OREANDA-NEWS. October 08, 2015. An International Monetary Fund (IMF) mission, led by Roberto Garcia-Saltos, visited Tegucigalpa on September 24 to October 6 to conduct the second review of Honduras’ Fund-supported program. At the conclusion of the visit, Mr. Garcia-Saltos issued the following statement in Tegucigalpa today:

“The mission welcomes the positive results obtained through the ambitious policy decisions made over the past 22 months. These policies are creating the foundation for sustained inclusive growth and fiscal sustainability.

“In 2015 real economic growth is projected to be 3.5 percent—better than expected. The outlook for growth is expected to be broad-based, led by communication, agriculture and manufacturing, and supported by favorable terms of trade and growth in trading partners. Inflation through August remained low and is expected to reach about 4 percent by end-year. Through September, net international reserves rose by US\\$206 million to about 4.5 months of imports, contributing to a strengthened external position. On the fiscal sector, the mission is encouraged by the more solid fiscal position, with lower deficits for the central government and in the state electricity company (ENEE), both smaller than originally envisaged. This has added to the credibility of fiscal policy and enhanced confidence –as evidenced by declining spreads on external commercial debt.

“Program implementation remains strong. The structural benchmarks were also observed, while significant progress toward meeting end-of-December 2015 benchmarks has been made. The 2016 budget submitted to congress is in line with program commitments and we welcome the medium term fiscal plan included with the documentation sent to congress.

“For 2016, the outlook for the Honduran economy remains just as positive, with growth projected at 3.6 percent (revised up from 3.4 percent), inflation low, at about 5 percent, and lower current account deficit.

“The mission and the authorities reached staff level understandings for the program for 2016. The agreement contains quantitative targets, including a floor on social spending, and appropriate policies to institutionalize the hard-won gains in macroeconomic stability, and simultaneously boost growth-enhancing spending by the government. These understandings are subject to approval by the IMF’s Management and Executive Board, which is expected to consider the second program review later in the year.

“Furthermore, the authorities have decided to protect the fiscal gains by establishing a fully functional medium-term fiscal framework. This would institutionalize fiscal discipline, thus helping to reduce the debt burden and enhance policy credibility. Monetary policy will continue, appropriately, to focus on keeping inflation under control and strengthening the external position while providing adequate support to economic growth.

“We are encouraged by the progress made thus far, in implementing the social protection framework law, which seeks to extend coverage of the social safety net and reaching universal health care in the medium term. The authorities are committed to implementing this law gradually within the program’s targets. At the same time a draft law to reform the Honduran Social Security Institute (IHSS) to protect its fiscal solvency and improve governance is being prepared for submission to congress later this year.

“The economic policies in the updated economic program designed by the government aim to improve transparency, support economic growth and job creation while maintaining prudent fiscal policies. Important actions to promote growth include a program to substantially reduce electricity distribution losses and better practices in public financial management that should create additional room for higher public spending on needed infrastructure. In line with this strategy, the authorities are taking actions to fight corruption and improve transparency in the operations of government.”

The mission met with Minister Coordinator of the Government, Jorge Hern?ndez-Alcerro, Head of the Economic Cabinet, Marlon T?bora, Acting Central Bank Governor, Manuel Bautista, Minister of Finance, Wilfredo Cerrato, and Minister Director of the Tax Directorate, Miriam Guzm?n, President of the National Commission of Banking and Insurance, Ethel Deras, Minister of Infrastructure and Public Services, Roberto Ord??ez, Vice Minister of Public Investment and Credit, Rocio T?bora, other senior government officials, members of congress, and private sector representatives.

The mission 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.