IMF Staff Statement at the Conclusion of a Visit to Honduras

Press Release No. 10/115
March 25, 2010

Mario Garza, resident representative of the International Monetary Fund (IMF) in Tegucigalpa, issued the following statement today:

“With the objective of assessing developments and the near-term outlook of the Honduran economy, an IMF mission met with President Porfirio Lobo, the economic cabinet, congress, and private sector representatives. The mission wishes to thank the authorities for their excellent cooperation and candid discussions. In 2009, the global economic slowdown and the political crisis contributed to an economic contraction of 2 percent. In the fiscal area, despite a decline in public investment, the fiscal deficit rose markedly due to a substantial increase in current spending, mainly the wage bill, leading to a large increase in the public domestic debt. In the context of an expansionary monetary policy, the increase of central bank credit to the public sector contributed to a loss of international reserves. The authorities and the mission shared the view that maintaining expansionary policies is not sustainable and that a solid macroeconomic framework is required to foster economic growth in Honduras.

“The mission supported the authorities’ vision of promoting economic recovery and enhancing social conditions in a context of macroeconomic stability and fiscal sustainability. To stabilize the public debt and improve the composition of public spending toward investment and anti-poverty spending, the mission is of the view that strong actions are required to contain current spending, especially the wage bill, and strengthen the finances of public enterprises, public pension funds, and municipalities. Also, monetary policy should be geared at protecting the foreign reserve position and lowering core inflation. The mission plans to hold the discussions for the 2010 Article IV consultation in May”.



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