Press Release No. 24/451

IMF Executive Board Completes First and Second Reviews of the Arrangements under the Extended Fund Facility and Extended Credit Facility for Honduras

December 6, 2024

• The Executive Board of the International Monetary Fund (IMF) completed the First and Second Reviews of the arrangements under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) for Honduras, enabling a disbursement of about US$198 million (SDR 150 million).
• The Honduran economy remains resilient, despite external and climate shocks. To bolster external stability and safeguard international reserves, the authorities have been normalizing monetary and exchange rate policies under the crawling band exchange rate, while also maintaining fiscal prudence.
• Strengthened budget execution, energy sector reforms, proactive implementation of monetary and exchange rate policies, and intensified efforts to tackle long-standing structural bottlenecks remain key to safeguard macroeconomic stability and to promote inclusive and sustained growth.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) today completed the first and second reviews of the arrangements for Honduras under the Extended Fund Facility and Extended Credit Facility. The completion of the reviews enables the authorities to immediately draw about US$198 million (SDR 150 million), bringing total disbursements under the program so far to about US$315 million (SDR 239 million).[1] Honduras’ 36-month arrangements totaling about US$823 million (SDR 624.5 million) were approved on September 21, 2023.

In completing the review, the Executive Board assessed quantitative performance targets for end-December 2023 and end-June 2024. The Board assessed that while all end-December 2023 performance criteria were met, the end-June 2024 criteria on net international reserves, central bank net domestic assets, and the stock of domestic arrears at the public electricity utility ENEE were not met. The Board approved the authorities’ requests for waivers of non-observance of these end-June performance criteria on the basis of corrective actions.

The Honduran economy has remained resilient, growing 3.6 percent in 2023 and projected to expand by close to 4 percent in 2024, despite the negative impact of this year’s El Niño-related drought on agricultural exports and energy production and a recent tropical storm. Inflation has also continued to decline close to the 4 percent objective. Fiscal performance has been strong, with the fiscal deficit outperforming the program target in 2023 at 1.3 percent of GDP and projected to outperform again in 2024 at around 1.5 percent of GDP. On the other hand, international reserves, while remaining adequate, continued to decline in 2024 in the context of the drought-related shock and lower-than-expected external financing support.

At the conclusion of the Executive Board’s discussion, Mr. Kenji Okamura, Deputy Managing Director and Acting Chair made the following statement:

“The Honduran economy remains resilient despite global and domestic challenges, including several climate-related shocks. The authorities’ policy adjustments and remedial actions demonstrate strong commitment to their Fund-supported program, which aims to durably strengthen macroeconomic stability and foster inclusive, sustainable growth.

“The authorities’ strong focus on fiscal discipline, as also reflected in the 2025 draft budget submitted to Congress, has opened space for greater public investment. Resolute efforts are still needed to strengthen the social safety net and protect the most vulnerable segments of the population. Continued progress in broadening the tax base, strengthening budget execution, and enhancing public financial management frameworks remains essential to support the authorities’ development efforts and preserve debt sustainability.

“The recent decisive monetary policy tightening was important to preserve low inflation and the crawling band exchange rate regime. The strengthened implementation of the exchange rate crawl should help improve competitiveness and preserve external stability, including safeguarding international reserves. The authorities must remain vigilant and stand ready to adjust policies as needed to achieve these objectives.

“Promptly addressing energy sector challenges remains a priority. The authorities have adopted measures to reduce electricity losses and domestic arrears of the state-owned electricity company. Continued progress on these fronts as well as strengthened financial management and transparency of the state-owned company are essential to promote needed investment in energy generation, contain fiscal risks, and support medium-term economic growth.

“Steadfast implementation of structural reforms remains key to fostering inclusive growth. Actions to simplify administrative processes, enhance transparency, streamline procedures, and strengthen procurement systems will help create a favorable environment for investment and job creation. Additionally, intensifying ongoing efforts to combat corruption and reinforce the AML/CFT framework is vital for improving governance.

“The increasing frequency of climate change-related events calls for accelerating the implementation of climate adaptation policies. To support these efforts, the authorities have requested an arrangement under the Resilience and Sustainability Facility. Close engagement with IMF staff on this area will continue.”

[1] U.S. dollar amounts have been calculated using today’s exchange rate: (SDR 0.758881/US$).