News Brief: IMF Completes PRGF Review for Honduras and Approves US$22.5 Million Disbursement
December 8, 1999
US$22.5 Million Disbursement
The International Monetary Fund (IMF) today completed the first review under the Poverty Reduction and Growth Facility (PRGF)1 for Honduras. As a result of the review, Honduras will be able to request a disbursement for the equivalent of SDR 16.15 million (about US$22.5 million).
In summarizing the IMF Executive Board's discussion of the review, Shigemitsu Sugisaki, Deputy Managing Director, said:
"Directors commended the authorities for their efforts to preserve economic stability in the difficult period following last year's devastating Hurricane Mitch, noting that under the PRGF arrangement inflation had been reduced and the international reserve position strengthened. In addition, some progress had been made toward privatization, reforms of the civil service and in tackling the most pressing social needs.
"Directors observed that despite these achievements, Honduras faced a number of challenges, including consolidating macroeconomic stability while speeding up the pace of the public sector reconstruction program; implementing reforms aimed at promoting a recovery in private investment; and addressing the social conditions which had become more difficult following the hurricane.
"Directors noted that promoting a sustained economic recovery and bringing inflation down further would require a combination of sound macroeconomic policies and speedy implementation of structural reforms. They welcomed the fiscal performance achieved in 1999, and the initial fiscal plan for 2000 that was broadly in line with the objectives envisaged under the PRGF ESAF arrangement. Directors stressed that an adequate level of public savings would be an essential counterpart to the significant inflows of external assistance aimed at restoring the country's physical and social infrastructure. In this connection, they recommended that the authorities maintain firm control over spending, strengthen tax administration and set public sector tariffs at the appropriate level.
"Directors stressed the need to implement without delay the structural reforms contained in the PRGF-supported program, in particular, strengthening the social security scheme, making further progress in privatization, continuing to restructure the civil service, and maintaining confidence in the banking system. Directors welcomed the initial steps made by the authorities to enhance transparency, governance and accountability, and to consult more fully with civil society on strategies to address poverty and the overall reconstruction process. In this connection Directors looked forward to discussing in 2000 Honduras' poverty reduction strategy in the context of the HIPC Initiative," Sugisaki said.
1The Executive Board decided on October 21, 1999 to rename the Enhanced Structural Adjustment Facility (ESAF) the Poverty Reduction and Growth Facility (PRGF) and to change the objectives of the renamed facility. The decision became effective on November 22, 1999. The PRGF is a concessional IMF facility for assisting eligible members that are undertaking economic reform programs to strengthen their balance of payments and improve their growth prospects. PRGF loans carry an interest rate of 0.5 percent and are repayable over 10 years with a 5½ -year grace on principal payments.