FINANCE-HONDURAS: Size of Debt Jeopardises Eligibility for Credit

By Thelma Mejía Reprint | | Print |

Thelma Mejia

TEGUCIGALPA, Jul 11 1996 (IPS) - Honduras is becoming ineligible for fresh credit, because its foreign debt exceeds the limit set by international financial institutions, the vice-president of the Central Bank warned.

“According to our creditors, wer are no longer eligible for credit, because we have surpassed the limit on foreign debt. And although we are paying off the interest, the capital is unpayable,” Daniel Figueroa said Thursday during a forum on the foreign debt.

Honduras owes nearly 4.3 billion dollars, equivalent to 104 percent of its Gross Domestic Product (GNP) and 271 percent of its annual exports. In the past four years, some 500 million dollars in debt have been cancelled by the United States, the Netherlands, Switzerland and Canada.

The multilateral lending institutions say a country’s debt must not exceed 80 percent of GNP and 220 percent of annual exports to be eligible for credit, Figueroa pointed out.

Over half of Honduras’ debt is owed to multilateral lending institutions, one third is bilateral and slightly under 10 percent is commercial.

“The growth of the debt has been tremendous, not gradual,” said the official, who recalled that the country owed a mere 50,000 dollars in 1950.

“History shows us that instead of paying off our credit we have made it grow, because we have been naive in following the route pointed out to us, and falling into debt with multilateral institutions — and now we are lamenting the situation.

“We cannot pay the debt. The only limit we meet is the 20 percent set for interest on exports. We are at 17 percent,” he added.

During the forum, several non-governmental organisations proposed swapping debt for social, educational and environmental projects, such as other Latin American nations are negotiating.

Oscar Rodriguez, the president of the Latin American Episcopal Council, pointed out that his organisation is in favour of creditor nations forgiving Latin America’s foreign debt, which has become “a threat to peace in the region” and a possible catalyst for social unrest.

“The case of Honduras is serious, as are those of other Latin American and also African countries. The Catholic Church believes it is time to raise our voice, and ask the international institutions to curb their voraciousness, in order to prevent a social hecatomb in the world,” said the Honduran bishop.

Tegucigalpa is negotiating with multilateral lending institutions for special conditions on the repayment of 35 percent of its debt, added Rodriguez, who said “it won’t be easy, because those entities do not consider us poor enough” to ask for that treatment.