Announcement of Honduras Seeks International Support for Economic Reforms on September 17, 1990

FOR IMMEDIATE RELEASE SWorld Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. *Telephone: (202) 477-1234 1 BANK NEWS RELEASE NO. 90/13 Contact: Marjorie Messiter (202) 458-1353 HONDURAS SEEKS INTERNATIONAL SUPPORT FOR ECONOMIC REFORMS WASHINGTON, September 17, 1990 -- Honduras has embarked on a bold program of economic reforms, including trade liberalization, reduction of the public sector deficit, and policy reforms in the agriculture and financial sectors, to improve economic growth. The World Bank is supporting the program with a $90 million second structural adjustment loan and is assisting in mobilizing additional resources through the Consultative Group for Honduras. The program is expected to provide incentives to stimulate exports and promote increased production of agricultural products in which Honduras is internationally competitive. These products include tropical fruits, vegetables, shrimp and clothing, as well as bananas and coffee. Honduras currently depends on exports of coffee and bananas for about 60 percent of foreign exchange earnings. The concentration of exports in two I products with unstable international prices has aggravated the country's balance-of-payments problems and affected access to external financing. The loan also supports measures to increase public savings and reduce public-sector deficits, such as improved tax collection and elimination of disincentives to production in the current tax structure. The commercial banking system will also be strengthened under the adjustment program. The loan will be disbursed in three tranches--$45 million at the time the loan becomes effective, $20 million in February 1991, and $25 million at the end of 1991. Honduras cleared its arrears of $152.6 million to the World Bank in June 1990 with the support of other donors and is seeking cofinancing for this economic reform program. The Inter-American Development Bank is providing $50 million and the German government has expressed its intention of providing DM15 million in support of the reforms. The World Bank loan is for 20 years, including five years' grace, with a variable interest rate, currently 7.72 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.25 percent on the undisbursed balance. Note: Money figures are in U.S. dollar equivalents.