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World Bank Document The World Bank Honduras DRM Development Policy Credit with a Catastrophe Deferred Drawdown Option (Cat DDO) (P172567) Document of The World Bank Public Disclosure Authorized FOR OFFICIAL USE ONLY Report No: PGD151 INTERNATIONAL DEVELOPMENT ASSOCIATION PROGRAM DOCUMENT FOR A Public Disclosure Authorized PROPOSED CREDIT IN THE AMOUNT OF US$119 MILLION TO THE REPUBLIC OF HONDURAS FOR THE DISASTER RISK MANAGEMENT DEVELOPMENT POLICY CREDIT WITH A CATASTROPHE DEFERRED DRAWDOWN OPTION (CAT DDO) Public Disclosure Authorized April 2, 2020 Urban, Resilience and Land Global Practice Latin America and Caribbean Region Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. The World Bank Honduras DRM Development Policy Credit with a Catastrophe Deferred Drawdown Option (Cat DDO) (P172567) Republic of Honduras GOVERNMENT FISCAL YEAR January 1 – December 30 CURRENCY EQUIVALENTS (Exchange Rate Effective as of April 2, 2020) Currency Unit: Honduras Lempira (HLN) HLN 24.86 = US$1.00 ABBREVIATIONS AND ACRONYMS Spanish Agency for International Development Cooperation (Agencia Española de AECID Cooperación Internacional para el Desarrollo) AMHON Association of Municipalities (Asociación de Municipalidades de Honduras) ANA National Water Authority (Autoridad Nacional del Agua) APEC Asia‐Pacific Economic Cooperation BCH Central Bank of Honduras (Banco Central de Honduras) BVM Government Social Housing Program (Bono Vida Mejor) Central American Bank for Economic Integration (Banco Centroamericano de CABEI Integración Económica – BECIE) Cat DDO Catastrophe Deferred Drawdown Option CCA Climate Change Adaptation Coordinating Center for the Prevention of Natural Disasters in Center America (Centro CEPREDENAC de Coordinación para la Prevención de los Desastres Naturales en América Central) CNBS Banking Commission (Comisión Nacional de Bancos y Seguros) CONVIVIENDA National Housing Agency (Comisión Nacional de Vivienda) COPECO National Disaster Risk Management Agency (Comisión Permanente de Contingencias) COSUDE Swiss Agency for Development Cooperation (Cooperación Suiza de Desarrollo) COVID‐19 Coronavirus Disease 2019 CPF Country Partnership Framework CPI Consumer Price Index CRRH Regional Water Resources Committee (Comité Regional de Recursos Hidráulicos) DPC Development Policy Credit DRFS Disaster Risk Financing Strategy DRM Disaster Risk Management DSA Debt Sustainability Analysis DSF Debt Sustainability Framework ENEE State‐Owned Electricity Company (Empresa Nacional de Energía Eléctrica) FDI Foreign Direct Investment National Fund for Preparedness and Response (Fondo Nacional de Preparación y FONAPRE Respuesta a Emergencias) FRL Fiscal Responsibility Law GDP Gross Domestic Product GFDRR Global Facility for Disaster Reduction and Recovery GNP Gross National Product GoH Government of Honduras GRS World Bank’s Grievance Redress Service HFA Hyogo Framework for Action IBRD International Bank for Reconstruction and Development IDA International Development Association IFC International Finance Corporation IHR International Health Regulations IMF International Monetary Fund IUWM Integrated Urban Water Management JEE Joint External Evaluation LAC Latin America and the Caribbean LDP Letter of Development Policy MAPS Methodology for Assessment of National Procurement System MOF Ministry of Finance MTEF Medium‐Term Expenditure Framework NCCS National Climate Change Strategy NDC Nationally Determined Contribution NFPS Non‐Financial Public Sector NPL Non‐performing Loans OECD Organization for Economic Co‐operation and Development. National Procurement Office (Oficina Normativa de Contratación y Adquisiciones del ONCAE Estado) PAHO Pan American Health Organization Central America Policy for Disaster Risk Management (Política Centroamericana de PCGIR Gestión Integral del Riesgo de Desastres) PCM Presidency of the Council of Ministers (Presidencia del Consejo de Ministros) PDO Project Development Objective PER Public Expenditure Review PFM Public Financial Management PPG Public and Publicly Guaranteed PV Present Value SBA Stand‐By Arrangement SCD Systematic Country Diagnostic SDR Special Drawing Rights SECO Swiss State Secretariat for Economic Affairs (Secretaría de Estado de Economía de Suiza) SEFIN Ministry of Finance (Secretaria de Finanzas) SESAL Ministry of Health (Secretaria de Salud) SEPLAN Ministry of Planning (former Secretaría de Planificación) SGJD Ministry of Interior and Justice (Secretaría de Gobernación, Descentralización y Justicia) SICA Central American Integration System (Sistema de Integración Centroamericano) National Disaster Risk Management System (Sistema Nacional de Gestión del Riesgo de SINAGER Desastres) TA Technical Assistance TPS Temporary Protected Status UN United Nations UNDRR United Nations Office for Disaster Risk Reduction US United States USAID United States Agency for International Development WBG World Bank Group WCDRR United Nations World Conference on Disaster Risk Reduction WHO World Health Organization WRM Water Resources Management . Regional Vice President: J. Humberto Lopez (Acting) Country Director: Yaye Seynabou Sakho Regional Director: Anna Wellenstein Practice Manager Ming Zhang Lizardo Narvaez Marulanda, Task Team Leaders: Nicolas Collin Dit De Montesson The World Bank Honduras DRM Development Policy Credit with a Catastrophe Deferred Drawdown Option (Cat DDO) (P172567) TABLE OF CONTENTS SUMMARY OF PROPOSED FINANCING AND PROGRAM ........................................................................ 3 1. INTRODUCTION AND COUNTRY CONTEXT .................................................................................... 5 2. MACROECONOMIC POLICY FRAMEWORK ..................................................................................... 8 2.1. RECENT ECONOMIC DEVELOPMENTS ............................................................................................ 8 2.2. MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY ......................................................... 13 2.3. IMF RELATIONS ............................................................................................................................ 15 3. GOVERNMENT PROGRAM .......................................................................................................... 16 4. PROPOSED OPERATION .............................................................................................................. 18 4.1. LINK TO GOVERNMENT PROGRAM AND OPERATION DESCRIPTION .......................................... 18 4.2. PRIOR ACTIONS, RESULTS AND ANALYTICAL UNDERPINNINGS .................................................. 20 4.3. LINK TO CPF, OTHER BANK OPERATIONS AND THE WBG STRATEGY .......................................... 31 4.4. CONSULTATIONS AND COLLABORATION WITH DEVELOPMENT PARTNERS ............................... 32 5. OTHER DESIGN AND APPRAISAL ISSUES...................................................................................... 33 5.1. POVERTY AND SOCIAL IMPACT .................................................................................................... 33 5.2. ENVIRONMENT, FORESTS AND OTHER NATURAL RESOURCE ASPECTS ...................................... 34 5.3. PFM, DISBURSEMENT AND AUDITING ASPECTS .......................................................................... 35 5.4. MONITORING, EVALUATION AND ACCOUNTABILITY .................................................................. 36 6. SUMMARY OF RISKS AND MITIGATION ...................................................................................... 37 ANNEX 1: POLICY AND RESULTS MATRIX ............................................................................................ 40 ANNEX 2: INTERNATIONAL MONETARY FUND PRESS RELEASE ............................................................ 42 ANNEX 3: LETTER OF DEVELOPMENT POLICY ...................................................................................... 43 ANNEX 4: ENVIRONMENT AND POVERTY/SOCIAL ANALYSIS ............................................................. 51 ANNEX 5: MUNICIPALITIES WITH DRM AND EMERGENCY PLANS ....................................................... 54 ANNEX 6: SUMMARY OF HONDURAS INTERNATIONAL HEALTH REGULATIONS SELF‐ASSESSMENT .... 57 ANNEX 7: EMERGENCY DECLARATION PROCESS ................................................................................ 59 Page 1 The proposed operation was prepared by an IDA team consisting of Lizardo Narvaez Marulanda (Senior DRM Specialist, SLCUR and Team Leader); Nicolas Collin Dit De Montesson (Economist, HLCHN and Co‐TTL); Alexandra Lelouch Loebl (Counsel, LEGLE); Rodrigo Andres Donoso Arias (DRM Specialist, SLCUR); Zoila Victoria Navarro Portocarrero (DRM Specialist, SLCUR); Felipe Montoya Pino (Urban Specialist, SLCUR); Marco Antonio Aguero (Senior Water Supply and Sanitation Specialist, SLCWA); Jose Simon Rezk (Senior Financial Management Specialist, ELCG1); Amparo Elena Gordillo‐Tobar (Senior Economist, HLCHN); Carlos Marcelo Bortman (Lead Health Specialist, HLCHN); Carolina Diaz‐Bonilla (Senior Economist, ELCPV); Cristina Elizabeth Coirolo (Social Development Specialist, SLCSO); Ricardo Marten (Social Development Specialist, SLCSO); Leanne Farrell (Senior Environmental Specialist, SLCEN); Elena Bondarenko (Economist, ELCMU); Maria Virginia Hormazabal (Finance Officer, WFACS); Jane C. Hwang (Senior Operations Officer; OPSIL); Elsa Lily Caballero
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