Press Release No. 05/23

The following statement was issued today in Tegucigalpa by an International Monetary Fund (IMF) staff mission:

"An IMF mission visited Tegucigalpa during January 24-February 7, 2005, for discussions with the authorities on the second review of the PRGF program, the 2005 Article IV consultation, and the status of implantation of policy commitments for the HIPC completion point.

"The mission found that the government's economic program continues to deliver favorable results. Preliminary estimates suggest that real GDP grew by nearly 5 percent in 2004—significantly above projections—with a broad rebound across all sectors, including agriculture. Inflation has now stabilized, after drifting up during much of last year mainly because of high oil prices. The external position has also strengthened significantly, boosted by rapid growth in remittances, exports, and capital inflows; as a result, official international reserves now stand at over US$ 1.6 billion, well above the program target.

"The strong performance reflects the government's steadfast implementation of macroeconomic policies and structural reforms envisaged under the program. The fiscal deficit was reduced in line with the program targets, owing especially to improved control of the wage bill which permitted poverty-reducing spending to increase as targeted. Important structural reforms implemented included strengthening the financial system, and improving tax administration and governance. All quantitative targets for end-December were met, and good progress has also been made on the set of trigger conditions for the completion point under the enhanced HIPC initiative.

"Looking ahead, it will be critical for Honduras to maintain broad consensus on the program supported by the PRGF, including the key elements of sustained public sector wage discipline, prudent macroeconomic policies, and financial sector reforms. Keeping the reforms on track will be important for Executive Board consideration of the PRGF review and HIPC completion. The program is working well, and evidence is growing that the key goal of poverty reduction is being achieved. It will be critical to maintain continuity in these policies, through the forthcoming election year and beyond, so that the hard-won gains of higher growth and social progress can endure and prosper further in the coming years.

"Upon its return to Washington, the mission will submit its report to the IMF's Management. Executive Board discussion of the PRGF review, the Article IV consultation, and the HIPC completion point could take place around end-March."