Encouraging Investment In Honduras Through New Economic And Legislative Programmes

During 2009 the Honduran economy was seriously hit by the global slowdown and by an internal political crisis. The GDP decreased almost 2% and unemployment increased significantly. The fiscal situation experienced a marked deterioration and gross international reserves fell by around $360 million reaching its lowest level since 2006.

Although the external conditions have experienced a slight improvement this improvement has not been reflected in the country's economic growth and recovery is still facing risks.

The new economic program

The Honduran Government with the aim of establishing the conditions for a solid and sustainable mid- term growth has began to implement key reforms designing an economic program (the Program) for 2010–2011 focused on decreasing the macroeconomic imbalances and strengthening the public sector finances.

This will help to improve the investors' trust and to consolidate the support of the international community.

To support said Program the Honduran Central Bank signed an Agreement with the IMF on October 1 2010 by which quantitative performance criteria and structural goals are being expected from the country. The Government has said that it will keep the public informed about the Program's progress.

This Program is being supported by the IMF with a financial assistance up to DEG 129.5 million (almost $202 million) through two credit lines: The Stand- By Agreement (SBA) and the Stand- by Credit Facility (SCF).

The main objective of the Program is to re-establish the macroeconomic stability, fortify the public finances, support the establishment of the conditions for sustainable economic growth and raise the resources for investment.

The Government's policies for fiscal consolidation aim to improve revenue management and collection, followed by a better composition of the public waste, a strict control on total wages to allow an increase in the programs of reduction of poverty and public investment.

During this Program the Government will not modify the exchange rate policy nor establish multiple exchange rate practices and will not restrict imports due to balance of payments reasons; it will continue accomplishing the agreed obligations with IMF.

The implementation of the Program is being monitored through five quarterly reviews. This year the IMF mission has visited the country twice, on February 15 2011 and May 15 2011.

In the last visit the IMF mission acknowledged the accomplishment of the quantitative...