This report was prepared by a mission comprised by Mr. Julio Vifluela and Ms. Maria Albino (both FAD).
The Constitution was adopted by Decree 131 of 1982.
Article 73 of the Organic Law of the General Accounting Office of the Republic, approved by Decree 2001 of 1980, regulates the structure of the public sector.
More specifically, the central government consists of the Legislative Branch (National Congress), along with three auxiliary bodies (the General Comptroller Office of the Republic, the Attorney General Office of the Republic, and the Directorate of Administrative Probity); the Judicial Branch (the Supreme Court of Justice); and the Executive Branch (the President of the Republic), assisted by the Centralized Public Administration (Office of the Presidency, the Council of Ministers, and the Ministries).
The de-concentrated agencies of the Executive are: the Honduran Social Investment Fund, the Family Allowance Program, the Executive Directorate for Revenue, the Education and Productivity Program, the Permanent Commissioner for Contingencies, the Directorate of Agricultural Science and Technology, the National Telecommunications Commission, the General Directorate for the Merchant Marine, and the National Graphic Arts Enterprise. They receive their resources from the parent entity and their budgets are approved by the Secretariat of Finance.
They are created by a law that requires a 2/3 parliamentary majority, have their own assets, and their budgets, after being scrutinized by the Secretariat of Finance, are approved by their executive councils and sent to Congress for legislative approval.
Honduran Social Security Institute, National Retirement and Pension Institute for Employees and Officials of the Executive Branch, and the National Institute for Teachers’ Welfare.
The most important ones are: the National Agrarian Institute, the Honduran Corporation for Forest Development, the Honduran Institute for Agricultural Marketing, the National Commodities Supplier, the Honduran Coffee Institute, the Honduran Tourism Institute, the Honduran Institute for Children and the Family, the Institute of Education Credit, the National Professional Training Institute, the Honduran Institute of Anthropology and History, the Honduran Institute of Cooperatives, the Honduran Institute to Prevent Alcoholism, Drug Addiction, and Drug Dependence, the National Children’s Foundation, the National Commission on Sporting Facilities, the Honduran Olympic Committee, the Autonomous Sports Confederation of Honduras, the National School of Forestry Sciences, the National Autonomous University of Honduras, and the Francisco Morazan National Teachers’ University.
Honduras does not report institutional coverage in the Government Finance Statistics Yearbook.
Article 216 of the Constitution stipulates that if the Executive Branch objects to a draft law passed by the Legislature, it can veto it and return it to the Legislature for renewed debate. If the Legislature ratifies the content of the draft, a two-thirds majority is needed in Congress for it to pass. Article 218 of the Constitution creates a specific exception to this veto power for the budget.
Article 62 of the Organic Budget Law, adopted through Decree 407-76.
Adopted by Decree 134-90, amended through Decree 48-91.
Articles 12-20 on municipal autonomy.
Articles 70-86 on municipal revenues.
Of this, 40 percent must be distributed in equal parts among the municipalities and the remaining 60 percent according to the number of inhabitants.
Legally, both the draft GBR and the draft budgets of the decentralized entities must be submitted to Congress in the first 15 days of September to be approved before the beginning of the fiscal year, which coincides with the calendar year. In case a budget is not approved in due time, the previous budget is temporarily adopted.
Article 20 of the 2001 Annual Budget Law regulates the budget process of the de-concentrated entities for that year.
The Law on the CBH, adopted through Decree 53-1950, was amended by Decree 17-1996 to give it functional and operating autonomy.
The budget of the CBH must be approved by Congress, and any subsequent substantial modification to the operating plan or the approved budget, without exception, requires congressional approval (Decree 202-2000).
This legal provision has not been used in practice.
At the end of 1999, public sector deposits in the CBH totaled 6.6 billion lempiras.
The value of the bond is 5.4 billion lempiras.
Since they have government guarantees, the National Banking and Insurance Commission do not supervise these two entities.
The NFPE are: The National Electricity Company, the Honduran Telecommunications Company, the National Autonomous Water Supply and Sewerage Company, the National Port Company, the Honduran Postal Company, and the National Railroad Agency of Honduras.
The government has submitted a draft law on administrative streamlining to Congress that aims to simplify the procedures for creating new enterprises, which are currently too long and bureaucratic, and to set maximum deadlines for the various procedures.
Decrees 228-96, 155-95, and 170-95, respectively. Other relevant laws are: the Provisional Law on Financial Stabilization, the Law on the Securities Exchange, and the Law on the Deposit Guarantee Fund.
Article 205.1 of the Constitution. Sanctions imposed by the Commission are typically challenged in the courts, which in turn submit them for interpretation to the Congressional Banking and Currency Commission.
The Constitution establishes basic provisions on the budget, taxation and the public debt. The OBL, as required by the Constitution, governs the formulation, approval, execution and liquidation of the GBR. The Law on Public Credit (Decree 111-90) regulates borrowing and the awarding of guarantees. The Organic Law of the General Accounting Office (Decree 101-80) regulates the government accounting system. Title Two of the General Law on Public Administration governs the general budgetary regime for decentralized institutions.
The sales tax law includes a long list of goods and services that are exempted, what in the Honduran case means that they are charged a zero tax rate. To prevent the devolution of the taxes charged on the purchase of the inputs used in their production, the Executive Directorate for revenue dictates resolutions authorizing the producers of those goods to buy their inputs without paying the sales tax. The same law exempts from the tax the sales made by the public sector and enterprises providing tourism services.
However, as noted elsewhere these are aggregate data and details of budget execution are not made available.
A particularly worrisome lack of coordination is that between the FHIS, which executes and program social investments (education and health) relying on local demands that not necessarily coincide with country’s priorities, and the corresponding ministries, which are to provide for the recurrent expenditures.
In cooperation with IMF staff, the authorities have prepared a medium-term macroeconomic framework and budgetary scenario for 2001-2005 for the Article IV Staff Report, which offers forecasts of revenues, expenditures, overall balance, and debt-GDP ratio for the central government.
These entities represent about 20 percent of central government expenditure as defined following GFS86.
“Overall appropriations” represent five percent of total expenditure included in the GBR. “Centralized services,” about 23 percent. Almost 18 percent of this last figure corresponds mainly to grants to local governments and subsidies to small consumers of electricity, urban transportation, and interest rates of loans guaranteed by FONAPROVI. Nearly 32 percent are allocated to personnel expenditures. The rest are mainly grants to two deconcentrated agencies: the Honduran Fund for Social Investments and the Family Allowance Program.
Article 69 of the OBL.
Transfers between institutions are to be approved by presidential decree. Transfers between capital expenditures and between programs within an institution shall be authorized by the SEFIN. Finally, ministries can transfer resources between line items within aggregate expenditure groups.
The base salary of these employees provided for under the statutes is equivalent to a given multiple of the minimum wage, so that every time wages are reviewed through a private collective decision, there is an automatic revision of the base pay.
The final accounts comprise: (a) Report on the execution of the GBR; (b) Government balance sheet; and (c) Report on the consolidated financial position of the public sector.
The approved GBR is not a good indicator of spending financed by donor funds because it only include foreign grants that are actually available when the GBR is prepared. Foreign grants are available once the budgets of the donor countries have been approved, usually at the end of the year. Only then has the recipient country guarantee that those funds will be available for a specific purpose. However, by that time the budget of the recipient country has already been approved. This prevents the inclusion of these funds in the initial budget and requires the approval of new or supplementary appropriations over the year. In countries like Honduras, in which a great part of the capital budget is financed by foreign grants, this issue necessarily distorts budget preparation and budget execution.