The Inter-American Development Bank (IDB) approved $45.8 million in financing to support Honduras’ fiscal reform, which seeks to bolster macroeconomic stability and restore sustainable growth by modernizing the tax system and improving state utility revenues.

The resources will be disbursed in two tranches of $22.9 million. The first one will be triggered by the approval of a tax reform designed to boost collection and increase efficiency and equity. The second tranche will be timed with the approval and implementation of regulations pertaining to the tax reform.

Honduras will also enact a law against tax evasion with at least one chapter on transfer pricing and another one on measures against evasion. In addition, the government will take steps to raise the revenues of the state-owned electricity company, ENEE, and the telecommunications company, HONDUTEL.

The program aims to contribute to stable and sustained growth within a framework of macroeconomic stability, strengthen tax collection through greater efficiency and equity of the tax system, and raise revenues and improve the targeting of subsidies for state-owned utilities in order to achieve a better overall performance of the consolidated public sector.

The IDB financing consists of a $32,060,000 loan for 30 years, with a 5.5-year grace period and a fixed interest rate, and a $13,740,000 concessional loan for 40 years, with a 40-year grace period and an annual interest rate of 0.25 percent.