The economic and productive situation in Honduras in recent months has been complicated by the damage left by storms Eta and Iota, in addition to what the pandemic had already caused. The Central Bank of Honduras (BCH) in joint work with the Ministry of Agriculture and Livestock (SAG) carried out a preliminary assessment of the damage to verify the most affected areas and economic activities, such as African palm crops, sugar cane, bananas and rice. Additionally, the manufacturing industries of chicken meat and eggs, sugar processing and coffee processing, among others. In this context, the Gross Domestic Product for 2020 would fall between -10.0% and -9.0%.
The president of the Central Bank of Honduras (BCH), Wilfredo Cerrato, advanced the strategy that they will implement to face the economic impact.
1. What plan have you defined to deal with the downturn in the economy?
R/ As part of a coordinated economic policy response, since the beginning of 2020 the BCH has conducted its monetary policy with the aim of generating a significant monetary impulse, promoting the flexibility of financial conditions that allow to boost credit to the private sector and economic activity .
Thus, in November the BCH set the MPR at 3.00%, its lowest level since the implementation of this monetary policy instrument, accumulating a reduction of 250 basis points in the last 11 months, this seeks to give even greater dynamism to the loans by lowering the interest rates applied by the BCH to the financial system and hoping that this benefit will translate into lower interest rates for its clients.
Likewise, the BCH Fiduciary Commission took additional measures to alleviate these adverse impacts, such as, for example, in the financial product Social Interest Housing from the BCH-BANHPROVI Trust, the following measures were approved:
- The reduction of the interest rate from 9.7% to 5.0%, with which these credits have an approximate reduction of 30% in the monthly value of the installment.
- Terms up to 20 years. A maximum amount to be financed of up to 910,000 lempiras.
Of the Liquidity Fund for the Readjustment of the Mipymes Loan Portfolio of the Financial System, the following was approved:
- The inclusion of MSMEs affected by storms Eta and Iota, in addition to those that have been affected by the pandemic.
- An amount of 3.4 billion lempiras for commercial banks supervised by the National Banking and Insurance Commission (CNBS).
- Term greater than 5 years and up to 10 years, with a final rate of 9.00%
- Term greater than 10 years and up to 15 years, with a final rate of 10.00%
- Grace period of up to 36 months for principal and 6 months for interest
- The allocation of an additional 540 million lempiras was authorized for the financial product Agro Crédito 8.7 in view of the demand that has arisen, totaling 2,115 million lempiras in this product.
The activities to which this program is oriented are those of production of the agri-food sector and can access it through financial intermediary institutions that are qualified and eligible by Banhprovi, with an interest rate of up to 8.7% per year and financing of up to 100% of the total investment amount.
2. How will you encourage national and foreign direct investment?
R/ This requires a set of coordinated initiatives at the government level, the BCH doing its part in actions aimed at controlling inflation, developing the interbank foreign exchange market, managing international reserves and stability of the financial system, necessary conditions that attract national and foreign investment.
Likewise, the BCH establishes the provisions for the financial system to operate in a better way, more dynamically and under more favorable conditions both for intermediaries and for households and producers who need to access credits under more favorable conditions of interest rates or terms, so that the entire system works to promote the economic recovery of the country.
3. Is it true what economists warn about unsustainable indebtedness for the next government?
R/ In the current context of the pandemic, the indebtedness of governments has grown worldwide, since it has been necessary to increase investment to face the pandemic and increase social benefits, in the case of our country, the Ministry of Finance for hiring again Indebtedness carries out all the respective technical analyzes that allow maintaining a sustainable level of debt, it should be noted that the country has had the support of international organizations such as the IMF when reviewing the economic projections.
4. Do you contemplate negotiations with international organizations on the subject of debt service to lower interest?
R/. The low interest rate to which there has been access in recent years is due to maintaining the macroeconomic stability of the country, reflected in the perception of risk; We could see this when the first sovereign bond was issued at a rate of 8.75% and now we have access to financing in the sovereign bond market at a lower rate, the last placement was at 5.63%; In addition to this, there are the concessional loans from multilateral banks, which were contracted at an average rate of approximately 2%, within which the most concessional resources of the IMF are included at an interest rate of less than 1%. For more details on this topic, you can contact the Ministry of Finance.
5. What is your final message for the Honduran population?
R/ As president of the Central Bank of Honduras, I reaffirm the commitment of the entire institution to continue working tirelessly at the service of the nation, fulfilling our mission of ensuring the maintenance of the internal and external value of the national currency, the proper functioning of the system. payments and promote the stability of the country’s financial system.
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