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IDB approves $15 million soft loan to improve revenue collection and public spending in Honduras

The Inter-American Development Bank today announced the approval of a $15 million soft loan for a program to improve revenue collection and fiscal management in Honduras.

The Swedish International Development Agency (SIDA) will provide $3,2 million to cofinance the program. SIDA has been instrumental in supporting the IDB’s recent research on Central American tax systems, which underscored the need for reforms.

The program will support a reorganization of the Ministry of Finance and the Honduran Revenue Office (DEI), the agency in charge of tax and custom tariff collection. The program will also strengthen the sections of the Honduran Central Bank that gather and analyze statistics, as well as assist in the implementation of an information system to measure the impact of the national poverty reduction strategy.

The program is expected to help improve fiscal management so the state may obtain more resources to invest transparently, efficiently and effectively in priority services. It will also promote macroeconomic stability and appropriate conditions for development.

One of the main components of the program will increase DEI’s capacity to collect revenue and control customs and borders. The agency’s reorganization was designed with assistance from the U.S. Internal Revenue Service. Among other goals, the program seeks to strengthen the agency’s management controls and administration, raise the skills and professional qualifications of its staff, and upgrade its infrastructure, equipment and technology.

The program was closely coordinated with several bilateral aid agencies and multilateral institutions, particularly the World Bank, with which the IDB is working on a comprehensive program to improve Honduras’ public finances.

The loan is for a 40-year term, with a 10-year grace period. The annual interest rate will be 1 percent during the first decade and 2 percent thereafter.

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