Responses to the Coup d'etat in Honduras on Sunday June 28, with special emphasis on producing English-language versions of commentaries by Honduran scholars and editorial writers and addressing the confusion encouraged by lack of basic knowledge about Honduras.

Thursday, September 17, 2009

Cooking the Books

La Prensa has an interesting article based on statistics supplied by the Banco Central de Honduras. In it, they claim that they have an International Net Reserve of $2,236.7 million. The sub-headline is that they admit the International Net Reserves have gone down $159 million since June 2009. However, its clear from the partial chart that accompanies the article, that they've counted the full IMF grant of $150 million that they can count against reserves, but cannot translate into cash, against the International net Reserves. What that means is that by their own admission, the International net liquid reserves are down $309 million since June, 2009. Compare this number with the nearly $68o million that CEPAL, the UN economic forecasting commission, says they've spent as we discussed in one of last weeks blog postings.

The chart compares the principal causes of weekly variation in the International net reserves for the week of August 27 and September 3, 2009. The first thing to note is that I haven't yet found the Banco Central press release with the numbers quoted in this article, but things often take a day or two to arrive on their website. The next thing to note is that the numbers in the chart just don't add up to the results displayed, so there are some numbers that are not being presented.

The first line of the chart represents the IMF grant of Special Drawing Rights (DEG in Spanish), which the de facto government can rightly count against reserves, but doesn't stand a chance in hell of converting into hard currency. It does not include the additional $9 million in SDR that were granted on September 9.

The second line of the chart shows the effects of importation of fuel on the International Net Reserves. This shows that the purchase of fuel has caused reserves to slip $17.7 million the week of August 27, and that loss increased to $24.5 million the week of September 3. Recall Benjamin Bogran's call to start using less gasoline on August 31? Its hurting the bottom line every week.

The other major cause of variation is the buying and selling of international currencies. The week of August 27 it caused a $31.4 million loss to the International Net Reserves. That loss, in part, represents a high rate of conversion of Lempiras into hard currencies. In contrast, they list a $6.4 million gain in reserves the week of September 3. This could possibly reflect a reversal of the cash flight from the country as a result of their press release about the IMF SDR grant on line 1, which happened that week. Coincidence that they chose that week to compare?

Finally, the chart shows that debt service increased the losses to International Net Reserves, going from a loss of $0.2 million August 27, to a loss of $1.4 million the week of September 3.

There are approximately 22 weeks until a new government could take power. If the reserves continue to be lost at the same rate as they were the week of August 27 (because the week of September 3 is anomalous) then they will loose a further $680 million (conservatively) in International Net Reserves. By January 27, 2010, the International Net Reserves, by the governments own numbers, will be around $1,400 million, down 40% since the coup started.

Does this narrowing in on the weekly burn rate make sense? If we calculate the same thing backwards, from the week of August 27 to the beginning of the coup in June, we would project their loss at $248 million for those 8 weeks, which is close to the actual figure of $300 million that their own numbers show.

Why would anyone want to be elected President in November to take over such a miserable economy?

1 comment:

Anonymous said...

RNS asks, "Why would anyone want to be elected President in November to take over such a miserable economy?"

Answer: The people running the government have very nice salaries and benefits. Sure, the public may be irritated and uppity, but the police and military exist to keep them off the lawn of the presidential palace.

As for counting the IMF grant as reserves, I think the coupistas are essentially correct. From the standpoint of a creditor, the money (or its electronic equivalent) exists. That means that some financial institution somewhere will lend money, probably at extortionate rates, against that security. As long as the world lifts sanctions before Honduras runs out of money, no problem (for the creditor). But even if the world doesn't lift sanctions for some time, the creditor's claim will probably eventually get paid, because of course banks have to be protected from the consequences of their own actions. And if there's a revolution... well, the new government will definitely need to establish its creditworthiness, and how better than to pay its obligations?

--Charles of MercuryRising