 effects, bank credit to the private sector has trended downward as a share of GDP.
- Commercial banks dominate financial sectors in many SDS; bank weaknesses (elevated nonperforming loans, weak profitability, recapitalizations) coincided with declining credit shares, notably in parts of the Caribbean.

---

### The Case of Belize

### The Belizean financial system (overview)
- Domestic banks dominate Belize’s financial system:
  - Domestic banks hold about two-thirds of the financial system’s assets, totaling 75 percent of GDP in 2024.
  - Credit unions hold 19 percent of financial system assets and have almost doubled their 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, after loss of correspondent banking relationships and closure of two large banks.
  - Domestic insurance companies and the Development Finance Corporation account for 6 percent and 2 percent of financial system assets, respectively.
- Distribution of financial sector assets - 2024 (percentage of total):
  - Domestic Banks: 68 percent
  - International Banks: 5 percent
  - Credit Unions: 19 percent
  - Domestic Insurance Companies: 6 percent
  - DFC: 2 percent

### Credit trends and composition
- Pre-global financial crisis (the decade prior), private sector credit in Belize expanded rapidly, driven by lending to building and construction, households, real estate, and distribution sectors.
- In the subsequent 15 years, domestic bank lending slowed considerably, constrained by sharp declines in lending to mining and exploration, marine, and distribution sectors—coinciding with weaker growth, successive debt restructurings, and fiscal consolidation.
- By end-2024:
  - Loans to the government accounted for less than 1 percent of total loans.
  - Lending remained concentrated in building and construction, individuals, real estate, and tourism.

### Bank concentration and market structure
- The domestic banking system became more concentrated: number of domestic banks fell to 4 in March 2025 from 6 a decade earlier.
  - 2016: Heritage Bank assumed control of CIBC FirstCaribbean International Bank’s assets in Belize.
  - 2021: Belize Bank acquired Scotiabank’s assets.
- Of the remaining 4 banks, Belize Bank and Atlantic Bank hold approximately four-fifths of total banks’ assets and gross loans.
- Concentration and market power may help explain constrained aggregate private sector lending and higher spreads:
  - The difference between the average rate charged on residential mortgages and the rate paid on fixed deposits is widest for the largest institutions.

### Banks' holdings and capital indicators (selected facts)
- Banks’ holdings of central government Treasury Bills and Treasury Notes accounted for 8 percent of their total assets at end-2024.
- Banks’ regulatory capital and liquidity have historically been broadly adequate but unevenly distributed across institutions.
  - Since 2007, the domestic banking system’s aggregate capital adequacy ratio has comfortably exceeded the regulatory minimum of 9 percent of risk-weighted assets, falling only to as low as (text truncated in source).

---

### Key findings and implications (from the Introduction and Section excerpt)
- Access to finance is especially acute in SDS and in the Caribbean due to structural factors: concentrated banking sectors, high fixed costs, and high collateral/intermediation requirements.
- Belize exhibits typical SDS features:
  - Heavy reliance on tourism (tourism receipts represent almost one half of exports of goods and services).
  - Lower labor force participation relative to non-SDS averages.
  - A concentrated banking system with domestic banks dominant and reduced international bank presence.
- Concentrated banking structures, declining international bank participation, and a shift in lending composition have coincided with lower private sector credit growth relative to pre-2009 levels.
- Policy focus on improving access to finance, increasing labor force participation (notably female participation), and addressing tourism capacity constraints are central to promoting sustained, inclusive, and resilient growth in Belize and other SDS.

*Source: IMF Working Paper — Introduction section of "Towards Achieving Sustained Economic Growth in Small Developing States: A Primer on Belize" (content as provided).*

### 14.9 percent in the aftermath of the pandemic. However, individual banks’ capital ratios have gotten close to or

### Towards Achieving Sustained Economic Growth in Small Developing States: A Primer on Belize

### Banking sector, credit supply, and interest rate pass-through
- Key systemic metrics and concentration
  - Aggregate sector capital ratio referenced at 14.9 percent in the aftermath of the pandemic.
  - As of March 2025, domestic banks’ system-wide regulatory capital = 15.5 percent of risk-weighted assets.
  - 45 percent of deposits were held as liquid assets as of March 2025.
  - Regulatory minimums: capital minimum = 9; liquid assets regulatory minimum = 21 percent.
  - Only one bank holds capital at or above 15.5 percent; more than 80 percent of the system’s capital and excess liquidity concentrated in two institutions.
- Interest rate dynamics and liquidity
  - Weighted average lending rate has trended downward since 2000 and fallen faster than deposit rates; lending spreads close to their historical low.
  - Despite high excess liquidity (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 (noted as a binding feature affecting deposit rates).
- Nonperforming loans and legacy loan losses
  - Gross NPLs peaked at 21 percent of gross loans in March 2011.
  - 69 percent of NPLs were concentrated in the largest bank, where NPLs rose to 38 percent.
  - Loan loss provisions peaked at 8.8 percent in June 2015.
- Empirical findings on savings-floor cuts and pass-through (local projections; Q1 2000–Q4 2024)
  - 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.
  - The impact is greater on deposit than on lending rates over the 8-quarter horizon.
  - Result: banking sector lending spreads widen in the near- to medium-term, as deposit rates fall more than lending rates.
  - Net interest margins likely increase over the medium term, potentially increasing banking sector profitability and capital accumulation.
  - Personal loan rates are more sensitive to cuts in the interest rate on savings deposits than commercial or residential construction loan rates.
- Credit supply, capital, and economic activity (panel regressions; 2007Q1–2024Q4; six domestic banks)
  - Regression specification highlights: ln(Loans) dynamics, ln(GDP) (lagged), CAR (lagged), Liquidity (lagged), Loan Losses (lagged).
  - Key threshold result: below a capital adequacy ratio of 13 percent (threshold ∅ = 13), an expansion in real GDP induces a negative but statistically insignificant impact on credit; above this threshold, the positive relationship between real GDP and credit is stronger.
  - Selected regression coefficients and statistics (Table 1, various estimators):
    - ln(Loans)it−1 = 0.978*** (Baseline, RE)
    - ln(Loans)it−2 = −0.159** (Baseline, RE)
    - ln(GDP)t−4 = 0.093** (Baseline, RE)
    - ln(GDP)t−4 I(x>∅) = 0.119*** (Threshold specification)
    - CARit−4 coefficients reported as 0.000 (standard errors 0.000 across estimators)
    - Liquidityit−4 = 0.000*** (Baseline, RE)
    - Loan Lossesit−4 = −0.002*** (Baseline, RE)
    - Threshold (∅) = 13
    - Observations = 329 (Baseline, RE); other estimators report 323 and 329 observations.
  - Interpretation: higher excess liquidity has a statistically significant but economically modest impact on credit; increasing capital adequacy above its long-term trend alone has no direct impact on bank credit in these specifications.
- Implications for policy and credit access
  - Results provide evidence that private sector credit growth is constrained by supply factors (capital and legacy loan losses) and that reductions in banks’ deposit rates could improve affordability and demand for credit.
  - A reduction or elimination of the savings deposit floor would likely reduce lending rates further, increase the spread temporarily, and, over time, potentially support bank profitability and capital accumulation.
  - Complementary measures to improve credit demand and supply identified in the text:
    - Establish a collateral registry (noted as a recent effort).
    - Automate the credit application process.
    - Reduce lending rates across lending institutions.
    - Address legacy NPLs and strengthen capital buffers above regulatory minimums to enable lending expansion.

*Source: IMF Working Paper — Towards Achieving Sustained Economic Growth in Small Developing States: A Primer on Belize (selected chapters and empirical results provided in the supplied content).*

### Understanding obstacles to credit demand and supply (firm-level perspectives)
- Demand-side observations
  - Financial inclusion increased since the pandemic; number of loans for individuals, MSMEs and corporates increased between 2020 and 2024.
  - Firms continue to cite access to finance and cost of finance as among the most severe obstacles to growth.
  - IDB survey of MSMEs (Interamerican Development Bank, 2024) findings: some firms do not apply for credit due to perceived high interest rates and administrative costs, manual application processes, and onerous collateral requirements.
- Recommended demand-side measures (from the text)
  - Encourage formalization of firms.
  - Support entrepreneurs with business-plan preparation and grants for nascent-stage businesses to increase eligibility for borrowing.
  - Automate application processes and improve collateral infrastructure (collateral registry).

*Source: IMF Working Paper — Towards Achieving Sustained Economic Growth in Small Developing States: A Primer on Belize (selected chapters and empirical results provided in the supplied content).*

### Labor force participation (LFP), gender gaps, and drivers
- Magnitude and recent trends
  - Gap between male and female LFP in Belize narrowed from about 45 percentage points in 1991 to about 26 percentage points in 2024.
  - Closing the LFP gap between men and women relative to 2022 levels could boost GDP level by over 20 percent (International Monetary Fund, 2024a reference in the text).
- Regional and district heterogeneity
  - Corozal, Orange Walk and Stann Creek districts (≈ one third of working-age population) have LFP gaps on average 40 percent higher than the country-wide aggregate gap in 2023 and mostly deteriorated over the past decade (except Orange Walk slight improvement).
  - Belize City and Cayo (≈56 percent of population) have gaps about one third lower than aggregate and improved over the past decade.
  - Toledo (southern district, <10 percent of population) recorded the biggest improvement over the past decade; gap broadly in line with aggregate for Belize as of 2023.
- Sectoral composition and services/tourism role
  - Women are less represented in agriculture and manufacturing; services account for 88 percent of all female employment in 2022.
  - Within services, tourism is an important contributor to reducing the LFP gap.
  - Empirical results (district-level regressions):
    - A one percentage point increase in the share of services employment is associated with a decline in the LFP gap of about 0.5 percentage point (column 1, Table 2: Services employment share coefficient = −0.463**).
    - Tourism employment share in 2013 coefficient = −1.369*** (column 2, Table 2).
    - Share of tourism in services employment in 2013 coefficient = −0.627*** (column 3, Table 2).
- Education and LFP gaps
  - Higher educational attainment associated with substantially smaller LFP gaps.
  - Regression estimates (Table 3):
    - Basic education dummy = −5.162** (column 1)
    - Intermediate education dummy = −21.761*** (column 1)
    - Advanced education dummy = −31.703*** (column 1)
    - Advanced education dummy = −29.699*** (column 2, controlling for rural/urban)
    - Rural dummy = 11.699*** (column 2) — indicating larger gaps in rural areas after controls.
  - Interpretation caveat: associations should not be interpreted strictly as causal because education choices and labor supply decisions are endogenous to labor market prospects; higher education may induce emigration when local opportunities are insufficient.
- Wage and employment disparities
  - After controlling for education (and occupation), women tend to earn almost BZ$200, or about 20 percent, less than men on average (Table 4: Female dummy = −197.230*** in Real wage; Female dummy = −0.199*** in ln(Real wage)).
  - Female unemployment rates tend to be higher than male rates across recent survey snapshots.
- Policy levers identified
  - Promote growth in tourism and other services that disproportionately demand female labor.
  - Increase educational attainment among women and young cohorts to reduce LFP gaps, while ensuring domestic demand for higher-skilled labor to avoid emigration.
  - Address gender wage gaps and promote female representation in ownership/shareholder and management roles (survey evidence: ∼25 percent of firms reported owners/shareholders all or predominantly women; nearly 60 percent reported owners/shareholders all or predominantly men).

*Source: IMF Working Paper — Towards Achieving Sustained Economic Growth in Small Developing States: A Primer on Belize (selected chapters and empirical results provided in the supplied content).*

### Tourism sector capacity constraints and competitiveness
- Tourism’s importance and vulnerabilities
  - Tourism directly accounts for about 12 percent of the economy (SIB May 2025); indirect footprint is larger.
  - Belize’s tourism-led recovery faces infrastructure bottlenecks, physical risks (floods, droughts, tropical storms), and high source-market concentration (United States ≈ 70 percent of arrivals in 2024).
- Recent performance and market diversification
  - Stayover arrivals in 2024 broadly in line with Caribbean average; Belize described as a “late boomer” outperforming some peers in 2024.
  - Cruise passenger segment underperformed regional peers post-pandemic, attributed to lack of a mainland docking facility for large cruise ships.
  - Source-market concentration: US accounted for about 70 percent of total annual arrivals in 2024.
- Infrastructure readiness and carrying capacity
  - Belize has low ratios of total tourists per population and per land area compared to Caribbean peers, implying capacity to receive considerably more tourists.
  - Electricity access improved from about 75 percent three decades ago to approaching 100 percent (full coverage).
- Hotel capacity and geographic misalignment
  - Calculated hotel capacity implies Belize can accommodate more than 1.5 times the number of stayover tourist nights in 2024 (overall).
  - Substantial cross-district variation:
    - Belize District capacity oscillates around 100 percent of total Belize tourist nights.
    - Orange Walk, Corozal, and Toledo typically have hotel capacity about 10 percent of aggregate needs.
  - Over three quarters of stayover tourists arrive via the single international airport in Belize City; hotel capacity in Belize City can accommodate only about 20 percent of those arrivals (per the supplied calculations).
  - Misalignment between hotel capacity distribution and visits to key tourist sites implies potential transport bottlenecks; many famous sites are more than 2 hours’ drive from the international airport.
  - Short-term villa rentals are not included in primary hotel-capacity estimates and could increase capacity in some districts.
- Flight capacity and utilization
  - Belize has one of the highest arrivals-to-flight capacity ratios in the region, indicating limited room for further growth without additional flights.
  - High flight capacity utilization from Europe suggests growth from European source markets could be constrained absent additional flights.
  - Belize added flights to the international airport; this contributed to somewhat lower capacity utilization in 2024 relative to 2019.
- Cost competitiveness
  - Snapshot from Budget Your Trip (April 2025) indicates Belize has a significantly lower cost of travel compared to Caribbean peers across categories: transportation, food/restaurants, sightseeing, and hotel costs — suggesting cost is not a key medium-term constraint.
- Policy implications and priorities
  - Expand hotel capacity (including short-term villa rentals) in districts with identified bottlenecks (Cayo, Orange Walk, Corozal, Toledo).
  - Address transport and connectivity bottlenecks (single international airport concentration; long travel times to sites) via airport network expansion and improved intra-country transport.
  - Invest in infrastructure resilience (utilities, environmental systems, social systems) to ensure sustainable tourism expansion.
  - Diversify source markets to reduce reliance on the United States; add flights/airline connections especially from Europe and other markets.
  - Consider infrastructure for cruise segment (mainland docking facility) to support cruise passenger recovery.

*Source: IMF Working Paper — Towards Achieving Sustained Economic Growth in Small Developing States: A Primer on Belize (selected chapters and empirical results provided in the supplied content).*

### Concluding synthesis and policy recommendations (selected)
- Improve access to finance
  - Reduce or eliminate the floor on the interest rate charged on savings deposits to lower deposit and lending rates (1 percentage point cut shown to reduce lending and deposit rates over 8 quarters).
  - Complement rate reforms with a collateral registry, automation of credit application processes, and measures to reduce lending rates across institutions.
  - Address legacy NPLs and strengthen regulatory capital buffers (noting a 13 percent CAR threshold above which GDP expansions more reliably translate to credit growth).
- Boost labor force participation (focus on female LFP)
  - Leverage tourism and services-sector growth to create demand for female labor.
  - Promote higher educational attainment for women and youth; target policies to ensure domestic absorption of higher-skilled labor.
  - Address gender wage gaps and underrepresentation in ownership/management to reduce barriers to female LFP.
- Alleviate tourism capacity constraints
  - Expand geographically distributed hotel capacity and short-term rental accommodation where bottlenecks exist.
  - Improve air connectivity and add flights to relieve high arrivals-to-flight capacity ratios, especially from Europe and non-AE source markets.
  - Invest in transport links to reduce travel times from the international airport to key sites, and invest in infrastructure resilience to physical risks.
  - Consider cruise infrastructure development (mainland docking) to support cruise passenger recovery.
- Emphasize complementarities across policies
  - Combining improved access to finance, higher female labor force participation, and scaled, sustainable tourism development can generate synergies for sustained growth and job creation in Belize.

*Source: IMF Working Paper — Towards Achieving Sustained Economic Growth in Small Developing States: A Primer on Belize (selected chapters and empirical results provided in the supplied content).*

### conclusions.

### conclusions.

### Access to credit: demand and supply constraints
- Empirical results provide evidence that private sector credit growth in Belize is constrained by both demand and supply factors.
- Demand-side constraints:
  - Complex collateral and application processes.
  - Relatively high lending rates that constrain credit demand.
  - Lower deposit rates could improve the affordability and demand for credit.
- Supply-side constraints:
  - Legacy of high NPLs and loan losses.
  - Insufficient regulatory capital above the regulatory minimum has limited banks’ expansion of credit in the past and likely influences future credit evolution.
- Policy implication:
  - Addressing banks’ capital adequacy and nonperforming loan resolution is key to restoring credit supply; reducing deposit rates may help stimulate credit demand.

### Labor force participation (LFP) gaps and drivers
- Several drivers explain heterogeneity in LFP gaps across Belize’s districts:
  - Share of the tourism sector within the services sector.
  - Educational attainment of younger workforce cohorts.
  - Availability of childcare services.
- Policy implication:
  - Addressing these drivers of LFP gaps between men and women could unleash untapped labor force and increase productivity over the medium term.

### Tourism sector prospects and constraints
- Key determinants of tourism prospects:
  - Hotel capacity, flight availability, and cost competitiveness.
- Findings:
  - Aggregate hotel capacity—double the actual nights—may suggest space for further growth, but distribution across districts is not necessarily aligned with the number of visitors to key attractions.
  - Flight capacity utilization is relatively high, particularly from Europe, constraining growth prospects in the absence of additional flights.
  - Belize’s competitive cost structure across sightseeing, cost of restaurants, and transportation could support the tourism sector going forward.
- Policy implication:
  - Aligning hotel capacity distribution with attraction demand and expanding flight connectivity could support tourism growth; leveraging cost competitiveness can enhance market positioning.

### Cross-cutting relevance and caveats
- Broader relevance:
  - The analysis centers on Belize, but findings on access to credit, drivers of labor force participation, and key factors determining tourism potential have broader relevance for SDS given commonalities facing these economies.
  - There are likely important spillovers and synergies linking improved access to credit, enhanced tourism offer, and better employment prospects in the services/tourism sector.
- Caution:
  - Important differences exist within this heterogeneous group of countries (SDS). Country-specific diagnostics and assessments are essential prerequisites for better informed analyses and policy actions.
- Policy alignment:
  - The references on policies are consistent with the policy recommendations in International Monetary Fund (2025), Belize—2025 Article IV Consultation Staff Report.

*Towards Achieving Sustained Economic Growth in Small Developing States: A Primer on Belize — Working Paper No. WP/2026/041. INTERNATIONAL MONETARY FUND*

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_Source: https://www.imf.org/-/media/files/publications/wp/2026/english/wpiea2026041-source-pdf.pdf_