{
  "title": "IMF Executive Board Concludes 2019 Article IV Consultation with Honduras",
  "publication": "IMF News, July 16, 2019",
  "sourceUrl": "https://www.imf.org/en/news/articles/2019/07/16/pr19285-honduras-imf-executive-board-concludes-2019-article-iv-consultation",
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  "summary": "Notes (as presented): - Sources: Central Bank of Honduras, Ministry of Finance, and IMF staff estimates and projections. - 1/ 2019 data as of May 31, 2019. - 2/ 2019 data as of April 2019. - 3/ Weighted average interest rates on loans to financial system in national currency excluding credit cards. ",
  "publishDate": "2019-07-16",
  "sections": [
    {
      "heading": "Summary of conclusions and program objectives",
      "content": "- On July 1, 2019, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Honduras.\n- At the same time, the Board approved two-year arrangements under the Stand-By Arrangement (SBA) and Standby Credit Facility (SCF) for Honduras; a press release on this was issued separately.\n- The authorities’ economic program aims to:\n  - Maintain macroeconomic stability.\n  - Enact economic and institutional reforms to foster inclusive growth.\n  - Center on three priorities: (i) secure the fiscal position by putting ENEE on a sustainable path while maintaining policy space for investment and social spending; (ii) strengthen monetary policy and financial institutions to buffer shocks; and (iii) implement reforms to improve the business environment and governance, including stepping up efforts in the fight against corruption."
    },
    {
      "heading": "Macroeconomic conditions and outlook",
      "content": "- 2018 performance and near-term projections:\n  - GDP growth slowed to 3¾ percent in 2018.\n  - Growth projected to slow to slightly less than 3½ percent in 2019.\n  - Inflation is stable around the center of the central bank´s 4±1 percent target band.\n  - Current account widened to 4¼ percent of GDP in 2018.\n  - Current account deficit expected to remain stable at around 4 percent of GDP.\n  - Outlook subject to downside risks from lower global growth, terms of trade shocks, tighter global financial conditions, and uncertainties associated with trade tensions and US immigration policies.\n- Expected impacts of reforms:\n  - Reforms in the electricity sector, improved governance, and strengthening of the macroeconomic policy framework would secure debt sustainability, support a recovery in investment, and foster GDP growth through positive confidence effects.\n  - Higher growth, public investment, and social spending would help reduce informality and narrow the gender gap.\n  - Inflation and inflation expectations are expected to converge towards the midpoint of the central bank target range."
    },
    {
      "heading": "Fiscal and public sector developments",
      "content": "- 2018 fiscal outcomes:\n  - Nonfinancial public sector (NFPS) posted a deficit of 0.9 percent of GDP, in line with the target in the Fiscal Responsibility Law (FRL), despite a higher-than-expected deficit in the electricity company (ENEE).\n- Directors’ fiscal recommendations:\n  - Continue fiscal prudence institutionalized by the Fiscal Responsibility Law while protecting investment and social spending.\n  - Continue revenue mobilization efforts, including revision of tax exemptions, and strengthen tax administration and compliance.\n  - Control expenditure over the medium term and improve transparency and governance, including for trust funds, and sound public financial management.\n  - Note positive completion of the Fiscal Transparency Evaluation and authorities’ commitment to implement its recommendations.\n- Electricity sector:\n  - Directors welcomed recent reforms including a tariff adjustment with subsidies to protect the very poor.\n  - Encouraged further efforts to improve the sector’s institutional framework and put ENEE finances on a sustainable path to create space for infrastructure and social spending."
    },
    {
      "heading": "Monetary policy and financial sector",
      "content": "- Monetary and exchange rate:\n  - Directors commended measures to modernize the monetary policy framework and make the exchange rate regime more flexible, notably by reducing foreign exchange surrender requirements.\n  - Encouraged a gradual transition to exchange rate flexibility and strengthening central bank operational autonomy and governance, with a view to gradually transition toward inflation‑targeting.\n  - Welcomed the authorities’ plan to submit a new Central Bank Charter to Congress by year‑end.\n- Financial system soundness:\n  - Financial system described as stable, liquid, and well capitalized, with NPLs at historic lows.\n  - Directors encouraged careful monitoring given foreign exchange credit growth and continued action on the financial situation of the non‑systemic agricultural development bank, BANADESA.\n  - Directors appreciated commitment to strengthening the AML/CFT framework in line with GAFILAT recommendations and called for more effective compliance."
    },
    {
      "heading": "Structural reforms, governance, and social issues",
      "content": "- Directors’ assessment:\n  - Commended ambitious reform efforts that delivered macroeconomic stability, fiscal deficit reductions, strengthened institutional and policy frameworks, and improved investor confidence.\n  - Noted persistent challenges: high poverty and inequality, corruption, weak rule of law, and widespread violence.\n  - Welcomed authorities’ focus on structural reforms to improve governance and the business climate by reducing scope for corruption and strengthening rule of law.\n  - Encouraged programs to improve gender equality and female labor force participation rates and urged strengthening these efforts."
    },
    {
      "heading": "Selected economic indicators (annual percent change or as indicated)",
      "content": "- National income and prices:\n  - GDP at constant prices: 2014: 3.1; 2015: 3.8; 2016: 4.9; 2017: 3.7; 2018: 3.4; 2019 (Proj.): 3.5; 2020 (Proj.): …\n  - GDP deflator: 2014: 6.8; 2015: 6.9; 2016: 4.3; 2017: 1.8; 2018: 3.2; 2019 (Prel./Proj.): …\n  - Consumer prices (eop): 2014: 5.8; 2015: 2.4; 2016: 3.3; 2017: 4.7; 2018: 4.2; 2019: 4.4\n- Exchange rate (eop, depreciation -): Lempiras per U.S. dollar 1/: 2014: 21.6; 2015: 22.4; 2016: 23.5; 2017: 23.6; 2018: 24.3; 2019: 24.5\n- Money and credit:\n  - Private sector credit: 2014: 10.8; 2015: 10.0; 2016: 12.9; 2017: 9.4; 2018: 13.4; 2019 (Prel./Proj.): 11.6; 2020 (Proj.): 9.0\n  - Broad money: 2014: 13.3; 2015: 15.6; 2016: 12.8; 2017: 8.3; 2018: 11.0\n  - Lending rate (eop, in percent) 3/4/: 2014: 15.9; 2015: 14.0; 2016: 14.3; 2017: 14.6; 2018: 14.1; 2019 (data as of March 2019): …\n  - Deposit rate (eop, in percent) 4/: 2014: 10.4; 2015: 8.8; 2016: 8.2; 2017: 8.4; 2018: 8.0\n- Nonfinancial public sector (percent of GDP):\n  - Primary balance: 2014: -3.4; 2015: 0.1; 2016: 0.3; 2017: 0.0; 2018: 0.6; 2019 (Proj.): 0.7\n  - Overall balance: 2014: -3.9; 2015: -0.5; 2016: -0.8; 2017: …; 2018: …\n  - Gross debt: 2014: 39.3; 2015: 39.0; 2016: 39.9; 2017: 41.8; 2018: 42.1; 2019 (Proj.): 42.0\n- Saving and investment (percent of GDP):\n  - Gross fixed capital formation: 2014: 23.0; 2015: 26.4; 2016: 23.4; 2017: 25.7; 2018: 26.9\n  - Gross national savings: 2014: 16.0; 2015: 21.7; 2016: 20.8; 2017: 22.6; 2018: 21.5\n- External sector:\n  - Gross international reserves (millions of dollars): 2014: 3,698; 2015: 4,187; 2016: 4,488; 2017: 5,088; 2018: 5,147; 2019: 5,288; 2020 (Proj.): 5,456\n  - Gross international reserves (in months of imports) 5/: 2014: 5.1; 2015: 5.0; 2016: 5.3\n  - Change in gross international reserves (increase -): 2014: -459; 2015: -303; 2016: -66; 2017: -884; 2018: -50; 2019 (Prel.): -141; 2020 (Proj.): -168\n  - Current account balance (percent of GDP): 2014: -6.9; 2015: -4.7; 2016: -2.6; 2017: -1.8; 2018: -4.2; 2019 (Proj.): -4.3\n  - Exports f.o.b.: 2014: 4.0; 2015: -3.2; 2016: 8.6; 2017: -0.4\n  - Imports f.o.b.: 2014: 1.2; 2015: 0.8; 2016: -5.5; 2017: 7.2; 2018: 7.7; 2019 (Prel./Proj.): 2.8; 2020 (Proj.): 3.9\n\nNotes (as presented):\n- Sources: Central Bank of Honduras, Ministry of Finance, and IMF staff estimates and projections.\n- 1/ 2019 data as of May 31, 2019.\n- 2/ 2019 data as of April 2019.\n- 3/ Weighted average interest rates on loans to financial system in national currency excluding credit cards.\n- 4/ 2019 data as of March 2019.\n- 5/ Refers to the following year's imports of non-maquila and nonfactor services.\n\nPress Release No. 19/285 — July 16, 2019\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- The IMF and Good Governance -- 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/2019/07/16/pr19285-honduras-imf-executive-board-concludes-2019-article-iv-consultation"
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    "Published: July 16, 2019",
    "On July 1, 2019, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Honduras.",
    "At the same time, the Board approved two-year arrangements under the Stand-By Arrangement (SBA) and Standby Credit Facility (SCF) for Honduras; a press release on this was issued separately.",
    "The authorities’ economic program aims to:",
    "2018 performance and near-term projections:",
    "Expected impacts of reforms:",
    "2018 fiscal outcomes:",
    "Directors’ fiscal recommendations:",
    "Electricity sector:",
    "Monetary and exchange rate:",
    "Financial system soundness:",
    "Directors’ assessment:",
    "National income and prices:",
    "Exchange rate (eop, depreciation -): Lempiras per U.S. dollar 1/: 2014: 21.6; 2015: 22.4; 2016: 23.5; 2017: 23.6; 2018: 24.3; 2019: 24.5",
    "Money and credit:",
    "Nonfinancial public sector (percent of GDP):",
    "Saving and investment (percent of GDP):",
    "External sector:",
    "Sources: Central Bank of Honduras, Ministry of Finance, and IMF staff estimates and projections.",
    "1/ 2019 data as of May 31, 2019.",
    "2/ 2019 data as of April 2019.",
    "3/ Weighted average interest rates on loans to financial system in national currency excluding credit cards.",
    "4/ 2019 data as of March 2019.",
    "5/ Refers to the following year's imports of non-maquila and nonfactor services.",
    "[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)",
    "[The IMF and Good Governance -- A Factsheet](https://www.imf.org/en/about/factsheets/sheets/2023/the-imf-and-good-governance)",
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    "[PRESS CENTER](http://presscenter.imf.org/)",
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