Honduras to Strengthen Fiscal Sustainability with $100 Million in IDB Financing

WASHINGTON – The Board of Executive Directors of the Inter-American Development Bank (IDB) has approved a $100 million programmatic policy-based loan to support structural reforms that will strengthen fiscal sustainability in Honduras. 

The loan is the first of two standalone, but technically linked operations, designed to strengthen regulatory and institutional capacity that improve the country’s fiscal resilience to external shocks. 

The first IDB operation will strengthen the country’s fiscal responsibility framework and enhance institutional capacity for macrofiscal management within the Ministry of Finance. It will also support reforms to improve efficiency, oversight, and transparency of tax incentives, and promote key improvements in public expenditure management, particularly in public procurement, treasury management, and public investment. 

The program aims to reduce public debt, strengthen the primary balance, rationalize tax expenditures, enhance the quality of public investment projects, and improve capital expenditure execution. These reforms are expected to bolster fiscal sustainability and improve the overall business environment in the country, benefiting both firms and the population at large. 

The $100 million IDB financing consists of $60 million from the Bank’s Ordinary Capital, with a 20-year maturity, a 5.5-year grace period, and an interest rate based on SOFR. The remaining $40 million will be provided from the IDB’s Concessional Ordinary Capital, with a 0.25% interest rate and a 40-year maturity and grace period. 

This operation is aligned with the ongoing 2023 agreement with the International Monetary Fund (IMF) and complements fiscal policy programs supported by the World Bank and the Development Bank of Latin America and the Caribbean (CAF).