{
  "title": "IMF Executive Board Concludes 2018 Article IV Consultation with Honduras",
  "publication": "IMF News, June 29, 2018",
  "sourceUrl": "https://www.imf.org/en/news/articles/2018/06/29/pr18268-honduras-imf-executive-board-concludes-2018-article-iv-consultation",
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  "summary": "On May 30, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Honduras.",
  "publishDate": "2018-06-29",
  "sections": [
    {
      "heading": "Recent macroeconomic performance and program completion",
      "content": "- On May 30, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Honduras.\n- Honduras successfully concluded its 2014-2017 Fund-supported program, which:\n  - Restored investor confidence and reduced macroeconomic imbalances.\n  - Catalyzed structural reforms, including modernization of the fiscal policy framework now anchored by a fiscal responsibility law (FRL).\n- Growth and demand:\n  - The economy grew 4¾ percent in 2017, boosted by domestic demand, mainly private consumption supported by record remittances inflows and public investment.\n- Inflation:\n  - Headline inflation picked up to 4¾ percent in 2017 from 3¼ percent in 2016 on the back of strong demand and rising oil prices.\n- External position and reserves:\n  - International reserves were equivalent to 5.3 months of imports of goods and services at end-2017, within Fund adequacy metrics.\n- Fiscal developments:\n  - The fiscal deficit increased slightly from ½ percent of GDP in 2016 to ¾ percent of GDP in 2017, still below the deficit ceiling of the FRL (1½ percent of GDP).\n  - Public revenues were boosted by a ½ percent of GDP windfall stemming from a series of tax amnesties granted after the introduction of the new tax code.\n- Monetary and financial sector:\n  - Monetary policy was accommodative in 2017, resulting in an increase in credit to the economy of 9½ percent.\n  - Modernization of the exchange rate regime continued as the authorities reduced surrender requirements by additional 10 percent (20 percent up to date).\n  - Financial indicators as of end-2017: banks’ capital adequacy ratio was 13¾ percent (well above the regulatory minimum); non-performing loans ratio was 2¼ percent (historical lows)."
    },
    {
      "heading": "Outlook and risks (2018–2019)",
      "content": "- Growth projections:\n  - In 2018-19, growth is expected to hover around 3¾ percent reflecting worsening external conditions.\n- Fiscal and external projections:\n  - The fiscal deficit would remain somewhat below the FRL ceiling as the authorities plan to limit the increase in public debt further.\n  - The current account deficit would widen to about 4 percent of GDP both in 2018 and 2019 as remittances’ growth moderates and oil prices rise.\n- Key risks:\n  - Tighter global financial conditions due to the normalization of the U.S. monetary policy.\n  - More restrictive U.S. immigration policies.\n  - Vulnerabilities to domestic political polarization and potential deterioration in the institutional framework."
    },
    {
      "heading": "Executive Board assessment and policy recommendations",
      "content": "- Overall assessment:\n  - Directors commended the authorities for successful completion of the Fund‑supported program and noted the reduction in macroeconomic imbalances and institutional enhancements, particularly the FRL.\n  - Directors emphasized the need for deeper reforms to entrench macroeconomic stability and place Honduras on a higher, more inclusive growth path.\n- Near‑term policy mix:\n  - Directors supported the authorities’ near‑term policy mix and favored a more prudent fiscal stance than required under the FRL to signal commitment to macroeconomic stability.\n  - Directors welcomed readiness to unwind the supportive monetary policy stance, if needed, to anchor inflation expectations and contain inflationary pressures.\n- Fiscal policy and public finances:\n  - Need for continued ambitious fiscal reforms and revenue mobilization to boost potential growth, expand the social safety net, and reduce poverty.\n  - Positive results of the conditional cash transfers program were noted and its envisaged expansion should remain within the ceilings of the FRL.\n  - Calls for a comprehensive review of large tax expenditures and rationalization of expenditures.\n  - Caution against adverse effects of repeated tax amnesties on compliance and revenue mobilization.\n  - Stronger efforts needed to resolve the financial situation of the state electricity company, right‑size the wage bill, and enhance transparency and efficiency of public expenditure.\n- Monetary and exchange rate policy:\n  - Welcome for progress toward modernization of monetary policy (reductions in surrender requirements; introduction of collateralized transactions in the interbank market).\n  - Recommendation to speed up adoption of the new central bank law to enshrine the primacy of inflation as a monetary policy target.\n  - Recommendation to deepen the money and foreign exchange markets and allow more exchange rate flexibility to provide a cushion against external shocks.\n- Financial sector and supervision:\n  - Welcome for banking system stability and progress toward adopting Basel III standards.\n  - Recommendation for sustained implementation of the Financial Sector Stability Review recommendations.\n  - Calls for careful monitoring of household debt, concentration of consumer loans in public pensions fund portfolios, and the expansion of development banks toward first‑tier operations.\n  - Need for further strengthening of the AML/CFT framework.\n- Structural and institutional reforms:\n  - Urgent need to implement supply‑side reforms to boost competitiveness, growth, and job creation.\n  - Strengthening the rule of law is critical to improve the business environment.\n  - Acknowledgement of ongoing progress in fighting corruption in collaboration with international agencies and recommendation to enhance transparency of the current asset disclosure regime for public officials.\n  - Continued efforts recommended to reduce red tape and increase the ease of doing business.\n  - Need to update national statistics for effective policy formulation; Directors welcomed progress made by the authorities."
    },
    {
      "heading": "Key economic indicators (selected)",
      "content": "- GDP at constant prices (annual percent change): 2013: 2.8; 2014: 3.1; 2015: 3.8; 2016: 4.8; 2017: 3.7; 2018: (Prel.) GDP deflator entries shown separately.\n- GDP deflator (annual percent change): 2013: 1.4; 2014: 6.8; 2015: 6.9; 2016: 3.5; 2017: 4.2; 2018: 4.3.\n- Consumer prices (eop, annual percent change): 2013: 4.9; 2014: 5.8; 2015: 2.4; 2016: 3.3; 2017: 4.7; 2018: 5.0; 2019: 4.5.\n- Exchange rate (eop, Lempiras per U.S. dollar 1/): 2013: 20.7; 2014: 21.6; 2015: 22.4; 2016: 23.5; 2017: 23.6; 2018: 23.8.\n- Real effective rate 2/: 2013: 0.2; 2014: 1.8; 2015: -2.3; 2016: -1.5; 2017: -1.2.\n- Private sector credit (annual percent change): 2013: 11.2; 2014: 10.7; 2015: 10.4; 2016: 10.6; 2017: 9.4; 2018: 10.8.\n- Broad money (annual percent change): 2013: 8.4; 2014: 13.2; 2015: 13.9; 2016: 12.4; 2017: 9.5; 2018: 9.1.\n- Lending rate (eop, in percent): 2013: 16.9; 2014: 15.9; 2015: 14.0; 2016: 14.3.\n- Deposit rate (eop, in percent): 2013: 11.0; 2014: 8.8; 2015: 8.2.\n- Primary balance (percent of GDP): 2013: -7.0; 2014: -3.4; 2015: 0.1; 2016: 0.3; 2017: 0.5.\n- Overall balance (percent of GDP): 2013: -7.5; 2014: -3.9; 2015: -0.9; 2016: -0.5; 2017: -0.8.\n- Gross debt (percent of GDP): 2013: 38.6; 2014: 39.3; 2015: 39.0; 2016: 39.9; 2017: 40.3; 2018: 40.8; 2019: 41.3.\n- Gross fixed capital formation (percent of GDP): 2013: 22.9; 2014: 23.0; 2015: 25.1; 2016: 23.4; 2017: 24.0; 2018: 24.9.\n- Gross national savings (percent of GDP): 2013: 13.4; 2014: 16.0; 2015: 20.5; 2016: 22.3; 2017: 21.1; 2018: 21.2.\n- Gross international reserves (millions of dollars): 2013: 3,255; 2014: 3,698; 2015: 3,992; 2016: 4,177; 2017: 5,086; 2018: 5,172; 2019: 5,351.\n- Gross international reserves (in months of imports) 3/: 2013: 5.3; 2014: 5.1.\n- Change in net international reserves (increase -): 2013: -546; 2014: -264; 2015: -303; 2016: 124; 2017: -708; 2018: -50; 2019: -155.\n- Current account balance (percent of GDP): 2013: -9.5; 2014: -6.9; 2015: -4.7; 2016: -2.7; 2017: -1.7; 2018: -3.8.\n- Exports f.o.b. (annual percent change): 2013: -6.6; 2014: 4.0; 2015: 1.3; 2016: -3.5; 2017: 9.3.\n- Imports f.o.b. (annual percent change): 2013: -3.7; 2014: 1.2; 2015: 0.8; 2016: -5.5; 2017: 7.2; 2018: 5.7; 2019: 3.9.\n\nIMF Executive Board Concludes 2018 Article IV Consultation with Honduras, June 29, 2018.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Honduras and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2018/06/29/pr18268-honduras-imf-executive-board-concludes-2018-article-iv-consultation"
    }
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    "Published: June 29, 2018",
    "On May 30, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Honduras.",
    "Honduras successfully concluded its 2014-2017 Fund-supported program, which:",
    "Growth and demand:",
    "Inflation:",
    "External position and reserves:",
    "Fiscal developments:",
    "Monetary and financial sector:",
    "Growth projections:",
    "Fiscal and external projections:",
    "Key risks:",
    "Overall assessment:",
    "Near‑term policy mix:",
    "Fiscal policy and public finances:",
    "Monetary and exchange rate policy:",
    "Financial sector and supervision:",
    "Structural and institutional reforms:",
    "GDP at constant prices (annual percent change): 2013: 2.8; 2014: 3.1; 2015: 3.8; 2016: 4.8; 2017: 3.7; 2018: (Prel.) GDP deflator entries shown separately.",
    "GDP deflator (annual percent change): 2013: 1.4; 2014: 6.8; 2015: 6.9; 2016: 3.5; 2017: 4.2; 2018: 4.3.",
    "Consumer prices (eop, annual percent change): 2013: 4.9; 2014: 5.8; 2015: 2.4; 2016: 3.3; 2017: 4.7; 2018: 5.0; 2019: 4.5.",
    "Exchange rate (eop, Lempiras per U.S. dollar 1/): 2013: 20.7; 2014: 21.6; 2015: 22.4; 2016: 23.5; 2017: 23.6; 2018: 23.8.",
    "Real effective rate 2/: 2013: 0.2; 2014: 1.8; 2015: -2.3; 2016: -1.5; 2017: -1.2.",
    "Private sector credit (annual percent change): 2013: 11.2; 2014: 10.7; 2015: 10.4; 2016: 10.6; 2017: 9.4; 2018: 10.8.",
    "Broad money (annual percent change): 2013: 8.4; 2014: 13.2; 2015: 13.9; 2016: 12.4; 2017: 9.5; 2018: 9.1.",
    "Lending rate (eop, in percent): 2013: 16.9; 2014: 15.9; 2015: 14.0; 2016: 14.3.",
    "Deposit rate (eop, in percent): 2013: 11.0; 2014: 8.8; 2015: 8.2.",
    "Primary balance (percent of GDP): 2013: -7.0; 2014: -3.4; 2015: 0.1; 2016: 0.3; 2017: 0.5.",
    "Overall balance (percent of GDP): 2013: -7.5; 2014: -3.9; 2015: -0.9; 2016: -0.5; 2017: -0.8.",
    "Gross debt (percent of GDP): 2013: 38.6; 2014: 39.3; 2015: 39.0; 2016: 39.9; 2017: 40.3; 2018: 40.8; 2019: 41.3.",
    "Gross fixed capital formation (percent of GDP): 2013: 22.9; 2014: 23.0; 2015: 25.1; 2016: 23.4; 2017: 24.0; 2018: 24.9.",
    "Gross national savings (percent of GDP): 2013: 13.4; 2014: 16.0; 2015: 20.5; 2016: 22.3; 2017: 21.1; 2018: 21.2.",
    "Gross international reserves (millions of dollars): 2013: 3,255; 2014: 3,698; 2015: 3,992; 2016: 4,177; 2017: 5,086; 2018: 5,172; 2019: 5,351.",
    "Gross international reserves (in months of imports) 3/: 2013: 5.3; 2014: 5.1.",
    "Change in net international reserves (increase -): 2013: -546; 2014: -264; 2015: -303; 2016: 124; 2017: -708; 2018: -50; 2019: -155.",
    "Current account balance (percent of GDP): 2013: -9.5; 2014: -6.9; 2015: -4.7; 2016: -2.7; 2017: -1.7; 2018: -3.8.",
    "Exports f.o.b. (annual percent change): 2013: -6.6; 2014: 4.0; 2015: 1.3; 2016: -3.5; 2017: 9.3.",
    "Imports f.o.b. (annual percent change): 2013: -3.7; 2014: 1.2; 2015: 0.8; 2016: -5.5; 2017: 7.2; 2018: 5.7; 2019: 3.9.",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
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    "[Honduras and the IMF](http://www.imf.org/external/country/HND/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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