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April 29, 2022

• Honduras recovered strongly in 2021, exceeding pre-pandemic levels, supported by strong remittances and robust external demand. Inflation continues to breach the central bank’s upper band.
• Authorities stressed their commitment to protecting the vulnerable and combating poverty, improving public financial management and investment, and enhancing institutions and transparency.
• Authorities must remain vigilant to preserve macroeconomic stability, given heightened global risks and uncertainty.

Washington, DC: An International Monetary Fund (IMF) team led by Joyce Wong visited Tegucigalpa from April 27 to29 to discuss recent economic developments, the impact on the Honduran economy of the COVID-19 pandemic and the war in Ukraine, and the authorities’ reform plans. At the conclusion of the visit, Ms. Wong issued the following statement:

“The authorities shared their diagnostic of the economic situation in Honduras and their reform priorities. They expressed their commitment to protecting the vulnerable, combating poverty and migration, improving the management of public finances and investment execution, and enhancing institutions and transparency. The team held meetings with the authorities on the 2022 budget, public investment plans, debt management, electricity sector reforms, and monetary and financial policy. The discussions laid important groundwork for further engagement with the Fund and continuing capacity development.

“Economic growth in Honduras reached 12.5 percent in 2021, led by strong remittances, which supported private consumption, and robust external demand boosted by the U.S. recovery. After remaining within the central bank’s reference range of 3 to 5 percent for most of 2021, inflation breached the upper band in December and neared 7 percent y/y at end-March, largely reflecting supply side factors, together with some demand pressures from strong remittances and higher government spending.

“Given the domestic context and heightened global risks with continuing shocks, including the COVID-19 pandemic, tropical storms Eta and Iota, and the war in Ukraine, it will be essential for the authorities to remain vigilant. Protecting the most vulnerable people, preserving macroeconomic stability, and fiscal discipline, must remain essential tenets of policymaking in the face of strong inflationary pressures.

“The IMF mission thanks the authorities and other stakeholders for their kind hospitality and fruitful discussions and stands ready to support the government of Honduras in the implementation of its social and economic program.”