The International Monetary Fund recently concluded an Article IV consultation to Honduras. The mission was led by the Mission Chief for Honduras, Roberto Garcia-Saltos, from April 3 to 12, the IMF announced in a press release.
During the consultation, Garcia-Saltos’ team met with senior government officials, including President Hernandez, Central Bank Governor Wilfredo Cerrato, Minister of Finance Rocío Tábora, as well as private sector and civil society officials and international donors.
Economic growth as measured by gross domestic product was 4.8 percent in 2017. Garcia-Saltos attributes the higher than expected growth rate to “good harvests, strong public investment, and robust private consumption growth amid record remittances inflows.” He also pointed to inflation which remained within the Central Bank’s tolerance band of 4 ± 1 percent.
Garcia-Saltos painted a cautiously positive economic outlook for Honduras in 2018. Honduras’ GDP is expected to grow by less than 4 percent in 2018 and inflation is expected to remain above the target of 4 percent. The country is also still grappling with the fallout from the highly contested presidential election in late-2017.
“Against this background, a cautious monetary and credit policy stance will be paramount to anchor expectations and gradually bring inflation and inflation expectations back to the 4 percent long-term target,” recommended Garcia-Saltos. “The current account deficit is projected to widen to about 4 percent of GDP, reflecting higher oil prices as well as the likely normalization in the growth of remittances. Nevertheless, the international reserves are expected to remain adequate. The NFPS deficit is forecast to remain at ¾ percent of GDP, same as in 2017 and below the ceiling set by the Fiscal Responsibility Law, reflecting the government’s continued commitment to reduce and contain the vulnerabilities associated with rising public debt.”
Garcia-Saltos pointed to several areas in need of strengthening and reform, including anti-corruption efforts, taxation, and monetary policy.
What is an Article IV consultation?
Article IV of the Articles of Agreement of the International Monetary Fund lays out the obligations of member-states vis-à-vis the IMF and the ability of the IMF to surveil its members’ monetary policies.
Article IV section 3(b) states that “the Fund shall exercise firm surveillance over the exchange rate policies of members, and shall adopt specific principles for the guidance of all members with respect to those policies.”
The IMF explains on its website that regular surveillance of a county is a routine matter, often occurring annually.
“During an Article IV consultation, an IMF team of economists visits a country to assess economic and financial developments and discuss the country’s economic and financial policies with government and central bank officials,” explains the IMF.