Press Release No. 19/284

IMF Executive Board Approves US$207.5 Million Stand-By Arrangement and US$103.8 Million Standby Credit Facility for Honduras

July 16, 2019

The Executive Board of the International Monetary Fund (IMF) approved on July 15 an SDR 149.88 million (about US$207.5million) Stand-By Arrangement (SBA) and an SDR 74.94 million (about US$103.8 million) arrangement under the Standby Credit Facility (SCF) for Honduras for a combined SDR 224.82 million (about US$311.3 million or 90 percent of Honduras’ quota). The authorities intend to treat the arrangements as precautionary. These arrangements provide support for the Honduran government’s economic and institutional reform agenda over the next two years.

Following the Executive Board discussion, Mr. Mitsuhiro Furusawa Deputy Managing Director and Chair, made the following statement:

“The Honduran authorities are implementing a comprehensive economic program and reforms that aim at maintaining macroeconomic stability, reducing vulnerabilities, protecting the most vulnerable, and bolstering inclusive growth.

“Securing the fiscal position while protecting investment and social spending is at the core of the program . Adherence to the fiscal responsibility law (FRL) should be coupled with reforms to address structural challenges in the electricity sector and further revenue mobilization efforts, including through the revision of tax exemptions. These reforms will help to reduce the infrastructure gap and increase social spending, while simultaneously ensuring fiscal sustainability.

“Reforms in the energy sector aim at enhancing efficiency in the provision of electricity, boosting investment, and strengthening the financial position of the public electricity company (ENEE). They will include changes in the institutional framework, measures to set electricity tariffs through an independent regulatory body, and governance and operational reforms in ENEE. The authorities have introduced subsidies to protect the most vulnerable from tariff adjustments.

“Priority has been given to enhancing governance and transparency, and to continue the fight against corruption. Efforts will aim at improving the macroeconomic framework, increasing the quality of public spending, and strengthening the rule of law—fundamental to improving the business environment and fostering investment and employment.

“Monetary policy will continue to focus on controlling inflation. Reforms will aim at strengthening monetary and financial institutions to support the transition toward inflation targeting, including by adopting a more flexible exchange rate regime. Vigilance in the financial sector will need to continue, given foreign exchange credit growth.

“The program also includes measures to protect the poor and bolster gender equality. It defines priority social spending that will be protected in coming years; and comprises a set of high-impact interventions aimed at alleviating poverty, fostering investment in human capital, and supporting women entrepreneurship and participation in labor markets, which are critical for long-term growth.”