The Central Bank of Honduras (Spanish: Banco Central de Honduras) is the central bank of Honduras. The current president is Maria Elena Mondragón. It was established on 1 July 1950.

From the series of events in political, economic and social, three important events in his time marked the beginning of a new stage in the process of economic development: the establishment of liberal reforms, the creation of our monetary unit, Lempira, April 3, 1926 and entry into service in the 1930s and the founding of the Central Bank of Honduras the first of July 1950 which led to the nationalization of the means of payment and the reorientation of monetary policy, exchange and credit of the Republic.

The Central Bank of Honduras was established on February 3, 1950, by Legislative Decree no. 53, and began operations the first of July of that same year, under the ownership of the Attorney Roberto Ramirez, in an opening ceremony chaired by Dr. Juan Manuel Gálvez, President of the Republic.

This effort of the Government represented a breakthrough on the special situation prevailing at that època, in which there were only two banks partially covering the financial activities of Tegucigalpa, San Pedro Sula and La Ceiba as well, although the National Congress had already approved Lempira as the official currency, the Government had failed to monetary institutions as skipper until the founding of the BCH.

Thus, the 1950 Act was the fundamental basis for the BCH will serve as a pillar of the Honduran economy. Subsequently, 46 years later, on December 17, 1996, the National Congress, through Decree no. 228-96, approved a package of reforms to that law to enable the institution to bring its to do with the conditions and requirements of the current financial market. The latest amendments to the Law of the BCH, are aimed at strengthening the autonomy and independence of the highest monetary authority, to enable it to fulfil the new role that society, through the Legislature, has given him.

The BCH is governed by the Act and regulations that dictate its index, collegial body with strictly professional and technical functions of central banking. This upper body, which serves full time in the institution, which is determined and manages monetary policy, exchange and credit of the State. To accomplish its mission, the BCH has a team of highly trained professionals, educated and trained through their years of institutional life, whose efforts have contributed to the strength, prestige and credibility of the institution, both nationally and internationally.

In addition to the tasks set forth in the Act, the Central Bank of Honduras since its inception has complemented its important tasks with an intense cultural and educational work. With this intention, between 1993 and 1994 in the BCH opened its annex building of Comayaguela, the Pinacoteca "Arthur H. Medrano, "Auditorium" Tom Cálix Moncada "and the Library" Roberto Ramirez "specializing in the areas of Economy, Currency, Banking and Finance.

Another activity in which the BCH has felt its cultural vocation is the continued publication of books which record the thoughts of renowned national and foreign writers, editions that have enriched the literature of the country.

Additionally, the BCH along its five decades has supported the formation of several physical and artistic cultural venues in the country, as in the donation of educational materials to public education, issuance of commemorative coins and a series of works and events , which would undoubtedly have strengthened the cultural heritage of the Honduran family.

The Central Bank of Honduras has more functions:

• Formulate and direct the Monetary, Credit and Exchange policy of the country and issue the corresponding regulations;
  
• Issue the bills and coins of legal course in the country's territory;
  
• Enable the changing agents that could negotiate exchanges in the national territory;
  
• Administrate the International Monetary Reserves;
  
• Determine the Exchange rate in function of the offers and demands;
  
• Make credit operations to attend the insufficient liquidity of the institutions of the Financial System;
  
• Make operations of monetary stabilization;
  
• Practice the duty of bankers, fiscal agents and economic/financial counselor of the State;
  
• Elaborate and publish the principal macro economical statistics.

Monetary Policy Descriptive Framework:

The Constitution of Honduras in Article 342 and the Law of the Central Bank of Honduras (Decree 53) establish the obligation to ensure the maintenance of the internal and external value of the national currency and facilitate the good functioning of the payment system. To this purpose, the Bank's Board, will formulate, develop and implement the monetary, credit and exchange policy in the country. Annually, the Board approves the Monetary Program, which contains policy guidelines in areas identified by law, which is derived from a comprehensive analysis of the internal and external economic conditions, through indicators generated by the various dependencies of the Bank and their assessment of the future trend of those indicators and the effect that this development will cause on the national currency.

The main policy instruments used by the COMA for the fulfillment of its objectives are Open Market Operations and the Monetary Policy Rate.

The COMA is committed to fulfilling the objective of obtaining a long-term inflation and moderate interest rates, that will help maintain the internal and external value of the national currency. To contribute to the understanding of its policy recommendations, the COMA seeks to disseminate and explain these recommendations to the public in the most clear and transparent way as possible, knowing that this clarity facilitates informed decision making by households and businesses, reduces uncertainty, increases the effectiveness of monetary policy and democratizes information, fundamental input in shaping expectations for economic agents.

Inflation and interest rates fluctuate in response to a series of economic and financial developments from internal and external sources. These fluctuations have an effect on the level of employment and economic activity. Knowing that monetary policy decisions have influence on these variables with a lag in time, COMA recommendations take into account the risks, including those that may affect the financial system and thus the national payments system.

In making recommendations on monetary policy, the COMA seeks to reduce deviations of inflation (measured by the percentage change in the Consumer Price Index between two time periods) from the objectives on the Monetary Program in a manner consistent with the goals of social economic growth and employment. These objectives are generally complementary, but to the extent that the tendency of the balanced relationship that should exist between the internal and external demand moves away from what is expected, due to factors beyond the control of the Central Bank and loses complementary, the COMA seeks to establish a balance between the objectives, always taking into account the size and importance of the deviations and the time horizon that is expected to restore economic balance and inflation return to its programmed level.


Credit Policy:

It contains a mix of policies taken by the Monetary Authority to determine the source and use of financial resources for the different economic agents. It could induce development in some strategic sectors of the economy; it is strictly related with the monetary policy. Even thought, it could be part of it, because both policies use similar instruments like interest rates, access to discount rate, legal reserves and some other normative topics.

In accordance to the National Constitution, the State of Honduras through the Central Bank of Honduras (CBH), is in charge of the formulation, management and execution of the monetary, exchange and credit policy in accordance with the dispositions described in the Central Bank of Honduras Law, is attribution of the Board of Directors to formulate, to manage and to emit the related normative.

Since the 90’s, one of the main goals of the Monetary Authority has been the economic restructuring, taking an economic policy with freeing market emphasis, stimulating the financing of private sector and reducing the financing of public sector

The Central Bank Law proposes that CBH only can give credits to the Government and Official Institutions through second markets. These credits cannot exceed the limits disposed by the Board of Directors. Even thought values can be negotiated with public and financial institutions.

The CBH will give credits to the Government only in emergency situations or public calamity; it will be determined in unanimity for the Board of Directors and ratified by Presidential Decree and Minister Council. At the same time the CBH could give loans to the Government to cover some variations in income and expenses according with the requirements prescripts to the law.


Exchange Policy Descriptive Framework:

The exchange rate policy objective, like the monetary policy objective, is to safeguard the internal and external value of the currency; consequently, to maintain export competitiveness, especially with regard to the country’s main trading partners, trying to reduce the current account deficit to sustainable levels in the medium term (6% of GDP).

To this end, the Central Bank of Honduras (CBH) has adopted as goal, within the framework of the 2008-09 Monetary Program, to increase Net International Reserves at least US$250.0 millions to reach US$2,726.0 millions, compared to the December 2007 balance. This increase on reserves will allow the imports coverage level to be similar to last year’s, at 4.0 months of imports, excluding Aquila.

The Monetary Program 2008-09 plans to continue exchange rate policy instrumentation through the Public Auction for Foreign Currency Allocation (SAPDI in Spanish) and to modernize, so that in the short run the CBH may have an Electronic System for Foreign Currency Negotiation.

The CBH will maintain the current exchange rate regime, using exchange rate policy more actively to accumulate an adequate level of reserves. This will allow the CBH to adequately manage the impact on the exchange rate of the growing risks of foreign shocks, especially those related to the increase in fuel and food prices.

The Honduran Government Program has been endorsed by the International Monetary Fund through the subscription of a Stand By Agreement to support the 2008 economic program, which contemplates resources for SDR 38.8 millions (US$63.5 millions). This financial access has a precautionary character tending to enforce external stability. In the same agreement, indicative goals are established for the net international reserve levels, which will be monitored quarterly.

Other actions considered for the attainment of the reserve goal, are related to acquiring external credit (only under concessional conditions) as well as obtaining concessional credit from the Petrocaribe Agreement in the amount of US$350.0 millions for the years 2008 and 2009.

Likewise, to diversify investments and to obtain greater foreign currency earnings, the CBH foresees a more efficient management of the international reserves investments, through the subscription to the Reserves Advisory and Management Program (RAMP) agreed with the World Bank under the principles of security, liquidity and profitability.

On the other hand, considering the regional environment and to support the nation’s productive areas, the CBHs Directory has authorized the banking system to gradually reduce the foreign currency reserve requirement in 10%, from 24% to 14% starting on March through November 2008, for those institutions that, according to the monthly records of the National Banking and Insurance Commission, direct their foreign currency loan portfolios to activities other than consumption and trade in a proportion equal to or greater than 70%.

Useful links

Currency of Honduras:

Hong Kong dollar

List of Central Banks:

Central Banks

Official website of Central Bank of Honduras:

www.bch.hn

Honduras—Staff Report for the 2009 Article IV Consultation:

www.bch.hn

Doing business in Honduras:

export.gov