Bailout Plan for Honduras

Just as several European countries have done, Honduras must prepare itself to ask for a bailout.

Friday, April 26, 2013

This was the suggestion made by the Social Forum of Honduran External Debt (Fosdeh) during the spring meetings of the International Monetary Fund (IMF) and World Bank (WB). According to Mauricio Diaz, Fosdeh coordinator, "we are still making recommendations, and we have just done so to the IMF and the WB, the general idea is that we have to prepare a rescue plan."

Because "it is not only first world countries who have the benefit of access, though so far they are the only ones who have used it, but a country like ours could also access take that option," said the official.

At the moment the country's situation is complicated because there is insufficient income due to the economic crisis. Also "the deficit will have to be considered beyond this administration, because of something that is technically known as a regressive tax policy, ie the political economy applied in the country does not contribute to economic growth, and if there is no economic growth , then there is insufficient generation of employment and income, and tax revenues tend to decline," said the economist.

"Fosdeh recommends that the from funds coming from the removal of exemptions, 50% be used to pay domestic debt, which exceeds $3 billion, and the rest be allocated to public investment," noted an article in

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Honduras' Fiscal Deficit Close to 40% of GDP

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The current administration can not implement an international bailout plan, therefore the serious fiscal problem will be inherited by the next government.

"The reality is that we have a huge fiscal problem, a fiscal deficit of 6% for Honduras is really high, the country has no access to external financing to meet a deficit of this magnitude and this has resulted in a growth of domestic debt," said the former finance minister, José Arturo Alvarado.

Honduras Could Seek International Bailout

June 2013

The sum of the external public and private debt reached a balance of $5.456 billion, 12.7% higher than that recorded at the end of December 2012.

The country is facing a severe financial crisis fueled by a runaway fiscal deficit and runaway government spending.

In the last few days, Mauricio Diaz Burdett, coordinator of the Social Forum of External Debt and Development of Honduras (Fosdeh) noted that the Honduran state institutions can not recover in financial terms, therefore he advocated the formulation of an international financial rescue plan.

The IMF's prescription for Honduras

July 2010

Gradual increase in exchange rate flexibility, supported by fiscal consolidation, wage moderation, and a prudent monetary policy.

On July 12, 2010, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Honduras.