IMF Staff Concludes Visit to Honduras

IMF Staff Concludes Visit to Honduras

November 10, 2023

• An IMF mission visited Honduras to discuss recent economic developments, the authorities’ implementation of their economic program, and policy priorities going forward.
• Amid a challenging global environment, decisive implementation of program policies will be essential to preserve macroeconomic stability and bolster economic resilience.
• IMF staff will continue to work with the authorities to support Honduras’ efforts to boost inclusive growth and reduce poverty, including through scaling up public investment and social spending.

Tegucigalpa, Honduras: An International
Monetary Fund (IMF) team led by Ricardo Llaudes and supported by resident
representative Christian Henn visited San Pedro Sula and Tegucigalpa,
Honduras, during November 5-9, 2023, to discuss recent economic developments
and the authorities’ implementation of their economic program supported by
the Fund through the ECF/EFF arrangements approved in late September. At
the conclusion of the visit, Mr. Llaudes issued the following statement:

“The team discussed with the authorities recent economic developments and
the outlook for Honduras amid a more complex global environment. Growth has
been picking up since May and is expected to close 2023 somewhat above 3
percent. Inflation has been coming down during most of this year, despite
recent increases in global oil prices, and is expected to reach the BCH’s
reference range in early 2024. Fiscal policy has remained prudent with
incipient signs of higher budget execution, in particular on capital
spending.

“Against the backdrop of a more challenging global outlook, with US
interest rates expected to remain higher, and a domestic environment
characterized by many challenges in the political debate, policies to
safeguard economic stability and foster investment remain essential.
Discussions centered on monetary and exchange rate policies needed to
ensure low inflation and preserve external competitiveness and the
country’s international reserves, which remain at adequate levels. Recent
increases in banks’ reserve requirements are a valuable first step. It will
be necessary to decisively redouble efforts, in line with program
commitments on monetary and foreign exchange (FX) policies, to achieve
these objectives. Forthcoming Fund technical assistance will assist the BCH
in evaluating the monetary and exchange rate frameworks to identify
measures to strengthen these and improve the efficiency of FX allocation.

“The team welcomed the authorities’ focus on scaling up public investment.
In addition, progress continues in rolling out social programs, especially
Red Solidaria, while keeping them focused on the poorest and most
vulnerable. These efforts are critical to increase economic opportunities
and reduce poverty. The authorities have also resumed domestic bond
placements, essential to deepen domestic financial markets. Timely adoption
of the 2024 draft budget submitted to Congress will be important to support
inclusive growth and preserve debt sustainability.

“The authorities emphasized their steadfast commitment to implement their
economic program. They pointed to recent achievements such as the launches
of customs reform and an electronic asset declaration system for public
officials, as well as publication of a public borrowing policy. They
reiterated their commitment to energy sector reforms, including to improve
the financial position of ENEE and guarantee the adequate provision of
energy. Key measures include investment in transmission and distribution and
stepping up implementation of the national loss reduction program (NLRP).
Finally, timely bond issuances by ENEE are important to address arrears and
improve payment discipline.

“The IMF team would like to thank the authorities for their kind
hospitality and candid discussions and stands ready to continue to support
the government of Honduras in the implementation of its economic reform
program.”