Honduras's New Economic Plan for Stability and Growth

IMF News, July 19, 2019

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Honduras completed its IMF-supported economic program in December 2017 and has "made significant progress in restoring economic stability and laying the groundwork for sustainable growth."
Remaining challenges identified:
- High poverty.
- A large informal labor market.
- Strong dependence on agriculture.
- Violence that continues to challenge economic growth.
- Deteriorating financial situation of the public electricity company, which has strained public finances.
The authorities maintained prudent policies with a low fiscal deficit that "over-performed the targets in the Fiscal Responsibility Law over the last years."

Honduras has requested US$311 million in IMF support to foster its reform agenda and promote inclusive growth.
The authorities plan to treat the financing as precautionary; they are not planning to draw on it.

Overall aims:
- Make the economy strong and stable.
- Protect the most vulnerable.
- Support jobs and growth that benefit all.
Key elements listed in the plan:
- Securing the fiscal position by placing the public electricity company on a sustainable path through reforms in the electricity sector and through measures to maintain spending room in the budget for investment and social spending.
- Strengthening the monetary policy framework to buffer shocks and maintain stability.
- Implementing reforms to improve the business environment and governance, including stepping up efforts in the fight against corruption.

Fiscal strategy:
- Bold reforms for the public electricity company’s finances plus efforts to uphold previous revenue mobilization achievements are intended to maintain space for social spending.
- The fiscal program defines priority spending that will be protected going forward.
High-impact interventions aimed at alleviating poverty and fostering inclusive growth include:
- Criando con Amor
- Mejores Familias
- Ciudad Mujer
Policy focus: alleviate poverty, foster investment in human capital, and support women entrepreneurship and participation in labor markets.

Current benchmark: women comprise 46 percent of the total working population in the formal labor market.
Plan measures to support more women in the workforce:
- Supporting childcare services.
- Facilitating credit for women.
- Supporting women with young children.
These measures combine new programs with expansion of ongoing initiatives to promote women entrepreneurship and improve access to education and labor market opportunities.

Planned reforms aim to:
- Improve governance and transparency in public finance management.
- Strengthen the monetary policy operational framework.
- Reform the electricity sector.
Efforts with staff and development partners to implement reforms to enhance the rule of law, with objectives to:
- Prevent misuse of public funds.
- Improve the business climate.
- Simplify procedures in public administration to reduce red tape and discretion that can give place to corruption.

Honduras's New Economic Plan for Stability and Growth — July 19, 2019