Press Release No. <a name="P16_75"></a>05/198

The following statement was issued today in Tegucigalpa by an International Monetary Fund (IMF) staff mission:

"An IMF staff mission visited Tegucigalpa, Honduras during August 22-September 2, 2005 for discussions with the authorities on the third review of the Poverty Reduction and Growth Facility (PRGF) program.

"The mission found the government's economic program is continuing to deliver results. The strong recovery of 2004 is moderating somewhat on account of lower agricultural output and higher oil prices. Inflation has stabilized, after drifting upward last year mainly because of high oil prices. The external position strengthened substantially, supported by strong growth in remittances of over 50 percent through June 2005, raising international reserves to over US$2 billion.

"The results reflect strong macroeconomic policies and structural reforms pursued under the government's program. The fiscal deficit was reduced as expected, as control over the wage bill and debt relief allowed poverty-reducing spending to increase. All quantitive targets for end-June were met.

"Looking forward, it will be important to maintain the consensus on the program through the upcoming election period and transition to a new government. The mission supports the government's efforts to cushion the impact of high oil prices on the poor, while maintaining fiscal discipline. It is essential to maintain continuity in policies to protect gains of higher growth and social progress.

"Upon its return to Washington, the mission will submit its report to the IMF's Management. Executive Board consideration of the PRGF review could take place in mid-October."