US$55 Million Loan to Support Fiscal and Financial Management, National Electricity Company and Social Protection Programs
WASHINGTON, December 9, 2014 – The World Bank Board of Executive Directors approved a US$55 million loan today to support Honduras’ plans to promote fiscal sustainability, strengthen the electricity utility and provide greater opportunities to the most vulnerable communities in the country, including 835.000 families living in extreme poverty
“The Government of Honduras is committed to the implementation of actions aimed at enabling it to achieve greater fiscal stability as well as sustained and inclusive economic growth, the purpose of which is to reduce poverty in the country and protect the most vulnerable. In this sense, the support of the World Bank is of great importance to us,” pointed out Wilfredo Cerrato, Honduras’ Minister of Finance
The loan will support government activities destined to strengthen public financial management in Honduras, whose fiscal deficit increased from 4.6 percent of Gross Domestic Product (GDP) in 2011 to 7.9 percent in 2013. These funds will contribute to the country’s fiscal sustainability by focusing on strengthening staff payroll management, the efficiency of public acquisitions and public debt administration
Moreover, the loan will support activities aimed at improving financial sustainability and transparency at the National Electricity Company (ENEE, in Spanish), which has a significant fiscal impact on the country via subsidies, tax exemptions and guarantees and whose loses represented 1.8 percent of GDP in 2013. It is expected that these measures will help the government of Honduras reduce this figure to 1.5 percent by 2015
The loan will also support social program targeting, including strengthening the Single Registry of Participants (RUP) so that more funding actually reaches those needing it, with the objective of providing social protection to people living in extreme poverty (around 46 percent of the population)
“This loan, alongside the Government’s continuous efforts at strengthening its tax collection capabilities and increase public spending efficiency, will allow Honduras to garner more resources to tend to its poorest people,” said Giorgio Valentini, World Bank Representative in Honduras. He added that “this will, in turn, increase the number of development opportunities for all.
The US$55 million “Fiscal Sustainability and Social Protection Improvement Development Policy Loan” is granted by the International Development Association (IDA) and has a 25-year maturity period, including a five-year grace period.