PRELIMINARY DEAL WITH IMF.

Honduras reached a preliminary agreement with the International Monetary Fund to give the nation access to US$350 million in loans and forgive as much as US$1 billion in foreign debt, reports Reuters (Nov. 25, 2003):

But first the government of President Ricardo Maduro must approve austerity measures and send to Congress reforms aimed at widening the tax base and limiting growth of the government payroll. "These conversations have resulted in a preliminary agreement, at the technical level, for an economic and financial program that could be supported by the International Monetary Fund," an IMF mission said in a statement following 15 days of talks in Honduras;

The agreement is expected to be submitted early in 2004 for final IMF approval, once the government has reached agreements with different sectors of the country and implemented cost controls, officials said. The agreement seeks to "reduce fiscal imbalances, maintain monetary stability and strengthen the national financial system," said central bank President Maria Elena Mondragon. The proposed measures have provoked sometimes violent protests from teachers, doctors, students, indigenous people and other citizens;

Honduras, among the hemisphere's poorest nations with 80% its 6.6 million people living in poverty, is hoping the three-year loan agreement will also bring debt relief for nearly US$1 billion under an international program for poor nations. Finance Minister Arturo Alvarado said the plan does not contemplate raising taxes or imposing new ones, but rather seeks to widen the tax base and clamp down on tax evasion. Maduro's administration has passed two fiscal reforms since May 2002 aimed at reaching an agreement with the IMF and improving macroeconomic performance.

Copyright 2004