June 13 (Bloomberg) -- Honduras’s government is betting that an accord with the International Monetary Fund will unlock $500 million to help the country boost growth in an economy plagued by one of the world’s highest levels of violence.
“I think that we are in better conditions than ever to reach an agreement,” President Juan Orlando Hernandez told reporters in Washington today. “The sovereign bonds already reflect a different attitude from the market toward Honduras.”
Honduran bonds have returned about 18 percent this year, the most about 60 emerging market economies tracked by JPMorgan Chase & Co.’s EMBIG index. The yield on the country’s dollar bonds due in 2024 plunged to 6.77 percent on June 10, the lowest since they were sold in March last year. The country will consider selling more bonds next year if yields continue to drop, Rivera said.
The government is pursuing an agreement with the IMF by August, Hernandez said. Honduras will seek about $200 million from the lender, with another $300 million in financing from the Inter-American Development Bank and the World Bank, Economic Development Minister Alden Rivera said.
“This would be $500 million that would help us cover very short-term needs, but obviously this could prepare us for having a healthier financial situation,” Rivera said. “From a macroeconomic point of view, it would help us boost social and economic investment.”
The IMF will initiate talks on a program for Honduras in August and no details have been agreed to, spokesman Raphael Anspach said.
Hernandez took office in January after vowing to counter criminal gangs and drug traffickers that have made the country of 8.4 million among the most violent in the world. The U.S. in 2012 estimated that 75 percent of all cocaine smuggling flights departing South America first land in Honduras.
Violence in Central America and Mexico has pushed undocumented workers and children into the U.S. The White House announced this week it will ask Congress for an additional $1.6 billion to deal with an influx of unaccompanied children, mostly from Central America.
Honduras’s central bank forecasts that the $18.4 billion economy will expand 2.5 percent to 3.5 percent this year, after growth of 2.6 percent in 2013. Growth has been crimped by the outbreak of coffee rust disease, which has hurt exports. The budget deficit will be about 5.2 percent, the central bank said.