The loan supports four main areas of the Honduran Government’s fiscal program:
- Fiscal reform and greater tax revenues for the central government by expanding the tax base.
- Strengthening the civil service.
- Strengthening the financial sustainability of the state-owned power company.
- Strengthening public financial management and transparency.
“The fiscal challenges faced by President Porfirio Lobo’s administration are the result of the global financial crisis, the country’s political crisis and pre-existing structural inflexibility. With the intention of preventing a fiscal crisis, the government has undertaken a corrective course of action that will help it achieve the necessary balance. Until the current reforms show their impact, Honduras will need substantial support from the international community,” highlighted Laura Frigenti, World Bank Interim Director for Central America.
The World Bank has been financing development and programs to fight poverty since the 1980’s. Due to the devastation caused by Hurricane Mitch, the organization increased the flow of aid to the country with projects emphasizing reconstruction initiatives and generating economic growth, employment and public service improvements benefitting the poor.
Currently, the World Bank finances 17 projects in Honduras focused on education, health, social protection, infrastructure and Bono 10 mil, totaling US$40 million.
As is the case with all World Bank-financed projects in Honduras, this loan has been granted with no interest rates, a 20-year maturity period and a 10-year grace period.