Sovereign bonds are issued to raise money to finance government services and budget deficits. Due to the crisis caused by the coronavirus pandemic, the Secretary of Finance proceeded to ask the National Congress to approve USD 850 million in sovereign bonds, with the objective of financing the fiscal deficit.
On October 9, the National Congress of the Republic, approved the issuance of USD 850 million dollars in sovereign bonds, authorizing the Executive Branch, through the Ministry of Finance, to issue sovereign bonds of the Republic of Honduras in the international capital market up to an amount of USD 850 million to the financial conditions obtained at the time of its negotiation.
According to the Ministry of Finance, until last September, fiscal income fell by more than 20 billion lempiras, which led the Government of the Republic to finance state spending with public debt. With the sovereign bonds, the Ministry of Finance intends to finance the fiscal deficit of the year 2020 and a part of the General Budget of the Republic corresponding to fiscal year 2021; therefore, they will be included by the Ministry of Finance in the budget of the year 2021.
Finally, the Honduran Association of Economists (CHE) points out that, with the new placement of the sovereign bonds, the foreign debt would be exceeding 55% of the gross domestic product (GDP), nine points more than the public debt until the year 2019. The financial analysts warn that if the economy does not grow more dynamically and if sufficient fiscal income is not generated, the country could find itself in a difficult situation, so it is necessary to know in what way the debt funds will be invested.
Associate
García & Bodán
Honduras