Statement at the Conclusion of the IMF Mission to HondurasPress Release No. 11/73
March 11. 2011
An IMF mission visited Honduras during February 28 to March 11 to conduct the first review of performance under the program approved by the Executive Board of the IMF on October 1, 2010. The mission wishes to thank the authorities for their cooperation.
The mission noted that all quantitative performance criteria for December 2010 were observed with ample margins, and that there have been significant advances in structural reforms. For 2011, the mission and the authorities reached understandings on the appropriate economic policies to support the economic recovery and reinforce macroeconomic stability. These understandings are subject to approval by the IMF’s Management and Executive Board, which is envisaged in late-April.
The mission observed that the Honduran economy continues to recover and estimates that real GDP grew by 2.8 percent in 2010, while annual inflation was 6.5 percent, within the central bank’s target range despite higher prices of food and fuels resulting from international price shocks and domestic weather-related supply shocks. The external current account deficit amounted to US$955 million (6.2 per cent of GDP), in line with program projections, and was financed with substantial inflows of private capital, resulting in an increase of gross international reserves to US$2.931 billion.
The Honduran authorities reaffirmed that fiscal policy will continue to aim at reducing the combined public sector deficit to 2 percent of GDP over the medium term. Consistent with this objective, the combined public sector deficit was 2.9 percent of GDP in 2010, lower than the program projection of 3.7 percent. The authorities concurred that the deficit in 2011 will be broadly maintained at 3.1 percent of GDP. Monetary policy will continue to focus on keeping inflation under control and protecting international reserves. In addition, the government will continue undertaking reforms designed to strengthen the financial situation of the public pension funds and the Honduran Institute of Social Security, increase the efficiency of the state enterprises, and improve the targeting of social safety nets.
The mission noted the government’s efforts and effective conduct of economic policy. The Government’s economic program is being supported by a blend of resources in the amount of SDR 129.5 million (about US$202 million) from two IMF credit lines, the Stand-By Arrangement (SBA) and the Standby Credit Facility (SCF).