Caribbean & Central America - July 2026

Honduras’ President Nasry Asfura is pushing to pass a bill that would reform the country’s troubled electricity sector, and the plans have received significant backing internationally despite opposition at home. 

The proposal was submitted to lawmakers in May, and it passed the second of three necessary debates on 18 June. At the time of writing on 6 July, the proposed initiative had yet to pass the final debate. It comprises 18 articles that will reform the general law of the electricity industry (Decreto 404-2013), that was promulgated in 2014. Key changes including splitting up the state power company Empresa Nacional de Energía Eléctrica (ENEE), which has produced, carried, and sold electricity in the country since the 1950s, into three entities to handle generation, transmission and distribution separately.

It will also create an independent systems operator named Operador del Sistema y Mercado (OSM) to replace the state-controlled national dispatch centre (CND) and provides for the transfer of ENEE assets from national administrative law to mercantile law, among other things.

This is a response to continued massive financial losses at ENEE, which the US Department of State’s most recent (October 2025) investment climate statement on Honduras put at about US$50m a month, while a 2025 report by Sociedad Más Justa (ASJ), the local chapter of anti-corruption NGO Transparency International, put estimated energy losses at 35.83% in June 2025. It is also a reversal of the 2022 energy reform enacted by former President Xiomara Castro (2022-2026), which failed to deal with either of the longstanding issues that have plagued the country’s electricity system for decades [EB-22-10]. For example, the International Monetary Fund (IMF) has highlighted “a history of uncompetitive contracting of generation capacity and inefficiencies” as well as “outdated infrastructure and incidence of fraud,” adding that “ENEE’s lack of payment discipline has stifled investment in generation."

There is therefore widespread consensus that reform is necessary, but the structure of that reform is contested. Asfura’s government has said that splitting ENEE into three separate entities will facilitate much-needed private investment that the state cannot hope to match. Other officials have framed the reform as a rescue mission, highlighting that the bill protects jobs at ENEE as well as declaring ENEE assets to be public property, and pointed to the long-term effects that ensuring a reliable power supply could have on foreign investment in Honduras.

NGOs have also supported the reform, including ASJ which said that it could help to shield ENEE from the political interference that it has long suffered. The Asociación Hondureña de Energía Renovable (AHER) renewable energy business association has given its conditional support too, with its president, Eduardo Bennaton, welcoming change but calling for a truly independent CREE and incentives for renewable generation.

The reform has also received widespread international support, including from the World Bank, the Inter-American Development Bank, the Central American Bank for Economic Integration (Cabei), and the Development Bank of Latin America (CAF). The US Department of State has said its successful passage could unlock investment, and officials from the European Union met with Honduran counterparts at a high-level meeting in April “to discuss pathways for reform, investment, and regional integration.”

In addition, the IMF has linked the reform to its lending programme. “Decisive progress on governance and energy sector reform will be essential to preserve macroeconomic stability and support inclusive growth,” it said in its latest review of the arrangement published on 29 June. However, it struck a more balanced tone about the bill’s prospects. “Reinvigorating reform momentum in the energy sector is critical to limit fiscal risks and support medium-term economic growth,” said the IMF. “Renewed efforts are needed to reduce electricity losses and address arrears to strengthen the state-owned electricity company’s financial position.” 

On the other hand, the bill’s content has sparked considerable concerns within Honduras. The left-wing opposition Partido Libertad y Refundación (Libre) party has said that it constitutes “privatisation in disguise,” and the centrist Partido Liberal, whose support Asfura’s government will need to pass the reform, has said that it will need to see firm guarantees that ENEE will not be privatised before it can vote in favour. 

Local economic thinktank Foro Social de Deuda Externa y Desarrollo de Honduras (Fosdeh) has published an analysis of the bill, concluding that while there is no formal privatisation of state assets, it opens the door to a functional privatisation. This means that while the state would retain nominal ownership, it allows private entities greater control over strategic functions.

Fosdeh has four main criticisms of the bill. The first is that it lacks protection for low-income customers against tariff increases; it weakens asset protection under mercantile law; privatises the potential benefits of sectoral reform while socialising risks; and lastly that public consultation has been insufficient. “Fosdeh believes that no reform can be said to be sustainable when it protects private profits but makes public finances more vulnerable; when it guarantees operator income but transfers costs to users; or when it reduces public control without establishing equivalent mechanisms of supervision and accountability,” it said.

Other criticisms include the fact there is no plan to address energy losses and the accumulated debt, according to the Colegio de Ingenieros Mecánicos, Electricistas y Químicos de Honduras (Cimeqh), a local NGO that promotes technology adoption in Honduras. And Erick Tejada, former energy minister (2022-2026) under Castro, echoes these concerns, arguing that the reform “does not address the main problems of ENEE: financial debt, high generation costs and loss reduction”. He has also raised concerns that the bill opens the door to regulatory capture that would undercut the state’s ability to oversee the sector.

IMF boost for Asfura government

On 29 June the International Monetary Fund (IMF) announced the completion of the fourth and fifth reviews under the Extended Fund Facility and Extended Credit Facility arrangements for Honduras.

This enables the authorities to release US$242m, bringing total disbursements under the programmes so far to about US$725m. Honduras’ 36-month arrangements totalling about US$847m were approved in September 2023 under Castro. However, the programme stalled late last year after the Castro government failed to fully meet its target for the fourth review. Reviving the programme was a priority for the new Asfura government.   

In a statement released on 29 June, the IMF said the Honduran economy has “remained resilient”, expanding 3.8% in 2025, supported by “record-high coffee prices and surging remittances”. The statement adds that “the continued implementation of prudent fiscal policies, an appropriate monetary and exchange policy mix, and the recent acceleration of structural reform implementation demonstrate the authorities’ strong commitment to the Fund-supported program” – no doubt a reference to the new public spending bill approved in late February which hands the executive more power to cut government spending [EB-26-04]. 

 Asfura’s insistence on non-privatisation

“The ENEE is not being privatised; it is being strengthened,” said President Nasry Asfura in June.

IMF growth forecast

In its 29 June statement, the International Monetary Fund (IMF) forecasts that Honduras’ economic growth will slow to 3.3% in 2026 due to higher global oil prices and headline inflation will close 2026 at 5.7%, up from 4.0% in 2025, also due to higher energy prices.