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."
The agreement, which expires in March 2012, will enable the country to get immediate access to funds worth $196 million.
An International Monetary Fund (IMF) staff mission was in Tegucigalpa between 7 and 10 September to continue discussions on an agreement between Honduras and the IMF to support the government's economic program. At the close, the mission's chief, Mr. Przemek Gajdeczka, issued the following statement:
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.
Background
Even though a benign external environment, spikes in foreign direct investment and remittances inflows, and substantial debt relief contributed to episodes of high growth in Honduras over the past decade, the country remains one of the poorest countries in Central America with limited progress in establishing conditions for sustained long-term growth. In part, these outturns may be explained by the fact that many successful economic reforms undertaken in the first half of the 2000s, which justified the completion of the Highly Indebted Poor Countries and Multilateral Debt Relief Initiative programs by the international community, were abandoned or even reversed in the latter part of the decade.
The global recovery is off to a stronger start than anticipated earlier but is proceeding at different speeds in the various regions.
A Policy-Driven, Multispeed Recovery
Following the deepest global downturn in recent history, economic growth solidified and broadened to advanced economies in the second half of 2009. In 2010, world output is expected to rise by 4 percent.
The global recovery is off to a stronger start than anticipated earlier but is proceeding at different speeds in the various regions.
A Policy-Driven, Multispeed Recovery
Following the deepest global downturn in recent history, economic growth solidified and broadened to advanced economies in the second half of 2009. In 2010, world output is expected to rise by 4 percent.
FMI: "Recessions associated with financial crises tend to be severe. Recoveries from such recessions are typically slow."
If such recessions are globally synchronized then they tend to last even longer and be followed by recoveries that are even weaker.
Countercyclical policies can be helpful in ending recessions and strengthening recoveries. In particular, expansionary fiscal policies seem particularly effective.
FMI: "Recessions associated with financial crises tend to be severe. Recoveries from such recessions are typically slow."
If such recessions are globally synchronized then they tend to last even longer and be followed by recoveries that are even weaker.
Countercyclical policies can be helpful in ending recessions and strengthening recoveries. In particular, expansionary fiscal policies seem particularly effective.
Former minister of Finance, A. Alvarado, recommended that the Government redesign its monetary and fiscal policy in order to deal with the impact of the US financial crisis.
There is a huge deficit in the balance of payments and inflationary problems and in the long term this means that we should establish a monetary and fiscal policy that is more conservative, he suggested.