Statement by the Staff Representative on the Honduras Executive Board Meeting, April 27, 2011

The authorities’ remain committed to lower the fiscal deficit and stabilize the public debt-to-GDP ratio at 30 percent of GDP while improving the quality of expenditure. The authorities agree to maintain public expenditure within the ceilings established in the 2011 budget. Further progress in public sector reform is essential for improving the efficiency and sustainability of public finances. Progress has been made in improving the government’s debt management strategy. The central bank has prepared a plan for upgrading the monetary policy framework.

Abstract

The authorities’ remain committed to lower the fiscal deficit and stabilize the public debt-to-GDP ratio at 30 percent of GDP while improving the quality of expenditure. The authorities agree to maintain public expenditure within the ceilings established in the 2011 budget. Further progress in public sector reform is essential for improving the efficiency and sustainability of public finances. Progress has been made in improving the government’s debt management strategy. The central bank has prepared a plan for upgrading the monetary policy framework.

This statement provides information that has become available since the issuance of the staff report (EBS/11/57). The new information does not alter the thrust of the staff appraisal.

Staff has received information on two quantitative performance criteria for end-March 2011. The information confirms that the two monetary targets were observed with wide margins.

Honduras - Performance Criteria 1/

(Quantitative monetary targets for end-March 2011)

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Definitions as specified in the Technical Memorandum of Understanding.

Other Developments

These new developments are in line with the macroeconomic projections presented in the staff report.

  • Headline inflation in March 2011 was 0.7 percent, which brought the 12-month inflation rate to 6.6 percent. Core inflation (12-month rate) rose to 4.7 percent in March 2011 from 4 percent in December 2010.

  • The monthly index of economic activity (IMAE) increased (yoy) to 3.9 percent in January 2011; it showed a 3.7 percent increase in December 2010.

  • As of mid-April, gross international reserves stood at US$3,236 million; US$305 million higher than at end-December2010.

  • Cumulative tax collections through February 2011 were 15 percent higher than during the same period in 2010.

  • By end-February, commercial bank credit to the private sector was 5 percent higher than one year earlier.

Honduras: First Review Under the Stand-By Arrangement and Under the Standby Credit Facility-Staff Report; Staff Statement; Press Release; and Statement by the Executive Director for Honduras.
Author: International Monetary Fund