Press Release No. <a name="P16_75"></a>03/206

The following statement was issued on November 25, 2003 in Tegucigalpa by Adrienne Cheasty, Assistant Director of the International Monetary Fund's (IMF) Western Hemisphere Department, at the conclusion of two weeks of discussions with the Honduran authorities:

"The IMF mission has maintained fruitful discussions with the Honduran authorities and a range of representatives of civil society. These discussions have resulted in a preliminary agreement, at the technical level, on an economic and financial program that could be supported by the Fund, under the Poverty Reduction and Growth Facility.

"The mission came to Honduras with the objective of supporting a program that reflects the government's economic agenda and that is well-anchored on a broad domestic consensus. In this context, we are pleased to confirm that the program presented to us by the authorities is based on the Poverty Reduction Strategy of the country, which has been discussed and updated by several groups of the Honduran society during this year. Indeed, we are confident that this program, if implemented as expected, will lay a solid foundation for the resumption of sustained economic growth and higher employment, in a way that will benefit the most vulnerable Hondurans.

"The program contains four main elements. First, a strengthening of the public finances with the aim of achieving sustainability and releasing more resources for social investment and private sector growth. Second, the introduction of reforms to reinforce the financial system and encourage private sector investment. Third, improvements in governance and transparency to ensure that the costs and benefits of the reforms are shared equitably by all members of society. And fourth, facilitation of access to greater concessional external resources to support the country's critical social needs.

"I would prefer not to offer more details about the negotiations, as it is the Honduran Government who will present them to the society and to Congress at the appropriate time. However, I would like to add that the arrangement with the Fund in support of this program will be for three years and will cover the period 2004-2006. At the end of this period, real growth is expected to increase by 4½ percent a year and inflation to fall to 5 percent. International reserves would remain at a level equivalent to 4 months of imports, the fiscal deficit would be completely financed with concessional resources, and most importantly, the living standards of Hondurans should improve.

"Besides the positive effects on growth and poverty reduction, satisfactory implementation of the program will pave the way for Honduras to reach the completion point under the HIPC Initiative, which would facilitate the debt relief already committed by the international community.

"We trust that in the near future, the Government will gather support for signing the agreement from the National Congress and the various sectors of society. Once this support results in the adoption of the reforms promoted by the Government, we will send the program to our Executive Board for its consideration and approval," Ms. Cheasty said.