Fiscal Policy

Finance Minister Emilio Hernández announced the 2027 budget totals 457 billion lempiras (about $18.3 billion), a 13-billion-lempira increase from 2026, with priority allocations for education, health, security, and defense.

Finance Minister Emilio Hernández says Honduras may qualify for Millennium Challenge Account funds, though 2025's fiscal challenges—legislative delays, missed economic targets, and payment arrears—could affect eligibility; a cabinet delegation will travel to Washington next week to discuss the account and International Monetary Fund issues.

Economist Liliana Castillo argues the government should hold the 2027 budget flat rather than increase it, citing poor spending execution rates—some agencies executing only 25% of allocations—and low productive investment at just 5% of the budget.

Sergio Zepeda, director of the UNAH's Institute for Economic and Social Research, called on the government to prioritize education, health, and productive investment in the 2027 budget draft due to Congress by September 15, arguing that spending must support development, not just cover operating costs.

Finance Secretary Emilio Hernández Hércules said the government will send its 2027 budget proposal to Congress on September 14, aiming to maintain a 1.0% fiscal deficit under the Fiscal Responsibility Law and avoid unsustainable debt.

The Finance Ministry reported that Honduras has executed over 50% of its 2026 budget and transferred more than L8.4 billion (about $340 million) to municipalities, though officials acknowledged the pace remains below target eight months into the year.

Standard & Poor's is conducting a periodic review of Honduras's sovereign credit rating on August 18–19, meeting with President Asfura, Congress members, and the private sector to assess the government's fiscal, economic, and institutional conditions.

The Finance Ministry has set preliminary budget allocations for government institutions as they prepare the 2027 General Budget proposal, due to Congress by September 14, with Finance Minister Emilio Hernández Hércules stressing the need to accelerate public investment execution this year.

Honduras's international reserves rose $1.26 billion to $11.56 billion in the first six months of 2026, a gain President Asfura credits to fiscal discipline and responsible management of public resources.

An economist at the governance think tank ASJ warns that Honduras is using new loans to service about 40% of its existing public debt, a practice that perpetuates debt growth and undermines long-term fiscal sustainability.

Honduras has spent about 950 million lempiras ($38 million) on fuel and electricity subsidies through mid-2026, exceeding the original budget and prompting officials to consider limiting the benefit to lower-income families.

The private-sector business council says Honduras should borrow the $400 million CAF financing to strengthen the housing bank and spur construction, but opposes debt used only to cover government operating costs.

Honduras sold a 10-year sovereign bond for $815.67 million at a 6.4% interest rate, securing funds for debt management and the national budget while locking in interest rates more than 2 percentage points lower than a 2024 issuance.

Economist Alex Baquis said Honduras is watching closely for any agreement with the International Monetary Fund, as decisions reached could significantly influence the country's economic direction.

Honduras's budget execution stood at only 35% through mid-2026, according to watchdog ASJ, leaving shortfalls in medicines, school infrastructure, and other key services, though Finance Minister Emilio Hércules put the figure above 42%.

ASJ economist Obed García warned that Honduras's public debt has grown to roughly equal the entire national budget, leaving little fiscal room for salaries, public investment, and essential services if the government were to address it.

Civil-society groups say drug purchases and free-tuition programs are at risk because budget execution has fallen below 40%, starving key public health and education initiatives of funds.

An economist at civic watchdog group ASJ warns that Honduras's rising public debt could approach $25 billion within years without policy changes, and calls for greater investment in infrastructure, ports, education, and energy to drive sustainable growth.

Dante Mossi, former president of the Central American Bank for Economic Integration, says the government lacks a public strategy to manage ENEE's $1 billion debt to power generators, a $700 million sovereign bond due in January 2027, and roughly $3 billion in stalled infrastructure projects including roads, dams, and hospitals.

Finance Minister Emilio Hernández Hércules reported that Honduras has executed more than 42% of its 48-billion-lempira budget (about $1.9 billion) two and a half months after its April approval, with spending focused on infrastructure, health, and upcoming housing programs through Banhprovi.

Obed García of the ASJ argues Honduras must streamline its 116 public institutions and reduce bureaucratic overhead to improve spending efficiency and remove regulatory barriers slowing investment.

Obed García, an economist at the Association for Justice, says Honduras should use public borrowing to fund infrastructure and productive projects rather than other spending, citing existing road and economic plans and the need to create jobs for 300,000 unemployed people.

Honduras has spent only L15.8 billion (about $635 million) of a L46.8 billion public investment budget in the first seven months of 2026, with roads leading at 54.9% execution while energy, transport, health, and education sectors lag well below 20%.

Honduras is under pressure to meet a 1% fiscal-deficit target in its International Monetary Fund agreement, with economists warning that maintaining the goal will be one of its toughest challenges to preserve the IMF's confidence and safeguard economic credibility.

The Asfura administration has sent a letter of intent to IMF chief Kristalina Georgieva as the current three-year, $822 million program nears completion, though officials say no decision has been made yet on whether to pursue a new agreement.

Honduras executed only 33.4% of its national budget in the first half of 2026, a shortfall economists attribute to Congress's late April approval, which delayed state investment in health, education, and infrastructure.

Finance Minister Emilio Hércules said reducing an electricity rate hike requires a large fiscal cost to the state, since the tariff increase was originally set at 21.5%.

Honduras has spent only 34% of its 444-billion-lempira (about $16.8 billion) 2026 budget through June, with economists attributing the lag to late congressional approval and urging faster execution in priority areas like health, education, and productive investment.

Finance Minister Emilio Hércules said Honduras placed $815 million in bonds this year—$615 million to manage debt and $200 million for the 2026 budget—while a new sovereign bond carries a 6.40% interest rate, down from 8.65% on the previous issue.

An economist at Honduras's social auditor's office warns that public debt has climbed to nearly $14 billion—above pre-2006 levels—as the government takes new loans to pay existing obligations, creating a cycle of mounting debt.