IMF Executive Board Completes Second Reviews Under SBA and SCF Arrangement and Approves Augmentations of Access to Support Honduras’ COVID-19 Measures

New Delhi: The Executive Board of the International Monetary Fund (IMF) completed today the second reviews of Honduras’ performance under its economic program supported by a two-year Stand-By Arrangement (SBA) and a two-year arrangement under the Standby Credit Facility (SCF). This program was approved on July 15th, 2019 in the amount of about US$308 million (SDR 224.82 million), the equivalent of 90 percent of Honduras’ quota in the IMF (see Press Release 19/284 ). Today, the Executive Board also approved augmentations of access under both arrangements by about US$223 million (SDR 162.37 million), bringing combined total access under the SBA and SCF arrangement to about US$531 million (SDR 387.19 million, 155 percent of quota).

The completion of the reviews will release about US$233 million (SDR 169.864 million), to help Honduras meet urgent balance of payments and fiscal financing needs stemming from the COVID-19 pandemic, including increased health care and social spending. In late March, to support the policy response to the crisis, the authorities decided to draw on available Fund resources for US$143 million (SDR 104.92 million). Previously, the authorities had treated the arrangements as precautionary.

Following the Executive Board’s discussion on Honduras, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, made the following statement:

“The COVID-19 pandemic and external spillovers are having a significant impact on Honduras, but the authorities remain strongly committed to the Fund-supported economic program. Despite a challenging economic environment in 2019, they have strived to maintain macroeconomic stability and protect social spending and investment. Electricity sector reforms are making progress and steps are being taken to improve governance.

“The authorities are articulating a strong policy response, including by using the flexibility under the Fiscal Responsibility Law to temporarily increase the deficit and accommodate higher healthcare and social spending. Measures are temporary and targeted to support affected groups and mitigate structural vulnerabilities. Monetary policy remains geared towards maintaining price stability and adequate international reserves, and efforts to strengthen the monetary policy framework and support the transition to a more flexible exchange rate continue. The authorities will strengthen tax administration to preserve tax revenue and protect critical spending. They will resume revenue mobilization efforts once the impact of the pandemic subsides.

“The authorities continue to take steps to improve the institutional framework in the electricity sector. Important measures have been incorporated into the program. These aim at improving governance and facilitating the unbundling of the national electricity company (ENEE). Tariffs continue to reflect the cost of electricity provision while providing subsidies to the poor.

“To improve governance, efforts are ongoing to strengthen public procurement and the institutional framework in the central bank and the Treasury. Reforms also aim at enhancing the Public Private Partnership, AML/CFT, and anti-corruption frameworks; and at securing transparency and accountability—including on pandemic-related emergency spending.

“The augmentation of access under the Stand-By Arrangement and the Arrangement under the Standby Credit Facility should help the authorities cover external financing needs to mitigate the impact of the pandemic.”