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IMF Staff Concludes Visit to Honduras

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.”

Source : IMF