Honduras Fourth Reviews Under The Stand By Arrangement And The Arrangement Under The Standby Credit Facility Requests For Augmentation Of Access Extension And Rephasing Of The Arrangements And Waivers Of Nonobservance Of Performance Criteria Press Release Staff Report

The protracted pandemic and two tropical storms have hit Honduras hard. Despite authorities’ responses, these shocks continue to weigh on activity; reconstruction needs are high while the outlook remains uncertain. The authorities plan to rebuild a more climate-resilient economy, given Honduras’ vulnerabilities to climate change. Presidential elections are scheduled for November 2021.

The OECD Public Governance Review of Honduras offers recommendations to strengthen the effectiveness, coherence and openness of the country’s public sector, and in particular its centre of government. It first provides an overview of Honduras’s public sector and assesses its performance across interrelated dimensions.

This Staff Climate Note is part of a series of three Notes (IMF Staff Climate Note 2022/001, 2022/002, and 2022/003) that discuss fiscal policies for climate change adaptation. A first Note (Bellon and Massetti 2022, henceforth Note 1) examines the economic principles that can guide the integration of climate change adaptation into fiscal policy. It argues that climate change adaptation should be part of a holistic, sustainable, and equitable development strategy. To maximize the impact of scarce resources, governments need to prioritize among all development programs, including but not limited to adaptation. To this end, they can use cost-benefit analysis while ensuring that the decision-making process reflects society’s preferences about equity and uncertainty. A second Note (Aligishiev, Bellon, and Massetti. 2022, henceforth Note 2) discusses the macro-fiscal implications of climate change adaptation. It reviews evidence on the effectiveness of adaptation at reducing climate change damages, on residual risks, and on adaptation investment needs, and suggests ways to integrate climate risks and adaptation costs into national macro-fiscal frameworks with the goal of guiding fiscal policy. It stresses that lower-income vulnerable countries, which have typically not contributed much to climate change, face exacerbated challenges that warrant increased international support. This third Note considers how to translate adaptation principles and estimates of climate impacts into effective policies.

The AREAER provides a description of the foreign exchange arrangements, exchange and trade systems, and capital controls of all IMF Member countries.

The pandemic has urged countries around the globe to mobilize financing to support the recovery. This is even more relevant in Central America, where the policy response to cushion the pandemic’s economic and social impact has accentuated pre-existing debt vulnerabilities. This paper documents the potential for local currency bond markets to diversify and expand financing for the recovery, lowering bond yields, funding volatility, and exposure to global shocks. The paper further identifies priority actions, both national and regional, to support market development.

Since 1998, the staff of the International Monetary Fund has published a classification of countries' de facto exchange rate arrangements. Experience in operating this classification system has highlighted a need for changes. The present paper provides information on revisions to the system in early 2009. The changes are expected to allow for greater consistency and objectivity of classifications across countries, expedite the classification process, conserve resources, and improve transparency.

"The Global Financial Safety Net (GFSN) is comprised mainly of countries' own reserves and external public sources of insurance and financing. The main external official arrangements are central bank bilateral swap arrangements (BSAs), regional financial arrangements (RFAs), and the Fund. The safety net seeks to provide countries with insurance against crises, financing when shocks hit, and incentives for ound macroeconomic policies."--Summary.

This paper analyzes the potential for fintech to facilitate cheaper and more efficient remittances, and to enhance financial inclusion in Central America. Digital remittances remain nascent in the region, primarily reflecting behavioral inertia, small cost advantages of digital over traditional channels, and inadequate financial literacy. Through expanded alliances between traditional and fintech operators, digital remittances can further reduce transaction costs and reach those remote, low-income households in a timely and secure manner. A meaningful expansion of fintech remittances necessitates an enabling regulatory environment for digital financial services, and KYC and AML/CFT requirements proportionate to the value of transfers.