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IDB approves $30 million soft loan for poverty reduction in Honduras

The Inter-American Development Bank today approved a $30 million fast-disbursing soft loan to support Honduras’ poverty reduction strategy and its efforts to obtain full benefits under the enhanced initiative for Highly Indebted Poor Countries (HIPC).

Honduras, one of the poorest countries in Latin America, has already achieved HIPC’s “decision point” and is striving to reach the “completion point” by the year 2005 to qualify for full debt relief.

The IDB loan will help the Honduran government carry out reforms in priority social sectors such as education and basic health, as well as gauge the quantity and quality of spending on poverty reduction programs and verify their progress systematically by using planning and monitoring methods that link policy and investment decisions to specific targets.

Reforms seek to expand coverage and quality of health services, particularly for people in poor communities; improve the quality of education and school administration and boost the efficiency of the country’s social safety network by promoting greater participation of beneficiaries in selecting and monitoring the Honduran Social Investment Fund’s projects.

This program reflects the IDB strategy of supporting Honduran efforts to reduce poverty by investing in social programs and developing human capital. The IDB project team worked in close coordination with the World Bank team that assisted Honduras in preparing its poverty reduction strategy.

The loan is for 40 years, with a 10-year grace period. Annual interest will be 1 percent during the first decade and 2 percent thereafter. Resources are to be disbursed in two $15-million tranches.

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