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International Monetary Fund. Western Hemisphere Dept.
The protracted pandemic and two tropical storms have hit Honduras hard. Despite authorities’ responses, these shocks continue to weigh on activity; reconstruction needs are high while the outlook remains uncertain. The authorities plan to rebuild a more climate-resilient economy, given Honduras’ vulnerabilities to climate change. Presidential elections are scheduled for November 2021.
International Monetary Fund. Fiscal Affairs Dept.
This report evaluates Honduras’s fiscal transparency practices in relation to the IMF Fiscal Transparency Code (FTC). Honduras’s score is similar to those of other Latin American countries and emerging market economies that have undergone the evaluation. In relation to the fiscal transparency principles, Honduran practices are considered basic in 15 areas; good in seven areas; and advanced in six areas. Fiscal transparency practices in the area of fiscal forecasting and budgeting are the strongest, while the fiscal risk analysis and management practices are the weakest. Finally, Honduras’s current fiscal transparency practices fall short of the FTC principles in eight areas.
International Monetary Fund. Fiscal Affairs Dept.
This report evaluates Honduras’s fiscal transparency practices in relation to the IMF Fiscal Transparency Code (FTC). Honduras’s score is similar to those of other Latin American countries and emerging market economies that have undergone the evaluation. In relation to the fiscal transparency principles, Honduran practices are considered basic in 15 areas; good in seven areas; and advanced in six areas. Fiscal transparency practices in the area of fiscal forecasting and budgeting are the strongest, while the fiscal risk analysis and management practices are the weakest. Finally, Honduras’s current fiscal transparency practices fall short of the FTC principles in eight areas.
International Monetary Fund. Western Hemisphere Dept.
The near-term outlook has worsened, while a recovery is expected for next year. Amid a weak health system and a surge in infections over the summer, the gradual reopening of the economy has faced setbacks and the pandemic is having a stronger and more protracted social and economic impact than expected. While the policy response to the Covid-19 shock was appropriately designed, there have been implementation challenges and delays. The authorities’ monitoring system of pandemic-related spending and civil society oversight helped identify missteps to implement corrective actions, for which they are receiving technical assistance from FAD and the Inter-American Development Bank (IDB). More recently, Honduras is also facing the challenge to respond to two tropical storms, which the authorities intend to manage within the contour of the current economic program.
International Monetary Fund. Western Hemisphere Dept.
This paper presents Honduras’ Second Reviews Under the Stand-By Arrangement and Arrangement Under the Stand-By Credit Facility, Requests for Augmentation and Rephasing of Access, and Modification of Performance Criteria. The coronavirus disease 2019 pandemic and external spillovers are expected to hit Honduras hard, and the augmentation of access will support the authorities’ response to mitigate the impact. The completion of the reviews will help Honduras meet urgent balance of payments needs stemming from the pandemic, including increased health care and social spending. The authorities continue to take steps to improve the institutional framework in the electricity sector. Important measures have been incorporated into the program. These aim at improving governance and facilitating the unbundling of the national electricity company. Tariffs continue to reflect the cost of electricity provision while providing subsidies to the poor. The augmentation of access under the Stand-By Arrangement and the Arrangement under the Standby Credit Facility should help the authorities cover external financing needs to mitigate the impact of the pandemic.
International Monetary Fund. Western Hemisphere Dept.
This paper highlights Honduras’ First Reviews Under the Stand-By Arrangement and the Arrangement Under the Stand-By Credit Facility, and Request for Modification of Performance Criteria. Despite headwinds to growth and a challenging external environment, the Honduran authorities remain fully committed to the economic program supported by the IMF. They have maintained prudent macroeconomic policies—the fiscal position is in line with the Fiscal Responsibility Law, inflation is within the central bank’s target band, and the current account deficit has narrowed despite adverse terms of trade—and have taken initial steps on structural reforms to promote sustained, inclusive growth. Important measures to strengthen the governance and anti-corruption frameworks have been incorporated into the program, adding to the ongoing efforts to strengthen the institutional framework in the central bank and in public finances, and to improve the business environment. The authorities are expected to protect the revenue mobilization efforts made over the past years to reduce the infrastructure gap and increase social spending. These efforts seem to be critical to reduce poverty and inequality, while maintaining a prudent fiscal position that secures debt sustainability over the medium term.
International Monetary Fund. Western Hemisphere Dept.
This paper discusses Honduras’s 2019 Article IV Consultation and Request for a Stand-By Arrangement and an Arrangement Under the Standby Credit Facility. Supported by a Fund program that expired in December 2017, Honduras has reduced macroeconomic imbalances, institutionalized fiscal prudence, and laid the groundwork for a modern monetary policy framework. The authorities are committed to maintain prudent policies and to build on previous achievements to make progress in solving long-standing issues. The authorities’ economic program aims at maintaining macroeconomic stability, while enacting economic and institutional reforms to foster inclusive growth. Honduras needs to foster inclusive growth through reforms and better governance. Policy priorities include: reforms to increase the quality of fiscal policy, sustaining revenue mobilization efforts, protecting investment and social spending, and securing financial sustainability of the public electricity company; and reforms to enhance transparency and governance in the budget.
International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper looks at revenue mobilization efforts in Honduras. The country has made considerable progress over the last years, helping to stabilize its fiscal position. Although tax revenue collection ratios in Honduras are high, the statutory rates are aligned with regional peers. A formal benchmarking exercise supports the evidence pointing to Honduras’s relatively good collection performance. The authorities’ future revenue mobilization strategy should prioritize reforms aiming at increasing efficiency and compliance. The cost-benefit assessment of existing tax exemptions in terms of their policy objectives may offer guiding principles to prioritize reforms going forward. Compared to peers, statutory tax rates are similar and tax collection ratios are generally higher—a benchmarking exercise suggests that the current revenue envelope is close to its frontier. Going forward, there is a need to sustain revenue mobilization efforts, which will be instrumental to maintaining a sound fiscal position, reducing the infrastructure gap, and increasing social spending. Rationalizing large tax expenditures could contribute to these efforts.