- IMF staff and the Honduran authorities have reached staff-level agreement on policies and reforms to complete the third review of the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements. IMF Board approval of the review, expected for June, would result in a disbursement of about US$155 million.
- The Honduran economy has remained resilient, and the authorities have made solid progress in implementing their economic program. Moderate spending policies, decisive adjustments in monetary and exchange rate policies, and progress in energy sector reforms are contributing to robust growth and a healthy rebalancing of the economy.
- There was agreement that Honduras needs to maintain prudent fiscal policies, especially during the election year, and proactive monetary and exchange rate policies to preserve macroeconomic stability. Structural, fiscal and energy sector reforms should be deepened, and efforts to enhance public investment and social spending should be redoubled.
Tegucigalpa, Honduras: An International Monetary Fund (IMF) team led by Ricardo Llaudes visited Tegucigalpa from March 31 to April 11, 2025 to discuss recent economic developments and policy implementation. At the conclusion of the visit, Mr. Llaudes issued the following statement:
"The Honduran authorities and the IMF team have reached staff-level agreement to complete the third review of the Extended Credit Facility (ECF) and Extended Fund Facility (EFF) arrangements. The IMF's Executive Board is expected to consider the case in June.
"Notwithstanding exceptionally high global uncertainty, the team and the authorities concurred that the Honduran economy has remained resilient and macroeconomic policy performance through end-December 2024 remained in line with program objectives. Solid growth—at 3.6 percent for 2024— has continued, and inflation, at 4.5 percent in March, remains within the tolerance range around the Central Bank of Honduras' (BCH's) inflation objective. International reserves have increased considerably, including due to the successful external sovereign bond issuance, disbursements from multilateral development banks, and adjustments to monetary and exchange rate policies, which have also contributed to a moderation of credit growth and a rebalancing of the economy. Increases in coffee exports and remittances early this year have also bolstered foreign exchange inflows.
"The authorities reiterated their commitment to a prudent macroeconomic policy mix and readiness to take prompt action to ensure success of their economic program supported by the IMF. Against a highly uncertain global backdrop, discussions focused on the need to remain vigilant and on policies and reforms to further increase Honduras' resilience:
"First, fiscal policy will remain prudent to enable needed investment and social spending. The 2025 budget targets a deficit of 1.5 percent of GDP and includes additional space for investments in roads, health and education, and the energy sector. The authorities are also working on modernizing the public procurement framework, improving public investment planning, and strengthening the budget execution process, which should help limit the size of payable accounts. Congressional adoption of amendments to the Organic Budget Law would strengthen the Treasury Single Account.
"Second, it is essential to redouble efforts to strengthen social spending. The Hermano, hermana, vuelve a casa program timely assists returning migrants and help their reintegration. That said, greater efforts are needed to expand and regularly deploy monetary transfers under Red Solidaria, the authorities' flagship program. The planned census of urban households in extreme poverty and the finalization of the Single Social Sector Information System are steps in the right direction. Tighter focalization of existing subsidies on the most vulnerable would free up resources to bolster social assistance.
"Third, the BCH must remain vigilant to maintain inflation anchored to its objective and safeguard international reserves. Adjustments to monetary and exchange rate policies have helped narrow the gap between FX demand and supply. The current windfalls from higher coffee exports and remittances should contribute to a further strengthening of reserve buffers. Looking forward, the rate of crawl should continue to be determined by the behavior of macroeconomic fundamentals, underpinned by the crawling band exchange rate regime. The authorities will adopt a data-driven approach to adjust monetary policies as needed to maintain inflation anchored to the objective and safeguard external stability. The authorities are also evaluating measures to pragmatically improve the efficiency of the current system of FX allocation, while safeguarding the strengthened confidence of market participants.
"Fourth, energy sector reforms remain critical to support long-term growth. Ambitious investments in energy transmission and distribution are beginning to yield results, improving reliability and reducing electricity costs and technical losses. The vigorous implementation of the authorities' financing plan in late 2024 successfully reduced the electricity utility's (ENEE) payment arrears. The Secretary of Finance's (SEFIN) commitment to timely transfer subsidy payments to ENEE will also bolster ENEE's financial position. A further reduction of arrears, strengthened payment discipline, and reforms to enhance ENEE's operational efficiency are essential ahead of the planned tender for new generation capacity.
"Fifth, efforts to fight corruption and enhance the business environment will continue. The launch of digital signatures and investment portal are expected to streamline transactions. To strengthen the AML/CFT framework ahead of the evaluation by the Financial Action Task Force (FATF) in 2026, it is critical that Congress adopts amendments to relevant laws as well as legislation stablishing a firm registry including with beneficial ownership information. Finally, the authorities are committed to approve the Honduran National Transparency and Anti-Corruption Strategy (ENTAH).
"The IMF team would like to thank the authorities, the private sector, and civil society for their kind hospitality and candid discussions."
