Fiscal Policy

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 spends more than 100 million lempiras (about $4 million) each day on public-employee salaries, with education receiving the largest budget allocation, according to former Education Minister Marlon Escoto.

Economist and former congressman Aníbal Cálix said public investment moved too slowly in the first half of 2026 and called for structural reforms at ENEE, the state power utility, to improve its financial performance and grid reliability.

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.

Honduras' external debt climbed to $9.3 billion as of March 2026, up 13.3% over two years, prompting the business council to urge the government to prioritize efficient public spending and curb excessive borrowing.

Family remittances made up 52 cents of every dollar in Honduras's national income during the first half of 2026, while budget execution reached only 35 percent, according to the Finance Ministry.

The International Monetary Fund's board approved Honduras's fourth and fifth program reviews, unlocking a $242 million disbursement and bringing total IMF funding to $725 million of a $847 million package, though the IMF flagged missed targets on electrical utility arrears and urged faster energy-sector reform.

The Inter-American Development Bank says Central American and Dominican economies face heightened global volatility and must build fiscal space, strengthen currency flexibility (especially Honduras and Nicaragua), and shore up foreign reserves to cushion external financial shocks.

Economist Henry Rodríguez says Honduras's budget execution is tracking at only 32% through June due to delays in budget approval and cabinet formation, with 26.2% committed to salaries and 27% to debt service, leaving little room for public investment.

Honduras's public external debt reached $10.76 billion as of March 2026, up $24.5 million from December 2025.

Honduras's public debt increased by $1.8 billion in the first three months of 2026 compared with the same period a year earlier.

An analyst with Honduras's external-debt and development forum says poverty levels have remained flat over two decades despite spending more than 800 billion lempiras (roughly $32 billion) in anti-poverty programs, raising questions about where the money went.

Finance Vice Minister Lilian Rivera said the IMF board will review Honduras's macroeconomic performance on June 29 to decide whether to approve a $245 million disbursement, as the country also prepares for an international credit-rating agency visit.

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.

FOSDEH economist Mario Palma says Honduras's public debt has risen to $18.454 billion this year, up from previous levels.