Meeting Honduras’ debts ‘practically impossible’ says new president

28 Jan 22

Honduras must restructure its debts if it is to afford servicing costs, according to new Honduras president Xiomara Castro at her swearing-in ceremony, but a minister has since taken a more moderate line.

Castro, a progressive politician who won last year’s election after promising to boost the economy by increasing the size of the state, said restructuring is the “only way” she will be able to meet the government’s liabilities.

The central American country’s government has gross debt equivalent to 58.6% of its GDP, according to International Monetary Fund figures.

“Evidently the state does not have the capacity to sustain the thunderous and suffocating debt that [her government] inherits,” said Castro.

“It’s practically impossible to meet debt maturities; the only way is through a comprehensive restructuring [following] an agreement with public and private creditors.”

But her new minister of economic development Pedro Barquero told Bloomberg the plans only constitute a “reprofiling”, rather than a restructuring.

In order for a restructuring to take place, the borrower would default on a payment and negotiate new arrangements with creditors.

“We have to better manage our liabilities, but all obligations will be met,” Barquero said.

The government will look at the details in the coming days, he said, but is “never going to stop paying”.

Castro became the first ever female president of Honduras, and has promised to renationalise public services, airports, highways and ports, and to end tax breaks she believes are unnecessary.

Her campaign had a consistent focus on employment, with many Hondurans leaving the country to find work in recent years.

She said in her speech she is committed to “strict monetary and fiscal policy” during her four-year term, and also said she hopes to renegotiate a trade deal with the US.

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