Honduras - Memorandum on recent economic development and prospects

Report No. 1856-HO Memorandum on Recent / Economic Deveopment and / Prospects of Honduras January 1, 1978 Latin America and Caribbean I FOR OFFHCHAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by-recipients . oniy in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS US$1.00 = 2.00 Lempiras (L) L 1.00 = US$0.50 GLOSSARY OF ABBREVIATIONS BANASUJPRO National Development Bank Food Marketing Agency BNF National Development Bank CABEI Central American Bank for Economic Integration CACM Central American Common Market CIDA Canadian International Development Agency CORBANA Honduran Banana Corporation COHDEFOR National Forestry Corporation CONADI National Investment Corporation CONSUPLANE National Planning Council ENEE National Electric Power Company ENP National Port Authority FAO U.N. Food and Agricultural Organization PNP National Railway Company GDP Gross Domestic Product HONDUTEL Honduran Telecommunications Corporation IDB Inter-American Development Bank IHSS Social Security Institute IJPM National Retirement Fund for Teachers INA National Agrarian Institute INFOP Professional Development Institute INVA National Housing Institute JNBS National Social Welfare Board JUPEMP National Retirement Fund for Public Employees LNB National Lottery PANI National Child Welfare Institute SANAA National Water and Sewerage Service UNAH National University USAID U.S. Agency for International Development  FOR OFFICIAL USE ONLY This report is based on the findings of Messrs. Juan Giral and Rene Vandendries during an economic mission to Honduras in June, 1977. The information in this report was updated based on discussions held with the Government in August 1977. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization   HONDURAS TABLE OF CONTENTS Page No. COUNTRY DATA MIAP SatDIARY AND CONCLUSIONS ........................ i - vi I. RECENT ECONOIIC DEVELOPMENTS ................................. 1 A. Growth Trends ....... .................. 1 B. Sectoral Trends ...... .................. I Agriculture .... ......... .............................. 1 Forest Industries ..................................... 3 Industrial Sector ..................................... 3 C. Public Investment ...... ................. 5 D. Public Finances ...... .................. 7 The Importance of the Public Sector ............... 7 The Financial Position of the Central Government ....... 7 The Financial Position of the Rest of the Public Sector . .10 E. The Balance of Payments ..11 II. THE PUBLIC INVESTI4ENT PROGRAII AND THE COUNTRY'S DEVELOP- MENT PROSPECTS .12 A. Growth Prospects and Exports .14 B. The Public Investment Program .15 C. Public Sector Finances and Public Savings Prospects .18 D. Balance of Payments and Creditworthiness ........e..... 22 E. Financial Viability of the Investment Program .22 STATISTICAL APPENDIX   Page 1 of 2 pages COUNTRY D2J0A -rPQNDUBAS AREA 2/ POPULATION DENSITY 112,100 1mJ 3.0 million (mid-1976) 27.0 per 2/ Rate of Growth: 2 71/ (from1961 to 1976 ) 104.0 per 1of arable land POPUMATION CaARCTEEISTICS (1970-75) MEALTH (1970 ) Crude Birth Rate (per 1,000) 49.3 Population per physician 3,710. Crude Death Rate (per 1,000) 14.6 Population per hospital bed 570 Infant Mortality (per 1,000 live births) 117.6 INCOME DISTRIBUTION (1967-68) DISTRIBTflION OF LAND WINERSHIP Z of national income, eluet quintile 60.6 Z owned by top 102 of awners lowest lquintile 2.5 % owned by malleat 107 of owners ACCESS TO PIPED WATER(1074) ACCESS TO ELECTCITY (1974) 7 of population - urban 89.0 Z of population - urban 27.0 - rural 15.0 - rural NUTRITION (1969-71) EDUCATITO (1914,) Calorie intake as % of requirements 94.0 Adult literacy rate % 52.0 Per capita protein intake 56.o Primary school enrollment Z 81.0 GNP PER CAPITA in 1976: US $ 390 GROSS NATIONAL PRODUCT IN 197 6 ANNUAL RATE OF GROWTH (7. constant prices) llS $ Min. _ lQ65-73 i973-76 1976 GNP at Market Pr'ces 1,162 100.0 4.1 3.7 6.C Gross Domestic Inrestment 228 20.4 5.3 6.5 2.4 Grogs National Saviug 106 9.1 4.7 3.7 27.3 Current Account Balance 3/ -109 -9.4 Exports of Goods, NYS 443 38.1 5.3 2.8 7.1 Imports of Goods, NFS 509 43.8 4.8 5.7 8.0 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1976 Value Added Labor Force4 V. A. Per Worker US$4Mln. % Hin. % US 7 . Agriculture 320 29.4 .485 60.3 660 48.7 Industry 301 27.6 .119 14.8 2529 186.5 Services 468 43.o .199 24.9 2352 173.5 Unallocated Total/Average 1089 100.0 .803 100.0 1356 10Q.0 GOVERNMENT FINANCE General Governoent Central Government (uS$ MIn.) % of GDP (US$ Min.) % of GDP 197_ 197 6 19'r4-76 1976 197 6 1974-76 Current Receipts 220 18,1 17.3 -183 15.0 14.4 Current Expenditure 19 166.4 15.6 176 14.4 13.2 Current Surplus 21 1.7 1 7 7 o.6 1.2 Capital Expenditures 73 6.0 5.9 68 5.6 5.7 External Assistance (net) 44 3.6 3.4 3. 2.8 3.1 1/ Population growth rate is lower than the rate of natural increase, largely because of emigration since 1969 of El Salvadoreans residentsin Honduras. 2/ GNP per capita estimate at market prices, calculated by same conversion method as World Bank Atlas. 3/ Includes transfers. Total labor force: unemnloyed are allocated to sector of their normal occunation. "Unallocated" consists mainly of unemployed workers seeking their first Job. not available not applicable  Page 2 of 2 pages COUNTRY DATA - HONDURAS MONEY. CREDIT and PRICES 1971 1972 1973 1974 1975 1976 (Million US$ outstanding end period) Money and Quasi Money 182.2 207.8 253.8 265.9 301.1 389.2 Bank Credit to Public Sector 35.1 40.1 43.8 42.9 43.0 46.8 Bank Credit to Private Sector 184.5 206.7 253.8 290.6 348.5 418.6 (Percentages or Index Numbers) Money and Quasi Money as a of GDP 24.0 25.4 28.2 27.5 28.5 32.0 Consumer Price Index (1966 = 100) 1.1.6 115.,4 120.7 136.4 147.4 154.7 Annual percentage changes in: Consumer Price Index 2.3 3.4 4.6 13.0 8.1 5.0 Bank credit to Public Sector 30.5 14.2 9.2 -2.1 0.2 8.8 Bank credit to Private Sector 6.2 12.0 22.8 14.5 19.9 20.1 BALANCE OF PAYMENTS MERCRANDISE EXPORTS (1976) 1L74 1975 1976 US $ Mln % (Millions US S) Exports of Goods, NFS 331.3 343.5 443.1 Bananas 106.7 26.4 Imports of Goods, NYS 456.0 452.4 509.0 Coffee 100.3 24.9 Resource Gap (deficit - -) -124.7 -108.9 - 66. Wood 380 9. - - ~~~~~~~~~~ ~~Beef 25.6 6.3 Interest Payments (net) -18.1 -23.8 -33.1 All other comodities 132.9 32.9 Workers' Remittances . *- . Total 403.5 Other Factor Payments (net) 4.6 -4.5 -23.0 Net Tranafers 32.5 1. 13.2 EXTZRNAL DEBT. DECEMBER 31. 1976 Balance on Current &ccount -105.7 -119.6 -108.9 Direct Foreign Investment -1.2 10.4 7.6 US $ Min Net MLT Borrowing 37.8 92.8 70 .,9 Public Debt, incl. guaranteed I 334-9 Disbursemenr (43.T) (99.2) (8*2) Non-Guaranteed Private Debt Amortizatiou (6.0) (6.4) (13.3) Total outstanding & Disbursed Subtotal 3=!7 6 2' Capital Grants .. .. .. DEBT SERVICE RATIO for 1976- Other Capital (net) 65.7 38.0 69.7 % Other items n.e.i 5,l 16. -1.1 Increase in Reserves (-) -1.9 -16.9 -23.0 Public Debt, incl. guaranteed 6.5 Non-Guaranteed Private Debt Gross Reserves (end year) 59.2 115.9 151.0 Total outstanding & Disbursed Net Reserves (end year) 31.8 48.7 71.7 RATE OF EXCHANGE IBRD/IDA LENDING, (October 31/77) (Million US S): Through - 1971 IBRD IDA US $ 1.00 - L 2.00 L 1.00 - US $0.50 Outstanding & Disbursed 85.2 32.3 Undisbursed 57.5 17.1 Since - 1971 Outstanding irl. Undisbursed 152.7 49,4 US $ 1.00 = L 2.00 L 1.00 - US $0.50 1/ Repayable in foreign currency. 2/ Ratio of Debt Service to Exports of Goods and Non-Factor Services. not available not applicable EPDiPRD  I . , . . , ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~IB5RD-103951 ! 8 E L I Z E eSMRAff GU4AND _ ..... | \1T11^ ISIAND _5 ' / ,, .~~~~~~~~~~~~~~AN i~~~~~~~~~~~~~~~~C cv I1r1 FANers sl. 5twec M.. 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