Food Prices Crisis Supplemental to HN First Prog Fin Sec Dev Pol Credit

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Honduras is committed to a reform program aimed at strengthening the financial sector so as to ensure that it contributes to long-term growth and poverty reduction. The authorities have expressed their intention to continue the implementation of the financial sector reform program and more specifically their intention to strengthen supervisory activities, keeping updated the database of related parties, and further strengthening banking resolution including through fully capitalizing the recently created bank capitalization fund. This commitment is particularly important because of the new challenges that the food crisis is creating for the financial sector, as higher food prices negatively affect the portfolio of consumer loans and the country's macroeconomic stability. In particular, strong supervisory activities and a well capitalized bank capitalization fund are crucial stabilizing factors for the financial system, because they signal to the market that the authorities will be able to respond to banks in difficulties and avoid a systemic crisis. Maintaining an appropriate macroeconomic framework is an integral part of the Government's strategy to keep a strong financial sector. The country's macroeconomic program is being supported by a Stand-by arrangement with the International Monetary Fund (IMF). Unfortunately, the government is facing unanticipated fiscal pressures arising from additional spending needs resulting from the food crisis and lower than anticipated external financing.

FY17 - Financial Sector,FY17 - Industry, Trade and Services,FY17 - Public Administration

World Bank Group

Project

Government