IMF staff completes 2026 Article IV Consultation and reaches staff-level agreement with Honduras

• IMF staff and the Honduran authorities have reached a staff-level agreement on the Sixth and Final Reviews of the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements and concluded discussions for the 2026 Article IV consultation.
• Prudent policies under the arrangements have preserved macroeconomic stability, strengthened external buffers and foreign exchange market functioning, and maintained debt sustainability. These achievements have been sustained despite significant external and climate-related shocks.
• The administration remains committed to these policies, including a nonfinancial public sector deficit target of 1 percent of GDP in 2026–27 and decisive monetary and exchange rate policies to safeguard stability and return inflation to the BCH’s tolerance range. Strong reserves bolster resilience amid a challenging external environment.
• Building on recent progress, deepening ambitious reforms—including modernising the monetary and exchange rate frameworks, strengthening governance and social protection targeting, and advancing the energy sector transformation—is essential to preserve stability and support inclusive growth.

TEGUCIGALPA, Honduras – An International Monetary Fund (IMF) team led by Emilio Fernandez Corugedo, IMF mission chief for Honduras, and joined by Nigel Chalk, director of the Western Hemisphere Department, visited Tegucigalpa during October 20 –November 2 to conduct discussions on the 2026 Article IV consultation and on the Sixth and Final Reviews under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements. At the conclusion of the visit,  Fernandez Corugedo issued the following statement:

“The Honduran authorities and the IMF team have reached staff-level agreement to complete the Sixth and Final Reviews of the EFF and ECF arrangements. The authorities reaffirmed that the Fund-supported program remains a key anchor for macroeconomic stability and reform. The IMF’s executive board consideration is expected in late December 2026. Upon approval, Honduras will have access to about USD120 million.

“The team and the authorities agreed that macroeconomic policies have remained prudent and program performance broadly favourable. These sound policies have helped Honduras navigate significant shocks, including higher energy prices associated with the Middle East conflict and a severe El Niño-related drought. The economy has remained resilient, growing by 3.7 percent in the first half of 2026, although growth is projected to moderate to 3.4 percent for the year amid a challenging external environment. Higher energy and food prices pushed headline inflation to 6.3 percent in September, while core inflation remained contained at 3.5 percent. The current account recorded a surplus of 4.1 percent of GDP in the first half but is expected to shift to a deficit of 2.2 percent of GDP for 2026. Net international reserves reached about USD11.5 billion in October, supported by robust remittances and favourable export prices.

“The authorities remain committed to a prudent macroeconomic policy mix and stand ready to act amid heightened global uncertainty. Their ambitious reform agenda combines macroeconomic and fiscal discipline with stronger institutions and social protection, while supporting private investment and job creation. Their priorities include:

• Maintaining strong fiscal discipline, improving social support targeting and safeguarding priority spending. The non-financial public sector deficit target of 1 percent of GDP remains appropriate for 2026-27 and is underpinned by prudent revenue assumptions, realistic expenditure plans, and a credible financing strategy. The response to higher energy and fuel prices helped cushion vulnerable households. However, recurrent external and climate shocks underscore the need for social assistance and subsidies to remain temporary, well targeted to those most in need, and consistent with energy-saving incentives, while reducing ENEE’s burden on public finances is imperative to contain fiscal risks, safeguard fiscal sustainability, and protect space for priority spending.

• Improving public financial management and tax administration to create fiscal space and strengthen transparency. Progress in liquidating trust funds demonstrates the authorities’ commitment to greater fiscal transparency. Effective implementation of the Organic Budget Law, a strengthened Treasury Single Account, tighter expenditure controls through SIAFI, better procurement and public investment management, and strengthening ONCAE should enhance spending efficiency, transparency, and the quality of public spending. Modernizing tax and customs administration—through improvements to risk-based audits, stronger arrears recovery, SIISAR consolidation, and electronic invoicing—as well as greater scrutiny of tax incentives should support revenue mobilisation.

• Implementing exchange rate and monetary and policies to preserve external stability and maintain low and stable inflation, while strengthening institutional frameworks. Policy adjustments under the program have helped improve foreign exchange market functioning and supported reserve accumulation. The timely increase in the policy rate in September underscores the authorities’ commitment to price and external stability. They also intend to advance carefully and gradually toward a more market-based foreign exchange allocation mechanism and lay the foundations for an inflation-targeting framework with an exchange rate that reflects market conditions to enhance monetary policy effectiveness and better anchor expectations.

• Advancing key structural reforms—including in the energy sector—and strengthening governance, and improving the business environment, remain essential to reduce vulnerabilities, support investment, and foster sustainable growth. The recent approval of the Energy Justice Law and a more targeted approach to subsidies are welcome steps toward improving the sector’s financial sustainability and reducing fiscal risks. However, sustained efforts remain critical to implement the reform, reduce ENEE’s elevated electricity losses and arrears, strengthen its governance, and promote competition in the energy sector. Advancing reforms under the National Transparency and Anti-Corruption Strategy (ENTAH), alongside efforts to enhance judicial effectiveness, the rule of law, and legal certainty, will also be important to bolster investor confidence and support stronger long-term growth. Operationalising the beneficial ownership registry and implementing recently and pending AML/CFT reforms will be critical for the ongoing 2027 FATF evaluation and will help strengthen safeguards against corruption and illicit financial flows.

“The 2026 Article IV Consultation focused on policies to preserve macroeconomic stability and reforms to support stronger, more resilient medium-term growth. Priorities centered on preserving fiscal sustainability and price stability, while safeguarding external stability, strengthening resilience to external and climate-related shocks, advancing energy sector and governance reforms, strengthening the AML/CFT framework, and fostering private sector-led growth. While macroeconomic performance remains strong and the objectives of the EFF/ECF-supported program have largely been achieved, risks remain elevated amid global uncertainty and climate-related vulnerabilities. Sustained commitment to prudent macroeconomic policies and structural reforms will be critical to preserve stability, enhance resilience, and promote stronger and more inclusive growth.

“The IMF team would like to thank the authorities, the National Congress, the private sector, and other counterparts for their hospitality and candid discussions.”