{
  "title": "Press Release: IMF Approves Three-Year Arrangement Under the ESAF for Honduras",
  "publication": "IMF News, March 26, 1999",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9911",
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  "summary": "The IMF approved a three-year arrangement under the Enhanced Structural Adjustment Facility (ESAF) for Honduras in an amount equivalent to SDR 156.75 million (about US$215 million) to support the government’s economic program for 1999-2001.",
  "publishDate": "1999-03-26",
  "sections": [
    {
      "heading": "IMF approval and financing",
      "content": "- The IMF approved a three-year arrangement under the Enhanced Structural Adjustment Facility (ESAF) for Honduras in an amount equivalent to SDR 156.75 million (about US$215 million) to support the government’s economic program for 1999-2001.\n- The first annual loan is equivalent to SDR 76 million (about US$104 million) and will be available in two semiannual installments.\n- The first semiannual installment, equivalent to SDR 59.85 million (about US$82 million), will be available on April 12, 1999.\n- ESAF loan terms: interest rate of 0.5 percent a year, repayable over 10 years, with a 5½-year grace period."
    },
    {
      "heading": "Background and recent economic performance",
      "content": "- Early- to mid-1990s: IMF-supported programs reduced fiscal imbalances, reformed the tax system, increased central bank autonomy, and liberalized interest rates and exchange and trade systems.\n- Persistent challenges: real GDP growth averaged less than 4 percent a year in the first half of the 1990s; inflation stood at 26 percent at the end of 1996; external position remained weak.\n- 1997–September 1998: real GDP growth accelerated to 5 percent in 1997 and to an estimated 5½ percent in the 12 months ended in September 1998.\n- January–September 1998 fiscal performance: central government deficit narrowed to about 2 percent of GDP from 3 percent of GDP in calendar year 1997."
    },
    {
      "heading": "Impact of Hurricane Mitch (late October 1998)",
      "content": "- The hurricane caused unprecedented human suffering and virtually crippled the economy.\n- Estimated direct losses of inventories and fixed assets amounted to about 50 percent of annual GDP.\n- Calendar year 1998 macro effects:\n  - Real GDP growth slowed to an estimated 3 percent.\n  - Unemployment increased.\n  - 12-month rate of inflation picked up to 15½ percent.\n  - Central government and balance of payments deficits widened."
    },
    {
      "heading": "Medium-term strategy and the 1999 program",
      "content": "- Main objectives:\n  - Achieve a rapid, sustained recovery.\n  - Address considerable social needs exacerbated by the hurricane.\n- Targets:\n  - Recovery in the rate of real GDP to about 5-6 percent a year by 2000-01 following an expected decline in real GDP by 2-3 percent in 1999 (mainly reflecting extensive damage to the agricultural sector).\n  - Reduction in the 12-month inflation rate to 13-14 percent by December 1999 and to 8 percent by end-2001.\n  - Maintain an international reserve position equivalent to 3½-4 months of imports.\n- Fiscal strategy for 1999:\n  - Revised budget to shift spending toward emergency relief and reconstruction.\n  - Contain growth in nonemergency expenditures.\n  - Strengthen revenue through improvements in tax administration.\n  - Program contemplates a marked widening of the combined public sector deficit in 1999 to about 8½ percent of GDP, expected to be financed almost entirely by concessional loans and debt relief."
    },
    {
      "heading": "Debt and HIPC considerations",
      "content": "- Prior to the hurricane, Honduran external debt indicators did not reach the thresholds required for eligibility under the Heavily Indebted Poor Countries (HIPC) Initiative.\n- In the wake of the hurricane, IMF, World Bank, and Inter-American Development Bank staffs have begun work on a comprehensive reassessment of the country’s debt situation and prospects for debt relief in the context of the initiative."
    },
    {
      "heading": "Structural reforms",
      "content": "- Public sector objectives:\n  - Complete transfer of control of the telephone company to a private partner.\n  - Conclude privatization of the electricity distribution network.\n  - Grant concessions to the private sector for management and operation of public works and airports.\n  - Reform civil service: eliminate duplication and overlap among institutions; reclassify positions and salaries to attract and retain skilled staff.\n- Financial sector measures:\n  - Identify and address weaknesses in legal and institutional framework for bank supervision.\n  - Implement recommendations of the banking commission resulting from ongoing on-site inspection of banks during the ESAF arrangement."
    },
    {
      "heading": "Addressing social needs",
      "content": "- Social sector policies focus:\n  - Tackling poverty through faster economic growth.\n  - Improving delivery and targeting of basic health, education, and social safety net services.\n  - Priority given to disease prevention, neonatal and child care, and minimum nutritional support.\n- Program contemplates creation of a fund to finance repair of low-income houses."
    },
    {
      "heading": "The challenge ahead",
      "content": "- Success depends on:\n  - Continued implementation of sound policies by Honduran authorities.\n  - A continuous flow of external assistance and debt relief.\n- IMF membership and exposure:\n  - Honduras is an original member of the IMF; its quota is SDR 129.5 million (about US$177 million).\n  - Outstanding use of IMF credit currently totals SDR 78.7 million (about US$108 million)."
    },
    {
      "heading": "Selected economic indicators (as presented)",
      "content": "- National income and prices (annual percentage changes, unless otherwise indicated):\n  - GDP at constant prices: 1995: 4.2; 1996: 3.7; 1997: 5.1; 1998: 3.0; 1999 (Prel./Prog.): -3.0\n  - GDP deflator: 1995: 24.8; 1996: 22.4; 1997: 22.7; 1998: 13.7; 1999: 15.3\n  - Consumer prices (end of period): 1995: 26.8; 1996: 25.5; 1997: 12.8; 1998: 15.7; 1999: 13.0\n  - Consumer prices (period average): 1995: 29.5; 1996: 23.8; 1997: 20.2; 1998: 13.6; 1999: (not listed)\n- External sector (data on U.S. dollars):\n  - Exports, f.o.b.: 1995: 27.6; 1996: 9.6; 1997: 8.0; 1998: 4.5; 1999: -22.5\n  - Imports, c.i.f.: 1995: 12.3; 1996: 12.0; 1997: 15.9; 1998: 14.7; 1999: 17.2\n  - Effective exchange rate (depreciation -)1 Nominal rate: 1995: -12.7; 1996: -12.0; 1997: -2.6; 1998: -6.5; 1999: ...\n  - Real effective rate: 1995: 5.8; 1996: 0.3; 1997: 15.0; 1998: 5.4; 1999: (not listed)\n- Central government (annual percent changes unless otherwise indicated):\n  - Current revenue: 1995: 46.8; 1996: 18.8; 1997: 28.7; 1998: -7.7; 1999: (not listed)\n  - Expenditure and net lending: 1995: 19.7; 1996: 21.2; 1997: 21.9; 1998: 39.1; 1999: 40.3\n- Money and credit:\n  - Net domestic assets2: 1995: 3.6; 1996: 16.2; 1997: 12.9; 1998: 15.1; 1999: 14.4\n  - Public sector: 1995: -8.7; 1996: -4.5; 1997: -11.4; 1998: -14.3; 1999: 0.0\n  - Private sector: 1995: 15.4; 1996: 25.0; 1997: 35.5; 1998: 28.4; 1999: 18.7\n  - Money and quasi-money: 1995: 20.8; 1996: 32.2; 1997: 43.3; 1998: 23.6; 1999: (not listed)\n  - Interest rate (on certificate of deposit): 1995: 17.1; 1996: 19.9; 1997: 21.7; 1998: 18.0\n- Central government overall balance (in percent of GDP): 1995: -2.8; 1996: -4.1; 1997: -3.2; 1998: -8.6; 1999: (not listed)\n- Revenue and grants (in percent of GDP): 1995: 18.3; 1996: 17.3; 1997: 19.3; 1998: 21.1; 1999: 21.4\n- Financing of the nonfinancial public sector (in percent of GDP):\n  - 1995: 2.7; 1996: 1.3; 1997: 0.9; 1998: 8.3; 1999: (not listed)\n  - Foreign financing: 1995: 4.7; 1996: 3.8; 1997: 2.9; 1998: 1.5; 1999: 7.8\n  - Domestic financing: 1995: -2.0; 1996: -0.2; 1997: -1.6; 1998: -0.6; 1999: 0.5\n- Public sector savings3 (in percent of GDP): 1995: 7.1; 1996: 6.9; 1997: 5.6; 1998: 2.2; 1999: (not listed)\n- Combined public sector balance4 (in percent of GDP): 1995: -3.5; 1996: -4.7; 1997: -2.9; 1998: -1.4; 1999: (not listed)\n- Fixed capital formation (in percent of GDP): 1995: 23.0; 1996: 23.3; 1997: (not listed)\n- External current account deficit (excluding official transfers) (in percent of GDP): 1995: -4.8; 1996: -3.9; 1997: -12.5; 1998: (not listed)\n  - Alternative line: 1995: -8.2; 1996: -6.9; 1997: -6.6; 1998: -16.3\n- Gross national savings (in percent of GDP): 1995: 18.5; 1996: 21.5; 1997: 20.0; 1998: (not listed)\n- External public debt inclusive of Fund credit (in percent of GDP): 1995: 101.2; 1996: 94.8; 1997: 78.8; 1998: 71.6; 1999: 80.2\n- Debt-service ratio (before debt relief) (in percent of exports of goods and services): 1995: 33.0; 1996: 32.6; 1997: 24.6\n- Change in net international reserves (increase -) (in millions of U.S. dollars): 1995: -116; 1996: -98; 1997: -280; 1998: -168; 1999: -45\n- Gross international reserves (in millions of U.S. dollars): 1995: 296; 1996: 283; 1997: 548; 1998: 770; 1999: 918\n- Reserves (in months of imports): 1995: 1.9; 1996: 1.6; 1997: 3.3; 1998: 3.4; 1999: (not listed)\n- Stock of external debt (in millions of U.S. dollars): 1995: 3,952; 1996: 3,767; 1997: 3,650; 1998: 3,788; 1999: 4,385\n- Stock of external debt arrears (in millions of U.S. dollars): 1995: 127; 1996: 179; 1997: 120; 1998: 136; 1999: 0\n\nPress Release No. 99/11, March 26, 1999.\n\n---\n\n\n References\n\n- Honduras and the IMF\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9911"
    }
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    "Published: March 26, 1999",
    "The IMF approved a three-year arrangement under the Enhanced Structural Adjustment Facility (ESAF) for Honduras in an amount equivalent to SDR 156.75 million (about US$215 million) to support the government’s economic program for 1999-2001.",
    "The first annual loan is equivalent to SDR 76 million (about US$104 million) and will be available in two semiannual installments.",
    "The first semiannual installment, equivalent to SDR 59.85 million (about US$82 million), will be available on April 12, 1999.",
    "ESAF loan terms: interest rate of 0.5 percent a year, repayable over 10 years, with a 5½-year grace period.",
    "Early- to mid-1990s: IMF-supported programs reduced fiscal imbalances, reformed the tax system, increased central bank autonomy, and liberalized interest rates and exchange and trade systems.",
    "Persistent challenges: real GDP growth averaged less than 4 percent a year in the first half of the 1990s; inflation stood at 26 percent at the end of 1996; external position remained weak.",
    "1997–September 1998: real GDP growth accelerated to 5 percent in 1997 and to an estimated 5½ percent in the 12 months ended in September 1998.",
    "January–September 1998 fiscal performance: central government deficit narrowed to about 2 percent of GDP from 3 percent of GDP in calendar year 1997.",
    "The hurricane caused unprecedented human suffering and virtually crippled the economy.",
    "Estimated direct losses of inventories and fixed assets amounted to about 50 percent of annual GDP.",
    "Calendar year 1998 macro effects:",
    "Main objectives:",
    "Targets:",
    "Fiscal strategy for 1999:",
    "Prior to the hurricane, Honduran external debt indicators did not reach the thresholds required for eligibility under the Heavily Indebted Poor Countries (HIPC) Initiative.",
    "In the wake of the hurricane, IMF, World Bank, and Inter-American Development Bank staffs have begun work on a comprehensive reassessment of the country’s debt situation and prospects for debt relief in the context of the initiative.",
    "Public sector objectives:",
    "Financial sector measures:",
    "Social sector policies focus:",
    "Program contemplates creation of a fund to finance repair of low-income houses.",
    "Success depends on:",
    "IMF membership and exposure:",
    "National income and prices (annual percentage changes, unless otherwise indicated):",
    "External sector (data on U.S. dollars):",
    "Central government (annual percent changes unless otherwise indicated):",
    "Money and credit:",
    "Central government overall balance (in percent of GDP): 1995: -2.8; 1996: -4.1; 1997: -3.2; 1998: -8.6; 1999: (not listed)",
    "Revenue and grants (in percent of GDP): 1995: 18.3; 1996: 17.3; 1997: 19.3; 1998: 21.1; 1999: 21.4",
    "Financing of the nonfinancial public sector (in percent of GDP):",
    "Public sector savings3 (in percent of GDP): 1995: 7.1; 1996: 6.9; 1997: 5.6; 1998: 2.2; 1999: (not listed)",
    "Combined public sector balance4 (in percent of GDP): 1995: -3.5; 1996: -4.7; 1997: -2.9; 1998: -1.4; 1999: (not listed)",
    "Fixed capital formation (in percent of GDP): 1995: 23.0; 1996: 23.3; 1997: (not listed)",
    "External current account deficit (excluding official transfers) (in percent of GDP): 1995: -4.8; 1996: -3.9; 1997: -12.5; 1998: (not listed)",
    "Gross national savings (in percent of GDP): 1995: 18.5; 1996: 21.5; 1997: 20.0; 1998: (not listed)",
    "External public debt inclusive of Fund credit (in percent of GDP): 1995: 101.2; 1996: 94.8; 1997: 78.8; 1998: 71.6; 1999: 80.2",
    "Debt-service ratio (before debt relief) (in percent of exports of goods and services): 1995: 33.0; 1996: 32.6; 1997: 24.6",
    "Change in net international reserves (increase -) (in millions of U.S. dollars): 1995: -116; 1996: -98; 1997: -280; 1998: -168; 1999: -45",
    "Gross international reserves (in millions of U.S. dollars): 1995: 296; 1996: 283; 1997: 548; 1998: 770; 1999: 918",
    "Reserves (in months of imports): 1995: 1.9; 1996: 1.6; 1997: 3.3; 1998: 3.4; 1999: (not listed)",
    "Stock of external debt (in millions of U.S. dollars): 1995: 3,952; 1996: 3,767; 1997: 3,650; 1998: 3,788; 1999: 4,385",
    "Stock of external debt arrears (in millions of U.S. dollars): 1995: 127; 1996: 179; 1997: 120; 1998: 136; 1999: 0",
    "[Honduras and the IMF](http://www.imf.org/external/country/HND/index.htm)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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