Overview

Honduras is a low middle-income country that faces major challenges, with more than 63 percent of the population living in poverty in 2014, according to official data. In rural areas, approximately six out of 10 households live in extreme poverty, or on less than US$2.50 per day.

Since the 2008-2009 global economic crisis, Honduras has experienced a moderate recovery, driven by public investments, exports and higher remittances. In 2015, the country’s economy grew by 3.6 percent and is expected to grow by 3.5 percent in 2016.

Despite the favorable economic outlook, the country faces the highest level of economic inequality in Latin America. Another major challenge is the rampant crime and violence. Honduras has one of the world’s highest homicide rates (67 homicides per 100,000 inhabitants in 2014).

The country is also vulnerable to external shocks. Its agricultural sector, for example, lost nearly one-third of its revenue over the past two decades, in part due to the declining prices of the country’s export crops, especially banana and coffee.

Additionally, Honduras is susceptible to adverse natural events such as hurricanes and droughts. Measures to mitigate the impact of these shocks focus on strengthening the adaptation capacity of households, expanding market-based risk management mechanisms, and developing effective social safety nets.

World Bank studies have highlighted the importance of improving the quality of education and diversifying sources of rural income given that most of the country’s poor live in rural areas and depend on agriculture for their livelihoods. Other studies have found that targeted social programs can potentially reduce poverty.

Last Updated: Sep 19, 2016

On December 15, 2015, the World Bank Group Executive Board approved the new Country Partnership Strategy (CPS) for 2016-2020, whose pillars are to promote inclusion, strengthen growth conditions, and reduce vulnerabilities in the country.

The new CPS has seven specific objectives:

  • Expand coverage of social programs.
  • Strengthen the renovation of key infrastructure.
  • Increase access to financing.
  • Strengthen the regulatory framework and institutional capacity.
  • Improve rural productivity.
  • Strengthen resilience to natural disasters and climate change.  
  • Build capacities of local governments to prevent crime and violence.

The World Bank’s current portfolio in Honduras totals over US$1.25 billion, including US$264 million from the International Development Association (IDA), US$633 million (including mobilized funds) from the International Finance Corporation (IFC) for the development of the private sector and US$327 million from the Multilateral Investment Guarantee Agency (MIGA) to promote investment. The World Bank’s portfolio also includes US$30 million from the Global Agriculture and Food Security Program (GAFSP) and US$1.5 million from a grant.

The different World Bank agencies implement a total of eight projects covering areas as diverse as social protection, water and sanitation, rural competitiveness, violence prevention, infrastructure and land management. Other programs include disaster risk management initiatives, fiscal sustainability, renewable energy, agribusiness, services and manufacturing.

Last Updated: Sep 19, 2016

With the Project for Education Quality, Good Governance and Institutional Strengthening, the Honduran Ministry of Education managed to expand school coverage in disadvantaged communities from 36 percent to 50 percent through the opening and equipping of nearly 800 preschools, as well as training of all their volunteer teachers.

With the Nutrition and Social Protection Project, the Government of Honduras helped 36,000 at-risk children avoid food insecurity and improved their social security through a pilot education program benefitting vulnerable youth.

The Safety Net Project focuses on increasing school attendance and use of preventive health services by vulnerable families through conditional cash transfers known as Bonos Vida Mejor. The project has benefitted more than 1.5 million Hondurans (about 300,000 families) living in extreme poverty.

The Project to Modernize the Water and Sanitation Sector (PROMOSAS) enabled improved water quality and access in 10 municipalities and contributed to the decentralization of the sector through the adoption of urban models of autonomous service provision.

Promoting growth

The Government of Honduras, through the Second Project for Highway Reconstruction and Improvement, paved two key sections of the Corredor Central (El Porvenir - Marale and San Lorenzo - Olanchito, some 60 kilometers), which facilitate access of poor rural communities to large cities. With World Bank support, 16 road maintenance microenterprises were also created (which generated new jobs) to guarantee the effective maintenance of unpaved roads.

The World Bank provided technical assistance and grants to support several initiatives in Honduras to strengthen transparency, good governance and improved multi-sector interactions in key development areas, such as the Open Government Partnership (OGP), the Extractive Industries Transparency Initiative (EITI) and the Transparency Initiative for Construction and Public Infrastructure (CoST).

The Rural Competitiveness Project seeks to increase the productivity and competitiveness of small rural producers in the country. To this end, it promotes productive partnerships between rural producers and trade partners and supports the development of business plans. To date, the project has created more than 9,000 jobs and has helped to increase productivity in sectors such as coffee production, from 11 quintals of parchment skin per square (1.75 acres) in 2012 to nearly 24 quintals in 2015.

The objectives of the Safer Municipalities Project are to improve the capacities of national and local authorities to prevent crime and violence, as well as to address the risk factors that cause them. The project also works to improve the capacity of municipalities to respond quickly and effectively to emergencies. In the cities of Choloma, La Ceiba and El Progreso, where the project is implemented, more than 1,300 people have participated in different violence prevention programs and 21 public areas have been renovated or constructed.

Reducing vulnerabilities

The Disaster Risk Management Project strengthens the capacity for the comprehensive management of disaster risks at the municipal and national government levels. It also helps to improve their capacity for rapid, effective emergency response. The project supported the implementation of disaster risk management programs in 81 of the country’s most vulnerable municipalities, benefitting approximately five million people.

Last Updated: Sep 19, 2016


LENDING

Honduras: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments