{
  "title": "IMF Executive Board Concludes 2018 Article IV Consultation with Honduras",
  "publication": "IMF News, July 3, 2018",
  "sourceUrl": "https://www.imf.org/en/news/articles/2018/07/03/pr18268-imf-executive-board-concludes-2018-article-iv-consultation-with-honduras",
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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": "2018-07-03",
  "sections": [
    {
      "heading": "Overview",
      "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 helped restore investor confidence, reduce macroeconomic imbalances, and catalyze structural reforms including modernization of the fiscal policy framework anchored by a fiscal responsibility law (FRL)."
    },
    {
      "heading": "Macroeconomic performance (2017)",
      "content": "- GDP growth: \"Boosted by domestic demand, mainly private consumption supported by record remittances inflows and public investment, the economy grew 4¾ percent in 2017.\"\n- Headline inflation: increased to \"4¾ percent\" in 2017 from \"3¼ percent\" in 2016 due to strong demand and rising oil prices.\n- External position: international reserves equivalent to \"5.3 months of imports of goods and services at end-2017,\" within Fund adequacy metrics.\n- Fiscal balance:\n  - Fiscal deficit increased slightly from \"½ percent of GDP in 2016 to ¾ percent of GDP in 2017,\" remaining below the FRL deficit ceiling of \"1½ percent of GDP.\"\n  - Public revenues were boosted by a \"½ percent of GDP windfall\" from tax amnesties after the new tax code.\n- Monetary and financial conditions:\n  - Monetary policy was accommodative in 2017, with credit to the economy increasing \"9½ percent.\"\n  - Exchange-rate modernization: authorities reduced surrender requirements by an additional \"10 percent\" (total \"20 percent\" to date).\n  - Banking system indicators (as of end-2017):\n    - Banks’ capital adequacy ratio: \"13¾ percent\" (well above the regulatory minimum).\n    - Non-performing loans ratio: \"2¼ percent\" (historical lows)."
    },
    {
      "heading": "Outlook for 2018-2019 and risks",
      "content": "- Growth projections: \"In 2018-19, growth is expected to hover around 3¾ percent reflecting worsening external conditions.\"\n- Fiscal stance: \"The fiscal deficit would remain somewhat below the FRL ceiling as the authorities plan to limit the increase in public debt further.\"\n- Current account: \"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 normalization of U.S. monetary policy.\n  - More restrictive U.S. immigration policies.\n  - Vulnerability to domestic political polarization and potential deterioration in the institutional framework."
    },
    {
      "heading": "Executive Board Assessment",
      "content": "- Commendations and recognition:\n  - Directors commended completion of the Fund‑supported program and noted reduction in macroeconomic imbalances and institutional enhancements, particularly the FRL.\n  - These gains are viewed as critical for a favorable medium‑term outlook.\n- Near‑term policy mix:\n  - Directors supported the authorities’ near‑term policy mix and encouraged a more prudent fiscal stance than required under the FRL to signal commitment to macroeconomic stability.\n  - They welcomed readiness to unwind the supportive monetary policy stance if needed to anchor inflation expectations and contain inflationary pressures.\n- Structural and fiscal reform priorities:\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 noted from the conditional cash transfers program and planned expansion within FRL ceilings.\n  - Called for a comprehensive review of large tax expenditures and rationalization of expenditures.\n  - Cautioned against adverse effects of repeated tax amnesties on compliance and revenue mobilization.\n  - Emphasized resolving the financial situation of the state electricity company, right‑sizing the wage bill, and enhancing transparency and efficiency of public expenditure.\n- Monetary and financial sector recommendations:\n  - Welcome progress in monetary policy modernization (reductions in surrender requirements; introduction of collateralized transactions in the interbank market).\n  - Recommended speeding up adoption of new central bank law to enshrine the primacy of inflation as a monetary policy target.\n  - Recommended deepening money and foreign exchange markets, more exchange rate flexibility, and support for domestic capital markets.\n  - Welcomed banking system stability and progress toward Basel III; recommended sustained implementation of Financial Sector Stability Review recommendations.\n  - Recommended careful monitoring of household debt, concentration of consumer loans in public pensions fund portfolios, and expansion of development banks toward first‑tier operations.\n  - Underscored need for further strengthening of the AML/CFT framework.\n- Structural and governance reforms:\n  - Underscored need to implement supply‑side reforms to boost competitiveness, growth, and job creation.\n  - Noted strengthening rule of law is critical to improve the business environment.\n  - Acknowledged progress in fighting corruption in collaboration with international agencies and recommended enhancing transparency of the current asset disclosure regime for public officials.\n  - Emphasized need to reduce red tape and increase ease of doing business.\n- Statistics:\n  - Directors emphasized the need to update national statistics for effective policy formulation and welcomed progress made by the authorities."
    },
    {
      "heading": "Selected Economic Indicators (annual percent change unless otherwise indicated)",
      "content": "- National income and prices:\n  - GDP at constant prices: 2013: \"2.8\", 2014: \"3.1\", 2015: \"3.8\", 2016: \"4.8\", 2017: \"3.7\"\n  - GDP deflator: 2013: \"1.4\", 2014: \"6.8\", 2015: \"6.9\", 2016: \"3.5\", 2017: \"4.2\", 2018: \"4.3\"\n  - Consumer prices (eop): 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, depreciation -) 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- Money and credit:\n  - Private sector credit: 2013: \"11.2\", 2014: \"10.7\", 2015: \"10.4\", 2016: \"10.6\", 2017: \"9.4\", 2018: \"10.8\"\n  - Broad money: 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- Nonfinancial public sector:\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- Saving and investment:\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- External sector:\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/: \"5.3\", \"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.: 2013: \"-6.6\", 2014: \"4.0\", 2015: \"1.3\", 2016: \"-3.5\", 2017: \"9.3\"\n  - Imports f.o.b.: 2013: \"-3.7\", 2014: \"1.2\", 2015: \"0.8\", 2016: \"-5.5\", 2017: \"7.2\", 2018: \"5.7\", 2019: \"3.9\"\n\nSources: Central Bank of Honduras, Ministry of Finance, and IMF staff estimates and projections.\n\n---\n\n\n References\n\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/2018/07/03/pr18268-imf-executive-board-concludes-2018-article-iv-consultation-with-honduras"
    }
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    "Published: July 3, 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 helped restore investor confidence, reduce macroeconomic imbalances, and catalyze structural reforms including modernization of the fiscal policy framework anchored by a fiscal responsibility law (FRL).",
    "GDP growth: \"Boosted by domestic demand, mainly private consumption supported by record remittances inflows and public investment, the economy grew 4¾ percent in 2017.\"",
    "Headline inflation: increased to \"4¾ percent\" in 2017 from \"3¼ percent\" in 2016 due to strong demand and rising oil prices.",
    "External position: international reserves equivalent to \"5.3 months of imports of goods and services at end-2017,\" within Fund adequacy metrics.",
    "Fiscal balance:",
    "Monetary and financial conditions:",
    "Growth projections: \"In 2018-19, growth is expected to hover around 3¾ percent reflecting worsening external conditions.\"",
    "Fiscal stance: \"The fiscal deficit would remain somewhat below the FRL ceiling as the authorities plan to limit the increase in public debt further.\"",
    "Current account: \"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.\"",
    "Key risks:",
    "Commendations and recognition:",
    "Near‑term policy mix:",
    "Structural and fiscal reform priorities:",
    "Monetary and financial sector recommendations:",
    "Structural and governance reforms:",
    "Statistics:",
    "National income and prices:",
    "Money and credit:",
    "Nonfinancial public sector:",
    "Saving and investment:",
    "External sector:",
    "[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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