Press Release No. 15/120

Press Release: IMF Mission Concludes Review Mission to Honduras

March 17, 2015

An International Monetary Fund (IMF) mission, led by Mr. Lisandro Ábrego, visited Tegucigalpa during March 9-17 to conduct the first review of Honduras’ Fund-supported program, approved on December 3, 2014. At the conclusion of the visit, Mr. Ábrego issued the following statement in Tegucigalpa today:

“The mission is encouraged by the progress made to stabilize the Honduran economy and return the public finances to a sustainable path. The staff team found that all quantitative targets for December 2014 were met, in most cases with ample margins. The structural benchmarks were also observed, while significant progress toward meetings March 2015 benchmarks has been made.

“Macroeconomic performance in 2014 generally exceeded program expectations. Real GDP growth is estimated to have risen to a solid 3.1 percent while inflation ended at 5.8 percent—well below the program projection—owing mainly to lower fuels prices. The external current account deficit decreased from 9.5 percent of GDP in 2014 to 7.4 percent of GDP, reflecting fiscal consolidation, more favorable terms of trade, and strong growth of remittances. International reserves increased by about US$260 million, comfortably exceeding the program target and bringing reserve coverage to 4.3 months of imports. Fiscal performance was also significantly stronger than anticipated, with the deficit of the combined public sector (CPS) declining to 4.3 percent of GDP, well below the program target of 5.9 percent of GDP. The overall deficit of Empresa Nacional de Energia Electrica (ENEE) was reduced to 1.3 percent of GDP (from 1.8 percent of GDP the previous year), in line with the program target.

“For 2015, the mission and the authorities reached understandings on the quantitative targets and appropriate policies to buttress macroeconomic stability while supporting solid economic growth and the expansion of social programs. These understandings are subject to approval by the IMF’s Management and Executive Board, which is expected to consider the first program review in May.

“The 2015 outlook of the Honduran economy is more positive than envisaged previously as a result of the macroeconomic over performance in 2014, the lower oil prices and a steady US recovery. GDP growth is expected to increase to 3.3 percent while inflation is projected to fall to 4¾ percent. This year’s fiscal program objective is to continue with fiscal consolidation to reduce the CPS deficit to about 3 percent of GDP. The authorities will also expand their poverty reduction programs. Monetary policy will continue to focus on keeping inflation under control and strengthening the external position while providing adequate support to economic growth. The external current account is also expected to improve, driven by lower fuel imports and more coffee exports, supporting an increase in international reserve coverage (projected to rise to 4.5 months of imports). The government will continue undertaking structural reforms in the electricity sector, including the establishment of a fully functional new regulator and the agreed measures to further strengthen the finances of ENEE.

“The mission met with President Juan Orlando Hernández, Minister Coordinator of the Government Jorge Hernández Alcerro, Central Bank Governor and Head of the Economic Cabinet Marlon Tábora, , Minister of Finance Wilfredo Cerrato, Minister Director Miriam Guzman from the Tax Directorate, President National Commission of Banking and Insurance Ethel Deras, Minister of Infrastructure and public Services, Roberto Ordoñez, other senior government officials, members of congress, and private sector representatives.

“The staff team would like to thank the authorities and private sector representatives for a cordial and productive dialogue, as well as for their excellent cooperation and hospitality.”