The reform program is supported by a blend of resources from two IMF credit lines, the Stand-By Arrangement (SBA) and the Standby Credit Facility (SCF). The SCF was recently created as part of a comprehensive reform of the IMF’s facilities for low-income countries and provides financing on concessional terms.

An initial disbursement of SDR 35.61 million will become available immediately after the Board approval, but the Honduran authorities plan to treat the credit as precautionary.

Following the Executive Board’s discussion of Honduras, Mr. John Lipsky, First Deputy Managing Director and Acting Chair, made the following statement:

“The Honduran economy is recovering gradually from the effects of the global slowdown and the domestic political crisis of 2009. The authorities’ economic program supported by the Fund seeks to strengthen public finances, protect the external position, and rebuild investor confidence, catalyzing donor support and financing from international institutions.

“The fiscal consolidation strategy aims to stabilize the public debt-to-GDP ratio below 30 percent, and create space for increasing anti-poverty spending and public investment. The authorities are strongly committed to implement the tax reform approved in April 2010 and strengthen tax administration. It will also be important to exercise strict control over current expenditure, improve the composition of public spending, and strengthen the financial position of public enterprises and pension funds.

“Monetary policy will remain geared toward safeguarding the inflation and external objectives of the program. The central bank intends to upgrade the monetary policy framework and to strengthen its implementation capacity.

“Honduras’s financial system has weathered the global financial crisis and the ensuing downturn in activity relatively well. Efforts will nevertheless continue to enhance the system’s resilience by improving the regulatory framework and supervisory practices, and strengthening the financial safety net,” Mr. Lipsky said.

Continue Press Release from the IMF here.