HONDURAS: JOINT BANK-FUND DEBT SUSTAINABILITY ANALYSIS - External debt distress risk Low - Overall risk of debt distress Moderate

Jul 19, 2026

Upload by Himbo

Honduras’ joint World Bank–IMF debt sustainability analysis finds a low risk of external debt distress and a moderate overall risk of public debt distress. Improved debt dynamics since the September 2023 full DSA are linked to prudent fiscal management and sizable net debt repayments, leaving end-2023 public debt at 48 percent of GDP. The report emphasizes strong debt-carrying capacity while noting vulnerabilities to policy slippages and exogenous shocks such as natural disasters. Key safeguards include strengthening domestic debt markets, macroeconomic frameworks, and the financial viability of the energy sector.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages25

Reading Time1 h 3 min

Risk of debt distress assessment

External debt distress risk

Overall risk of public debt distress

Policy and safeguarding priorities

Debt coverage and contingent liabilities

Scope of public sector debt coverage

Stress test design and calibrated shocks

Domestic debt components and unaccounted items

Public Disclosure Pub lic Disc losure Authorized Approved by: Manuela Francisco and Oscar Calvo-Gonzalez (IDA) , and Rodrigo Valdés and Anna Ivanova (IMF Prepared by the staff of the International Development Association (IDA) and the International Monetary Fund (IMF) | HONDURAS: JOINT BANK-FUND DEBT SUSTAINABILITY ANALYSIS | | | --- | --- | | Risk of external debt distress | Low | | Overall risk of debt distress | Moderate | | Granularity in the risk rating | Tool not applicable | | Application of judgment | No | Prudent fiscal management and sizeable net debt repayments have led to an improvement in Honduras’ debt dynamics compared to the September 2023 full DSA, resulting in an end-2023 public debt stock of 48 percent of GDP, 4 p. p. lower than projected at program approval. Risk ratings remain unchanged, with Honduras’ risk of external debt distress assessed low, while the risk of overall public debt distress is moderate 1 ,2. Honduras maintains a strong debt-carrying capacity. Going forward, the authorities remain committed to prudent macroeconomic policies, including by continuing to adequately balance social and investment needs with preserving fiscal and debt sustainability. Sustaining efforts to further strengthen the domestic debt market, enhance monetary and foreign exchange policy frameworks, and strengthen the financial viability of the energy sector are important safeguards to debt sustainability. The debt sustainability outlook remains vulnerable to policy slippages and risks of exogenous shocks, such as natural disastersand a deterioration of the global outlook. 1 Prepared by the IMF and the World Bank. With “Low” risk of external debt distress, Honduras has been exempted from the preparation of Performance and Policy Actions under the Sustainable Development Finance Policy since its inception in July 2020. 2 Honduras’s debt carrying capacity is assessed to be strong based on a composite indicator of 3.12 that uses the April 2024 WEO vintage and the 2022 World Bank CPIA. 1. The debt coverage of the public sector is comprehensive (Text Table 2) . The debt sustainability analysis (DSA) covers the non-financial public sector (NFPS), which includes the general government and non-financial state-owned enterprises (SOEs) . Debt from extrabudgetary trust funds is also included, with the authorities having abolished through legislation all trust funds in 2022.3 Debt from decentralized agencies such as public universities, public pension funds, and central bank borrowing on behalf of the government is also covered. In addition, the baseline 2023 debt stock includes 2.1 percent of GDP in domestic debt that was unaccounted for before approval of the Fund arrangements (Text Table 1),4 of which (i) 0.3 percent of GDP relates to central government arrears to domestic suppliers; (ii) 0.6 percent of GDP consists of trust funds’ debt liabilities,5 and (iii) 1.2 percent of GDP pertains to arrears accumulated by the state electricity | Lempiras | | | | --- | --- | --- | | | (million) | % GDP | | Domestic Debt | 17,612 | 2.1 | | Central Government | 2,946 | 0.3 | | Trust funds | 4,879 | 0.6 | | ENEE | 9,787 | 1.2 | 1/ Preliminary data. Source: Country authorities; and IMF staff calculations. utility Empresa Nacional de Energía Eléctrica (ENEE), mainly to private electricity generators and which the authorities are working on reducing. External debt is defined on a currency basis.6 2. The contingent liability tailored stress test is calibrated to account for public sector debt coverage gaps and risks from contingent liabilities (Text Table 2) . First, the default shock of 0 percent of GDP for other entities of the general government is kept unchanged as these are already captured in the coverage of public debt. Second, the default shock of 2 percent of GDP for SOE debt and governmentguaranteed private debt is maintained to reflect risks from potential lawsuits linked to a highway concession project

FAQs

What are the assessed risks in Honduras’ debt sustainability analysis?

The analysis rates the risk of external debt distress as Low, while the overall risk of public debt distress is Moderate.

Why did Honduras’ debt dynamics improve compared with the September 2023 DSA?

Prudent fiscal management and sizeable net debt repayments improved the debt outlook, resulting in an end-2023 public debt stock of 48 percent of GDP.

What vulnerabilities and safeguards does the report highlight going forward?

The outlook remains vulnerable to policy slippages and exogenous shocks such as natural disasters. Safeguards include strengthening domestic debt markets, enhancing monetary and foreign exchange frameworks, and improving the energy sector’s financial viability.

Jul 19, 2026

Upload by Himbo