More Honduran Bonds Coming

Honduras has yet to place an offering of the final $250 million dollars in government bonds authorized by Decreto 183-2012 of November, 2012 in a foreign capital market, but already Congress is modifying it to authorize the placement of even more government bonds to finance current expenditures.

Through Decreto 183-2012 the Honduran Congress authorized the sale of up to $750 million dollars in government bonds, placed in domestic or foreign capital markets.  In the spring of this year, they successfully offered $500 million dollars of that in bonds that had slightly more than 7% interest.  However, when they sought to place the remaining $250 million dollars in government bonds this summer, they found the interest rate had risen to above 10% and withdrew the offer.  They have announced that they intend to try again this month to sell the last $250 million in bonds, hoping for a better interest rate.

But acting rapidly yesterday, the Honduran Congress, reportedly without dissent, amended the original bill to authorize up to $1 billion dollars in bonds, an increment of a further $250 million, because it has become clear that the original amount will not meet the financial needs of the Lobo Sosa government.

Honduras owed about $4.8 billion dollars at the start of the Zelaya Rosales administration, when it qualified for debt relief under the Initiative for Highly Indebted Poor Countries and received a total of $3.5 billion in relief. That left it a foreign debt of about $1.3 billion dollars.

As of September this year, Honduras's foreign debt was back up to $5.68 billion dollars. $842 million of that increase occurred just this year. La Tribuna reports that for 2013 so far, the debt incurred ($1.496 billion) is about 3.2 times the government income for the same period ($455 million).

Honduran sociologist  Julio Navarro notes

"The first difficulty that this government has is how to pay its salary obligations to about 205 million government employees....this is a problem for this [the Lobo Sosa] government and it's a problem that the next government will inherit."

That's why Congress is authorizing more bonds to meet the current obligations of the Lobo Sosa government.  But Navarro continues:

"The other real problem of the next government is how to negotiate the expiration of the bonds the government has with private financial institutions, like banks and pension systems; the government currently has no way to pay off this internal debt."

Yikes!