Washington, DC: An International Monetary Fund (IMF)
team, led by Mr. Ricardo Llaudes, Mission Chief for Honduras, visited
Tegucigalpa during June 5–16, 2023,
[1]
and held virtual discussions in the recent weeks, to discuss with the
Honduran authorities IMF support for their policy and reform plans. Mr.
Llaudes issued the following statement today:
“The Honduran authorities and the IMF have reached staff-level agreement on
a 36-month blended arrangement under the IMF’s Extended Fund Facility (EFF)
and Extended Credit Facility (ECF) for about US$830 million (equivalent to
SDR 624.5 million or 250 percent of Honduras’ quota in the IMF) to support
Honduras’ economic reform policies. The agreement is subject to the
approval of the IMF’s Executive Board.
“The Honduran economy has remained remarkably resilient to several shocks,
both domestic and external, including the pandemic, weather events
(tropical storms and droughts), the impact of the war in Ukraine, and the
global economic slowdown, which has impacted especially the country’s
export sector. Honduras continues to face long-standing social and
structural challenges, including high vulnerability to climate change.
Addressing these challenges will require steadfast implementation of
policies and structural reforms that promote economic diversification and
social inclusion.
“The authorities’ reform program, supported by the Fund, includes economic
and institutional reforms to entrench macroeconomic stability while
creating fiscal space for much-needed productive investment and social
spending to foster durable and inclusive growth and enhance climate
resilience.
“The authorities’ ambitious reform program is anchored by four key pillars:
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Preserving macroeconomic stability. The program
envisages a medium-term fiscal frameworkthat creates fiscal space for
productive investment and social spending while preserving debt
sustainability. The Central Bank will continue to support the ongoing
disinflation process and will take any necessary action to ensure that
there are no undue pressures on the exchange rate. Over the course of
the program, and with the support of IMF Technical Assistance, the
Central Bank will continue to strengthen the frameworks for monetary
and foreign exchange (FX) policies with a view to preserving external
competitiveness and creating the necessary conditions to gradually
transition to a balanced, competitive, and efficient FX allocation
system while safeguarding exchange rate stability.
-
Opening fiscal space to support productive investment and social
spending.
The government is advancing a comprehensive reform agenda to generate
fiscal space and improve public financial management, including by (i)
eliminating trust funds, which have hampered transparent spending
execution; (ii) strengthening tax and customs administration; and (iii)
promoting and strengthening budget transparency. A far-reaching tax
reform, currently in Congress, would reduce the extensive exonerations
to the income tax while safeguarding Honduras’ competitiveness. If
adopted, it will be crucial that implementation of the reform proceeds
in a transparent and predictable manner, as would be set out in
corresponding regulations. These reforms will be critical to support
urgent infrastructure investment, particularly on climate adaptation
and the energy sector. Moreover, the program will support the
authorities’ efforts to build a well-targeted and wide-reaching social
safety net, centered on the flagship programs Red Solidaria
and Programa de Acción Solidaria, aimed at the
extreme poor and the most vulnerable groups in society.
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Strengthening the monetary framework, developing the local debt
market, and safeguarding financial stability.
The Central Bank will continue enhancing the functioning of the
monetary transmission mechanism. To further develop domestic debt
markets, the authorities will resume regular issuance of treasury bonds
and put in place a medium-term debt strategy. This will help mobilize
domestic savings, diversify financing sources, and issue in
international capital markets. The financial system remains robust but
close monitoring of risks remains warranted.
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Improving governance and transparency, fighting corruption, and
enhancing economic resilience.
The authorities are determined to strengthen the Anti-Money Laundering
framework in line with international standards. The recent repeal of
Decree 57-2020 and modification of Decree 93-2021 are key steps in this
direction. To improve governance and transparency, the repeal of the
Secrecy Law, which blocked access to public information, and, recently,
of Decree 116-2019 on the departmental fund, through which Congress
members have been directing budgetary resources, have also been
important. To further enhance governance, the authorities aim to
implement a nationwide firm registry, including beneficial ownership
information, and an electronic asset declaration system for public
employees. Safeguarding the sustainability of the energy
sector—including through the steadfast implementation of the
authorities’ loss-reduction program and strengthening the financial
position of the electricity company ENEE—will be critical to support
growth and employment.
“The IMF team would like to thank the authorities for the open and
constructive dialogue and looks forward to our continuing work with the
authorities to support Honduras and its people.”
