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Economic Situation in Honduras: A Report by the International Monetary Fund (IMF)

The International Monetary Fund (IMF) has released a report assessing the economic situation in Honduras. The report highlights progress made by the country in implementing reforms and discusses the current state of its economy.

Fiscal Position

  • Anchoring Fiscal Responsibility: The authorities have made significant efforts to anchor the fiscal position to the Fiscal Responsibility Law (FRL), despite facing challenges due to sluggish economic growth.
    • Lower-than-expected tax collection has affected the country’s fiscal performance, but the government is committed to meeting its obligations under the FRL.

Monetary Policy

  • Data-Dependent Stance: The central bank has maintained a data-dependent policy stance aimed at anchoring inflation expectations. The transmission mechanism operates mainly through the signaling channel.
    • This approach allows the central bank to respond effectively to changing economic conditions and maintain price stability.

Economic Growth

  • Supporting Growth: Given the current cyclical position, there is a case for using all available fiscal space to support growth in the short term.
    • The government can leverage its fiscal resources to stimulate economic activity and promote sustainable development.

Electricity Sector Reforms

  • Progress Made: The authorities have made significant progress in strengthening the institutional framework of the electricity sector.
    • Key achievements include the creation of an independent dispatch center (ODS) and improvements to ENEE’s governance.

Targets Met or Not Met

The report highlights several targets that have been met or not met, including:

  • Fiscal Targets:
    • Floor on net lending of the nonfinancial public sector
    • Floor on net lending of ENEE
    • Ceiling on the accumulation of domestic arrears by ENEE
  • Indicative Targets:
    • Floor on central government tax revenues
    • Ceiling on the central government wage bill
    • Floor on priority social spending

Conclusion

Overall, the report provides a comprehensive assessment of Honduras’ economic situation and progress in implementing reforms. The focus is on securing the fiscal position while protecting social spending to ensure sustainable development and poverty reduction.