IMF Staff Concludes Visit to Honduras

IMF News, November 10, 2023

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IMF team led by Ricardo Llaudes and supported by resident representative Christian Henn visited San Pedro Sula and Tegucigalpa, Honduras, during November 5-9, 2023.
Visit focused on recent economic developments and the authorities’ implementation of their economic program supported by the Fund through the ECF/EFF arrangements approved in late September.
End-of-mission press release date: November 10, 2023. Press Release No. 23/388.

Growth has been picking up since May and is expected to close 2023 somewhat above 3 percent.
Inflation has been coming down during most of this year, despite recent increases in global oil prices, and is expected to reach the BCH’s reference range in early 2024.
The country’s international reserves remain at adequate levels.
Against a more challenging global outlook, US interest rates are expected to remain higher.

Fiscal policy has remained prudent with incipient signs of higher budget execution, in particular on capital spending.
Recent increases in banks’ reserve requirements are described as a valuable first step.
Discussions centered on monetary and exchange rate policies needed to ensure low inflation and preserve external competitiveness and the country’s international reserves.
Forthcoming Fund technical assistance will assist the BCH in evaluating the monetary and exchange rate frameworks to identify measures to strengthen these and improve the efficiency of FX allocation.

The team welcomed the authorities’ focus on scaling up public investment.
Progress continues in rolling out social programs, especially Red Solidaria, while keeping them focused on the poorest and most vulnerable.
The authorities have resumed domestic bond placements, described as essential to deepen domestic financial markets.
Timely adoption of the 2024 draft budget submitted to Congress will be important to support inclusive growth and preserve debt sustainability.

Authorities highlighted recent achievements:
- Launches of customs reform and an electronic asset declaration system for public officials.
- Publication of a public borrowing policy.
Authorities reiterated commitment to energy sector reforms to improve the financial position of ENEE and guarantee the adequate provision of energy.
- Key measures include investment in transmission and distribution and stepping up implementation of the national loss reduction program (NLRP).
- Timely bond issuances by ENEE are important to address arrears and improve payment discipline.

Decisive implementation of program policies will be essential to preserve macroeconomic stability and bolster economic resilience.
It will be necessary to decisively redouble efforts, in line with program commitments on monetary and foreign exchange (FX) policies, to achieve low inflation and preserve external competitiveness.
IMF staff will continue to work with the authorities to support Honduras’ efforts to boost inclusive growth and reduce poverty, including through scaling up public investment and social spending.
The IMF team stands ready to continue to support the government of Honduras in the implementation of its economic reform program.

IMF Press Release No. 23/388, November 10, 2023.