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Honduras Budget
Throughout the 1980s, the Honduran government was
heavily
financed by foreign assistance. External financing--mostly
bilateral credit from the United States--rose dramatically
until it
reached 87 percent of the public deficit in 1985, rising
even
further in subsequent years. By 1991 the public-sector
deficit was
entirely financed with net external credit. That financing
permitted the government to reduce the demand for internal
credit
and, therefore, to maintain its established exchange rate.
In 1991 President Callejas managed to give the
appearance of
having reduced the overall fiscal deficit, a requirement
for new
credit. The deficit decrease, however, was mostly an
accounting
device because it resulted from the postponement of
external
payments to the
Paris Club (see Glossary) debtors and
eventually
would be offset by pressure to raise public investment.
During
1991, loan negotiations with multilateral and bilateral
lending
institutions brought Honduras US$39.5 million in United
States
development assistance, US$70 million in
balance-of-payments
assistance in the form of cash grants, and US$18.8 million
in food
aid. The country also negotiated US$302.4 million in
concessional
loans from the multilateral lending institutions. Total
outstanding
external debt as a percentage of GDP fell from 119 percent
in 1990
to 114 percent in 1991 and to 112 percent in 1993. This
drop was
largely the result of debt forgiveness of US$448.4 million
by the
United States, Switzerland, and the Netherlands. Scheduled
amortization payments of an average US$223.2 million per
year,
however, guaranteed that Honduras's gross funding
requirements
would remain large indefinitely.
The government of Honduras projected that overall tax
revenues
would increase from 13.2 percent of GDP in 1989 to about
15.7
percent in 1991. Adjustments for low coffee prices and the
continuation of lax collection methods, however,
undermined those
goals. Despite these tax increases, compared to developed
countries, Honduras has low tax rates with particularly
low
property taxes.
Data as of December 1993
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