Honduras' Fiscal Deficit Close to 40% of GDP

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

Friday, June 28, 2013

"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.

According to Alvarado, the new government taking office will have to perform an analysis of the fiscal situation, design a medium-term macroeconomic framework plan, negotiate a new agreement with the International Monetary Fund (IMF) and take the measures needed to reduce the deficit to a level that is fundable.

According to the official, the measures to be taken when confronted with a problem such as this, are to strengthen revenue and rationalize current expenditure. Raising the sales tax is, according to Alvarado, a move that will be analyzed by the next government.

"... If the economy does not grow at the levels it should, there will come a time when there will be no ability to pay, so the important thing is to create the conditions for the economy to grow, generate more employment and economic activity which will allow the government to obtain higher revenues," noted an article in Proceso.hn.

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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.

Bailout Plan for Honduras

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

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."

Another Business Model for Hondutel

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The Honduran state telecoms company is discussing a plan for mobile phones to be operated by a subsidiary.

The article in Laprensa.hn outlines that "In the past two years there have been discussions on a dozen economic models such as capitalization, leasing, manufacturing, joint ventures, public-private partnerships, franchising and outsourcing.