Honduras to Improve Water and Sanitation Services with IDB Support

The Inter-American Development Bank (IDB) approved up to $56.1 million in financing to enhance the continuity of and quality of access to water and sanitation services for the residents of Honduras’s Central District. The program’s reforms will consolidate municipal control over this the services and enhance the sector’s governance and management, in the context of climate change.

Around 1.3 million people from the Central District will benefit from this reform process, which aims to boost the Municipal Drinking Water and Sanitation Unit’s efficiency as it operates and manages its water and sanitation services.

The IDB contribution will also help enhance the governance and management of the sector nationwide, as a result of the Central District’s fundamental importance and influence. In the context of climate risk, these improvements will center on ensuring water security and climate resilience.

This loan, which has been approved by the IDB’s Board of Executive Directors, also aims to bolster the financial sustainability of the Municipal Drinking Water and Sanitation Unit’s services, strengthen planning at this service provider, and reinforce the sector’s framework through better governance, regulations, and resource management.

The proposed policy reforms reinforce the commitment of the IDB and the Government of Honduras to improving operations, institutional coordination, and strategic planning in order to provide better access to water and sanitation services in Tegucigalpa, thus reducing inequity.

The bank has provided ongoing support to the Government of Honduras on water and sanitation through its investment programs, which have included robust institutional strengthening and grant funding components, as well as other policy-based loans like this one.

This is the second loan in a programmatic series to support policy reform. Its support includes up to $19.6 million in ordinary capital and up to $36.46 million in concessional ordinary capital, a 20-year repayment term, a 1-year disbursement period, and an interest rate based on the Secured Overnight Financing Rate (SOFR).

This period of the two-phase operation will focus on cementing the work achieved in the first operation, within a policy matrix structured around five pillars: macroeconomic stability; developing the operational and management framework for water and sanitation services; establishing the rate policy for the services; strengthening water and sanitation planning instruments; and modernizing the national sector framework.