OREANDA-NEWS. September 14, 2015. Executive Board of the International Monetary Fund (IMF) today completed the first review of Honduras’s performance under an economic program supported by a three-year Stand-By Arrangement (SBA) and a two-year arrangement under the Stand-By Credit Facility (SCF). This blended program was approved on December 3, 2014 in the amount of SDR 129.5 million (then about US\\$188.6 million), the equivalent of 100 percent of Honduras’ quota in the IMF (see Press Release No. 14/545). With the completion of the review, the authorities have access to resources in the total amount of SDR 45.325 million (about US\\$63.8 million); however the authorities plan to continue treating the arrangements as precautionary.

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

“The Honduran authorities are implementing their Fund-supported economic program with strong commitment, amid improved terms of trade and strong remittance inflows.

“For 2015, the authorities have strengthened fiscal and monetary targets, taking advantage of the more favorable external environment to reduce the deficit of the central government and state electricity company (ENEE) at a faster pace than originally envisaged. This will add to the credibility of fiscal adjustment and enhance confidence. The authorities also plan to continue changing the composition of public expenditure to create room for higher and better-targeted social spending to support the reduction of the high levels of poverty.

“The tightening of monetary targets is important to strengthen international reserve buffers and help keep monetary policy focused on controlling inflation and protecting the external position. Plans to strengthen the central bank’s governance and independence will enhance its capacity to maintain stable monetary and financial conditions.

“To bolster public finances and support long-run economic growth, the authorities should press ahead with reforms in the electricity sector. In particular, the authorities’ plan to bring forward measures to reduce the deficit of ENEE is required to further lower the burden on the central government finances and increase efficiency. These measures should be accompanied by full implementation of the reforms envisaged in the 2014 electricity sector law, including the implementation of plans to reduce distribution losses in the sector.

“Finally, Honduras would benefit from protecting the hard won gains envisaged under the program by establishing a fully functional medium-term fiscal framework, which would institutionalize fiscal policy discipline. In addition, the provisions under the recently adopted social protection framework law should be implemented gradually to ensure consistency with the program’s objectives and with long-term fiscal sustainability.”