Revision of Agreement with the International Monetary Fund in Honduras
The International Monetary Fund (IMF) and the government of the Republic of Honduras signed an economic agreement that came into effect on July 15th, 2019, for a period of two years, allowing Honduras access to a credit line of USD 309.2 million in financial assistance. The agreement includes measures to strengthen governance, improve the business environment, maintain macroeconomic stability through reforms to ensure the sustainability of the electricity sector, as well as create the necessary fiscal space for investment and social spending, maintaining fiscal stability by implementing economic and institutional reforms.
Months after the Stand By agreement was signed, the International Monetary Fund was present in Honduras for the first quarterly revision and evaluation of progress in the country and the proper use of resources. In his report, the IMF Managing Director underscores the Honduran authorities’ full commitment to meet the objectives and commitments made, and emphasizes that the government has maintained prudent macroeconomic policies and fiscal policies in line with the Fiscal Accountability Law, and has undertaken structural reforms to promote sustained and inclusive growth.
The report also shows that Honduras’ inflation is within the Central Bank’s target, and the current account deficit has been reduced, as well as that the government has taken effective measures to reduce the infrastructure gap and increase social spending. It is of utmost importance to mention that reforms to the electricity sector are highlighted, improving the institutional framework by strengthening the regulatory agency, creating an independent system operator and issuing regulations that will facilitate an open, transparent and competitive electricity market.
The agreement signed and the revision carried out assure and sustain that the government of Honduras should create initiatives that guarantee the necessary fiscal space to attract investment, both foreign and local, and social spending without unbalancing the fiscal balance, which should go hand in hand with the strengthening of the fight against corruption and the strengthening of the institutional framework, all with a view to improving a business environment in the country.
In short, by signing this type of agreement, Honduras commits itself to improving both the public and private sectors by strengthening its public policies and thus being able to attract investment to the country, which contributes to the creation of employees and a better quality of life for Hondurans.
Astrid Villeda Hersperger
Associate
García & Bodán
Honduras