Press Release No. 20/373

IMF Executive Board Completes Third Reviews Under the Stand-By Arrangement and Arrangement under the Standby Credit Facility for Honduras

December 14, 2020

• The IMF Executive Board’s completion of the reviews allows for immediate disbursements of US$90 million.
• The pandemic has slowed down economic activity more than previously anticipated, but a recovery is expected for next year.
• The authorities are recalibrating their policy response to the pandemic and two recent tropical storms, while taking corrective actions to address initial implementation challenges.

WASHINGTON, DC: The Executive Board of the International Monetary Fund (IMF) completed today the third reviews of Honduras’ performance under its economic program supported by a Stand-By Arrangement (SBA) and a arrangement under the Standby Credit Facility (SCF) and extended the duration of the SBA and SCF by four months until November 14, 2021.

The SBA and SCF were approved on July 15, 2019 in the total amount of about US$323 million (SDR 224.82 million), the equivalent of 90 percent of Honduras’ quota in the IMF (see Press Release 19/284). On June 1, 2020, the Executive Board completed the second reviews and approved an augmentation of access under both the SBA and SCF by about US$234 million (SDR 162.37 million), bringing combined total access under the SBA and SCF to about US$557 million (SDR 387.19 million, 155 percent of quota), see Press Release 20/230.

The completion of the reviews allows for immediate disbursements of about US$90 million (SDR 62.45 million) t o help Honduras meet its balance of payments and fiscal financing needs stemming from the pandemic and the recent tropical storms, including increased health care and social spending.

Following the Executive Board’s discussion on Honduras, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, made the following statement:

“Notwithstanding challenges from the pandemic and, more recently, two tropical storms, the authorities remain strongly committed to their Fund-supported economic program. They have strived to respond to these shocks, maintain macroeconomic stability, and protect social spending and critical investment. Significant progress has been made in fiscal and governance reforms.

“To mitigate the impact of the pandemic, the authorities designed a strong policy response , which had to be recalibrated as the outlook for 2020 worsened, allowing a more accommodative fiscal stance while maintaining debt sustainability. The implementation of emergency spending faced challenges, but the authorities took corrective actions promptly and are strengthening controls. Monetary policy continues to be geared towards maintaining price stability and adequate international reserves. Efforts to strengthen the monetary policy framework and support the transition to a more flexible exchange rate continue. The authorities remain committed to revenue mobilization and plan to streamline tax exemptions and persevere with customs administration reforms.

“The authorities continue to take steps to improve the institutional framework in the electricity sector and have cleared historical arrears to generators. Further efforts are needed to improve governance at the electricity company (ENEE) and its financial situation; restarting the losses reduction plan will be an important element.

“The authorities are implementing policies to preserve financial stability while sustaining economic activity. A prudent approach to regulation while encouraging loan restructurings will support sound monitoring of the financial system. The authorities stand ready to take actions as needed.

“Efforts to improve governance continue, notably through steps to strengthen public officials’ asset declarations, create a comprehensive beneficial ownership registry, and enhance transparency and accountability of pandemic-related spending and procurement. Efforts are also ongoing to strengthen the institutional framework in the central bank, the Treasury, and public companies.”