Honduras central bank approves $1 bln loan to government

In February, the Honduras Congress, under a fiscal and financial emergency decree, gave the new government of leftist president Xiomara Castro authorization to borrow up to $2 billion, including local and international sovereign bonds, over the next two years.

The Central Bank of Honduras approved a loan of $1 billion to the country's government aimed at addressing a severe fiscal imbalance, the central bank announced on Wednesday. In February, the Honduras Congress, under a fiscal and financial emergency decree, gave the new government of leftist president Xiomara Castro authorization to borrow up to $2 billion, including local and international sovereign bonds, over the next two years. In addition to financing public investment, the loan is to be used for "the servicing of internal and external debt for 2022 and the payment of the second tranche of the sovereign bond that matures in March 2023 for $166.7 million dollars," the central bank said in a statement.

In February, the central bank loaned the government $336 million from Special Drawing Rights funds provided by the International Monetary Fund (IMF) to support external debt service payments. Honduras, the second-poorest country in Latin America, faces external and internal debts worth a total of $15.68 billion, which represents 56.7% of the country's gross domestic product. Some 30% of the national budget is reserved for debt servicing, according to finance ministry officials.

The loan was announced during an IMF mission to Honduras, whose government hopes to reach a deal with the fund to secure new financing.