## IMF Executive Board Approves US$822 Million Arrangements Under the Extended Fund Facility and the Extended Credit Facility for Honduras and Concludes 2023 Article IV Consultation

_IMF News, September 21, 2023_

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## Bibliographic details
- Published: September 21, 2023

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### Overview
- The Executive Board approved arrangements under the Extended Fund Facility (EFF) and the Extended Credit Facility (ECF) for Honduras totaling US$822 million (SDR 624.5 million, equivalent to US$822 million or 250 percent of quota).
- The decision allows an immediate disbursement of SDR 89 million (about US$117 million).
- The arrangements provide support for the Honduran government’s economic and institutional reform agenda over the next three years, aiming to preserve macroeconomic stability, improve governance and transparency, and fight corruption.

### Program and Financing
- Combined arrangements: SDR 624.5 million (equivalent to US$822 million or 250 percent of quota).
- EFF: SDR 416.3 million (about US$548 million).
- ECF: SDR 208.2 million (about US$274 million).
- Immediate disbursement: SDR 89 million (about US$117 million).
- Program objectives:
  - Strengthen economic resilience and address structural bottlenecks to boost inclusive growth.
  - Increase public investment while safeguarding macroeconomic stability.
  - Support far-reaching tax reform and measures to strengthen tax administration.
  - Build a well-targeted and wide-reaching social safety net.
  - Diversify financing sources, including developing domestic debt markets, bolstered by a zero limit on central bank financing of the budget.
  - Strengthen frameworks for monetary and foreign exchange policies, supported by Fund technical assistance.
  - Support reforms in the energy sector, including a comprehensive loss reduction plan for the public electricity company.
  - Enhance governance and transparency, including eliminating trust funds, implementing an electronic declaration system for public officials’ finances, creating a comprehensive beneficial ownership registry, and establishing an anti-corruption commission.

### Macroeconomic Outlook and Key Projections
- Post-pandemic and storms rebound: economic output now around 6 percent above pre-pandemic levels.
- Growth projections:
  - 2022: 4.0
  - 2023: 2.9
  - 2024: 3.2
  - 2025: 3.5
  - 2026: 3.7
  - 2027: 3.8
  - (Table entry: "GDP (change in percent)" with annual values: 12.5 for 2021; 4.0 for 2022; 2.9 for 2023; 3.2 for 2024; 3.5 for 2025; 3.7 for 2026; 3.8 for 2027)
- Inflation projections:
  - Average inflation: 2021: 4.5; 2022: 9.1; 2023: 6.4; 2024: 4.7; 2025: 4.1
  - End of period inflation: 2021: 5.3; 2022: 9.8; 2023: 4.2
- IMF staff note: growth projected to moderate to around 3 percent in 2023, down from 4 percent in 2022; medium-term growth projected to increase to near 4 percent, supported by public investment and reforms.
- Inflation: After peaking near 11 percent in 2022 in the aftermath of the global commodity price shock, inflation has declined significantly and is projected to moderate to near 5 percent by the end of 2023.

### Public Finances and Debt (percent of GDP)
- Non-financial public sector overall balance:
  - 2021: -3.7
  - 2022: -0.2
  - 2023: -2.0
  - 2024: -1.7
  - 2025: -1.4
  - 2026: -1.0
  - 2027: -0.9
- Non-financial public sector primary balance:
  - 2021: -2.3
  - 2022: 1.2
  - 2023: -0.7
  - 2024: 0.0
  - 2025: 0.4
- Gross debt:
  - 2021: 51.6
  - 2022: 52.3
  - 2023: 51.9
  - 2024: 51.3
  - 2025: 50.4
  - 2026: 49.1
  - 2027: 47.8

### Balance of Payments and Reserves
- Current account balance, percent of GDP:
  - 2021: -4.6
  - 2022: -3.2
  - 2023: -5.2
  - 2024: -4.9
  - 2025: -4.7
  - 2026: -4.3
  - 2027: -4.1
- Gross international reserves (billions of US$):
  - 2021: 9.0
  - 2022: 8.7
  - 2023: 7.9
  - 2024: 8.0
  - 2025: 8.1
- Memorandum item — Nominal GDP (billions of Lempiras):
  - 2021: 684
  - 2022: 777
  - 2023: 850
  - 2024: 919
  - 2025: 990
  - 2026: 1068
  - 2027: 1153

### Executive Board Assessment and Directors’ Views
- Directors agreed with the thrust of the staff appraisal and commended authorities’ implementation of prudent economic policies that underpinned macroeconomic stability and resilience to recent shocks.
- Key concerns and priorities highlighted by Directors:
  - Poverty and inequality, corruption, and large investment needs remain major hindrances to sustained growth and development.
  - Need to maintain strong ownership and commitment to reforms, continued capacity development support by the Fund and other IFIs, and adequate contingency planning.
  - Importance of revenue mobilization policies, including the planned tax reform and strengthened tax administration.
  - Need for mechanisms to enhance the targeting of social spending, including a planned social registry, and improvements to public investment efficiency, including through the upcoming PIMA.
  - Continued progress in diversifying fiscal financing sources.
  - Enhance monetary and exchange rate policies to support price stability and resilience to shocks; manage the crawling band exchange rate regime to preserve competitiveness and improve foreign exchange market allocation efficiency.
  - Importance of data-driven monetary policy, including active monitoring of developments in international interest rates, and enhancing the monetary policy framework and transmission.
  - Support for authorities’ efforts to strengthen transparency and governance and reduce corruption risks, including elimination of trust funds and strengthening of the AML/CFT framework.
  - Need to accelerate energy sector reforms to limit fiscal risks, support growth, and improve the business environment.
  - Call for increased preparedness and resilience to the effects of climate change; Directors took note of authorities’ interest in Fund financing under the Resilience and Sustainability Facility.

### Policy Recommendations and Structural Measures
- Fiscal policy:
  - Implement medium-term fiscal framework that preserves debt sustainability while opening space to increase productive investment and social spending.
  - Undertake far-reaching tax reform and measures to strengthen tax administration.
  - Diversify financing sources and develop domestic debt markets; maintain zero limit on central bank financing of the budget.
- Social policy:
  - Build a well-targeted and wide-reaching social safety net to reach the most vulnerable groups.
  - Establish a planned social registry to enhance targeting of social spending.
- Monetary and exchange rate policy:
  - Strengthen frameworks for monetary and foreign exchange policies with IMF technical assistance.
  - Manage the crawling band exchange rate regime to preserve competitiveness and improve foreign exchange allocation efficiency.
  - Ensure monetary policy supports the disinflation process and that there are no undue pressures on the exchange rate.
- Governance and anti-corruption:
  - Strengthen transparency and governance, including elimination of trust funds, implementation of an electronic declaration system for public officials’ finances, creation of a comprehensive beneficial ownership registry, and establishment of an anti-corruption commission.
  - Strengthen the Anti-Money Laundering framework.
- Energy and climate resilience:
  - Implement comprehensive loss reduction plan for the public electricity company to limit fiscal risks and improve electricity provision.
  - Build resilience to climate change and consider Fund financing under the Resilience and Sustainability Facility.

*Press Release No. 23/321 — IMF Communications Department — September 21, 2023*

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## References

- [Honduras and the IMF](http://www.imf.org/external/country/HND/index.htm)
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_Source: https://www.imf.org/en/news/articles/2023/09/21/pr23321-honduras-imf-executive-board-approve-under-eff-and-ecf-for-honduras_