Electronic Notification to Taxpayers: Structural Benchmark Met
Honduras has made significant progress in strengthening transparency and controls over emergency-related spending. The country has successfully implemented electronic notifications to taxpayers, meeting a key structural benchmark (SB).
Progress on Structural Benchmarks
While Honduras has made progress, there are still areas where the country is lagging behind. The integration of the procurement portal Honducompras2 with IFMIS has been delayed due to IT issues, as well as the automated process to record trade in special regimes, which has been delayed due to coordination issues across agencies.
- Delayed integration of procurement portal Honducompras2 with IFMIS
- Automated process to record trade in special regimes delayed due to coordination issues
Additionally, the authorities were unable to cancel the distribution trust fund, citing strategic negotiations with the operator of the distribution network. However, the transmission trust fund was eliminated. The transfer of control of tax exemptions to SAR remains pending in Congress, but preparatory technical work continues at SAR.
Policy Discussions
Recent policy discussions focused on the impact of tropical storms and adapting the policy response to sustain reform momentum. Topics included:
- Adjustments to the fiscal stance to incorporate reconstruction spending
- Challenges and next steps in electricity sector reforms
- Immediate storm-related emergency needs
Fiscal Outlook
The country’s fiscal outlook is expected to remain challenging due to ongoing pandemic-related spending needs and increased balance of payments needs. Revenues are expected to recover somewhat in 2021, but they remain well below pre-pandemic levels. The authorities are pursuing a looser fiscal stance in 2021-2022, with plans to return to the Fiscal Responsibility Law (FRL) target in 2023.
Medium-Term Reconstruction Strategy
The authorities’ comprehensive medium-term reconstruction strategy includes:
- Climate-resilient infrastructure
- Dams for flood management
These projects are critical for Honduras’ sustainable development due to its vulnerability to climate-related shocks. The country plans to start several projects in 2021, with an estimated immediate cost of 0.6 percent of GDP.
Request for Waiver
The authorities have requested a waiver of non-observance for the missed NFPS balance PC for end-December, citing temporary nature of the non-observance and the need to address increased balance of payments needs. The country is also requesting an augmentation of access to cover part of the additional balance of payment needs, supplemented by increased IFI financing (an additional US$205 million).
Overall, Honduras continues to make progress on its reform agenda, but challenges remain in certain areas. The country’s fiscal outlook remains uncertain due to ongoing pandemic-related spending needs and increased balance of payments needs.