Press Release No. 06/98

Press Release: Statement by IMF Staff Mission to Honduras

May 15, 2006

Mr. Hunter Monroe, the International Monetary Fund's resident representative in Tegucigalpa, issued the following statement on May 14, 2006:

"An IMF mission visited Honduras during May 3-11, 2006 to continue discussions on the fourth review under Honduras' Poverty Reduction and Growth Facility (PRGF) arrangement.¹ The three-year arrangement, approved by the Executive Board of the IMF on February 27, 2004 (see Press Release No. 04/29), provides SDR 71.2 million (about US$106 million) to support implementation of Honduras' economic program.

"The mission found that macroeconomic indicators have improved in recent months. Growth in 2006 is now projected to exceed 5 percent, led by coffee, maquilas, construction, and the financial sector. Annual inflation fell to 5.8 percent through April 2006. The external sector remains strong, due to higher remittances and strong exports. Net international reserves grew by US$325 million through end-April 2006, even before including debt relief from the Fund under the Multilateral Debt Relief Initiative (see Press Release No. 05/295).

"The mission worked with the authorities to assess performance under the PRGF program and to elaborate on the economic and financial program for the remainder of 2006.

"The authorities are working to finalize their policies in key areas, especially affecting fiscal policy. There is agreement on maintaining fiscal discipline, improving project execution, and entrenching a sustainable medium-term public sector wage policy that would allow for increased poverty-reducing spending and needed public investment. In this context, the authorities are working to strengthen the finances of the state enterprises taking into account the high international cost of energy and ongoing reforms in telecommunications.

"The mission expects to continue discussions toward completing the fourth program review in the near future."

¹ The Poverty Reduction and Growth Facility (PRGF) is the IMF's low-interest lending facility for low-income countries. PRGF-supported programs are underpinned by comprehensive country-owned poverty reduction strategies.