Back Matter

Annex I. Recommendations of the Fiscal Transparency Evaluation: Action Plan

Pillar I

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Pillar II

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Pillar III(1)

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Annex II. Summary of Nonfinancial Assets

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Source: Comptroller General.

Annex III. Financial Soundness Indicators of Commercial Banks in Honduras and Summary of Banking System Indicators for Central America, the Dominican Republic, and Panama

Financial Solvency Indicators of Commercial Banks

(Percentages, December of each year)

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Source: Department of Financial Stability, BCH, with figures from the CNBS.Note p/: Preliminary

Summary of Banking System Indicators from Central America, Panama, and Dominican Republic December of each year

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Source: Secretariat of the Central American Monetary Council (SECMCA)

Data from Honduras are prepared at the BCH. Return indicators use earnings before income taxes as the numerator to be comparable with coefficients in the rest of the countries.

Calculations are based on a simple average.

According to the SECMCA, CARD countries require 10.0% of IAC, except for El Salvador, which requires 12.0%, and Panama, 8.0%.

Annex IV. BANADESA Financial Statements, 2016–17

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1

This is explained in Note 47 to the 2017 financial statements.

2

A financial liability is part of the debt because it entails an unconditional obligation for the government to pay the operatorofthe asset.Although the nonfinancial liabilityis not a debt instrument because there is no unconditional obligation to pay the operator, and the operator is granted the right to collect it directly from the users of the asset, it forms part of the contingent liabilities of those contracts.

5

Basically, these are the different recognition of PPP expenditures and the register of trusts (vehicle registration trust).

6

Specifically, the analysis considers the stock and recent changes in the consolidated NFPS domestic debt, by borrowing agency and instrument (bonds or loans) and by debt holder.

7

The total amount is HNL 2.158 billion, according to the 2016 Property Institute annual report: https://www.ip.gob.hn/memorias/Memoria_Anual_IP_2016.pdf.

8

A trust is a legal instrument whereby title to assets is assigned to an authorized bank, subject to the limitation that the bank may only carry out those acts required to accomplish the legitimate, specific purpose for which the trust is intended, as provided by article 1033 of the Commercial Code.

9

The MTMFF is issued every July/August by the Unit of Planning and Evaluation of Management (UPEM) and presents a comparison of actual versus projected changes in the principal variables for the entire year. The interagency committee discusses the new projections accompanying the budget. However, the projection for the upcoming fiscal year is not reflected in the documents.

10

The Priority Note is a technical-legal opinion that determines whether a public investment project is economically, socially, environmentally, legally, and technically viable; it analyzes and approves the logical design (logical framework matrix) of the investment project. The full analysis of the project’s logical design is based on the internal consistency of resources and goals (activities, components, purpose,and goal). It also ensures that the project goal is consistent with the institutional and sector strategic plans and Honduras’s Plan de Nacion y Vision (Nation and Vision Plan).

11

Government procurement law (Law47/2001).

13

August 2017 report of the assessment of Honduras’s public procurement system, based on the OECD Development Assistance Committee methodology.

14

It was determined that although the 2016 and 2017 budgets were approved and published prior to the start of the respective fiscal years, the 2018 bud get was approved on January 18, 2018.

15

Legislative Decree 25 of 2016 approved the FRL.

16

General Law on the Public Administration (Ley General de la Administracion Publica).

17

AECOM-Millennium Account 2016. “Public Expenditure and Financial Accountability Report (PEFA) measuring performance”. (MCATHP-17–2015); IMF. 2017. “Honduras: Improving Performance-Based Budgeting.” Technical Assistance Report, International Monetary Fund, Washington, DC.

19

The portal contains six [sic] tabs for each entity: (1) organizational structure, (2) planning and accountability, (3) finances, (4) regulation, (5) citizen participation,and (6) links. Under the finances tab, each entity reports information on financial statements, budget liquidation, monthly budget,annual reporting, physical expenditure, physical execution, financial execution, debt, and arrears.

20

Article 13 of the LOP establishes the integrity of bud get appropriations for expenditures, with a financial structure that distinguishes among current spending, procurement of nonfinancial assets, and financial assets and liabilities.

21

Uncertainties as to rising oil prices create uncertainties for short- and medium-term fiscal risks, particularly for ENEE, and are analyzed by the BCH. However, the BCH analysis is not part of the budget documentation.

23

The assumptions used in the debt sustainability analysis—economic growth and prices, fiscal policy, financing terms for the NFPS and external sector—are discussed on page40 of the 2019–22 PEP. The sensitivity analyses appear on pages43–45.

24

Article 25 of MTMFF.

25

The SEFIN Fiscal Contingencies Unit (UCF) is the entity responsible for consolidating information on fiscal risks and analyzing fiscal implications.

26

The authorities have completed the calculations, but they have not been officially reported.

27

Based on calculations provided by the authorities.

28

Information on pensions and the health sector are based on information provided by the authorities.

29

Sub-item 900 of item 499 of 2017 approved budget.

30

See 2018–22 Medium-term Debt Strategy. The financing requirements are described in the 2018 financing plan.

31

PEP (2019–22), page 13.

32

IMF. 2018. Technical Assistance report on the development of local debt markets.

33

Source: CGR and IMF staff calculations.

34

See Notes4 and 14 to the financial statements.

35

For example, some of the trusts make risky investments, such as transferring money for loans to banks like BANADESA.

36

The National Directorate of Government Property previously operated as the Office of National Property Administration within the CGR organizational structure. Decree-law No. 1001 of 1980. Legislative Decree No. 274–2010 of 2011 created the Directorate of National Property (Direccion de Bienes Nacionales); Executive Decree PCM-047–2015) modified the Directorate General of National Property (Direccion General de Bienes Nacionales) to the National Directorate of Government Property (Direccion Nacional de Bienes del Estado).

37

Legislative Decree 143–2010.

38

Legislative Decree 115 of 2014.

39

See Article 51 of the Law Establishing the National Agricultural Development Bank (BANADESA) (“all Bank obligations are fully guaranteed by the government”).

40

See the FOSEDE 2017 annual report for further information on the financial position and financial statements.

41

The maximum guaranteed amount is derived by converting the amount of insurance coverage, US$9632.92, to HNL; this was done by the FOSEDE board of directors in Resolution No. 287/20–01-2017.

42

See the discussion in the FOSEDE 2017 annual report, page 13.

43

The entities supervised by the CNBS pursuant to its legal authorities are primarily public and private banks, financial corporations, insurance companies, pension funds, and securities intermediaries (stock exchanges and brokerage firms). CNBS also supervises institutions that engage in other financial activities, including currency dealers and warehouse operators that make loans secured by goods or merchandise on deposit (almacenes generales de deposito).

44

At its first meeting on November 2, 2017, the Financial Stability Committee also discussed measures to prevent and correct situations that could com promise financial system stability.

45

See BCH. 2017. “The “Financial Stability Report.”

46

CNA press release on irregularities in the administration of the trust signed between BANADESA and a commercial firm, November 1, 2018.

47

HNL 105.6 million was transferred through the trust to the firm, to be used for the construction of the market and layout of interior spaces. The CNA stated that it determined on-site that the physical progress of the project at this time is inconsistent with the amounts authorized for the project and that there is an unjustified difference of HNL 29.4 million. According to the CNA, BANADESA officials were negligent in making the loan without following the procedures established bylaw.

48

If the financial position of any of those public banks indicated a need for compulsory liquidation, this would trigger application of article 261 of the Constitution: “In order to create or eliminate a decentralized institution, the National Congress shall adopt a resolution by two-thirds vote of its members. Prior to promulgating laws relating to the decentralized institutions, the National Congress shall request the opinion of the Executive Branch.”

49

The initiative ensures transparency and accountability in payments to governments by companies of the extractive and hydrocarbon industries,as well as the revenues that the governments receive from those companies.

50

The most recent INHGEOMIN report that is available is from 2016, at which time the extractive industry— primarily gold and zinc—represented 1 percent of GDP.

51

According to BCH statistics.

52

According to the EITI.

53

There is a methodology for classification of municipalities, which is a combination of two indices, the municipio and the municipality. The municipio index, which includes the UNDP Human Development Index (2009), contains urban/rural population data from the 2014 census (forecast data from the 2014 census) and sector data for 2014 from the ENEE on residential energy coverage. The municipality index includes, for example, the available, certified, universal information available on the administrative and financial performance of Honduras’s 298 municipios, provided by the Ministry of Justice, Government, and Decentralization (SDJGD).

54

See Legislative Decree No. 25–2016, article24, and implementing regulations (Decision No. 288–2016, article 20); SDJGD 2014 Municipal Categorization; Executive Decision No. 556-A-2016, Technical Guidelines for Measurement of Macro-Fiscal Rules for the Nonfinancial Public Sector; and Decree No. 141–2017, General Budget Provisions for fiscal year 2018.

55

Compares with the DGID report on municipalities for the first quarter 2018.

56

Ministerial Decision 213 of 2013, article 19, and pages 29–31 of the document attached to the PEP.

57

The laws establishing policies for public corporations include, for example, Decree No. 404–2013, the General Law on the Electricity Industry; Decree No. 91–61, establishing the SANAA, Water Law 181–2009; Decree No. 120–93, creating HONDUCOR; Decree 89–99, establishing HONDUTEL’s public interest status; Decree Law 592/78, creating the IHMA; Decree 185–95, the Framework Law on the Telecommunications Sector,as amended by Decree 118–97; and the 2014–18 Strategic Institutional Plan, January 2011.

58

For further discussion of the subsidies historically provided to ENEE, see the SEFIN 2016 annual report. The government of Honduras has established indirect electricity subsidies through tax exemptions on imports of fuels, equipment,or materials used for electricity generation; and direct subsidies supporting the price per kilowatt hour for residential users, either through the cross-subsidy incorporated in tariffs or through direct government payments to cover the residential electric service according to household consumption tranches. The subsidies have been modified overtime; there were no direct consumer subsidies in 2016.

59

The DGPMF reports only on the NFPS. The financial corporations are BANHPROVI, BCH, and BANADESA.

60

Under article 47 of Decree No. 83–2004 approving the Framework Budget Law, the DGID is responsible for the following: reviewing the institutions’ performance and submitting periodic reports to the senior authorities to support decision-making; and supervising economic-financial activities and periodically evaluating the efficiency of institutional activities.