The central bank has begun to devalue the lempira, which is now trading at about HNL19.03/US$, two months after the bank reinstated the exchange rate band system, spun at the time as a “revaluation”.
Under the reinstated system, the lempira is effectively allowed to fluctuate 7% above or below HNL18.89/US$. From mid-September the central bank has incrementally lowered the base rate set for its daily dollar auctions to HNL19.0885/US$1 from HNL19.0271/US$1.
Net international reserves fell by US$298.2m from the date of the first daily auction on 25 July to reach US$2.71bn on 25 August. They were down to US$2.59bn on 23 September, which is barely enough to pay for three months of imports. There has been a sustained high demand for dollars, which the authorities have partially attributed to speculation. Business confidence is also very fragile in this US-dependent economy.
The bank initially spun the move as a ‘revaluation’, but there was always a suspicion that it was really a devaluation in disguise. Honduras reported a fiscal deficit of 4.8% of GDP for 2010, failing to meet the IMF-targeted 3.5%. The deficit will be 3.9% in 2011, according to the government
Total public debt was US$5.7bn as of 30 June 2011, of which 57% was external. Internal debt has risen since 2009, after the de facto government that took power in June 2009 rapidly contracted debt with local banks.
Inflation: Inflation in the 12 months to August 2011 was 7.7%.
