Agreement 219-2023

Approve the General Guidelines of Budget Policy for the Formulation of the 2024 Budget Draft, which are aimed at guaranteeing the financing of the priorities of the Government of Democratic Socialism in accordance with the strategic axes, results and indicators defined in the Strategic Planning for each Sectoral Cabinet, as well as the continuity of the implementation process of Zero-Based Budgeting within a framework of fiscal sustainability. The heads of the State Secretariats and other institutions, as well as Administrative Managements, must ensure that in the programmatic structures: Programs, Subprograms, Projects, Activities and/or Works, the budget allocations and the products and benefits in favor of the Honduran people are reflected, considering the transversality in matters of gender, human rights and territorial development.

Objectives: 1. Comply with the global pre-assigned ceilings for the 2024 formulation in accordance with what is established in the Medium-Term Fiscal Macro Framework and the Fiscal Responsibility Law. 2. Rigorously review each category of expenditure: programs, subprograms, projects, activity/work, to improve the efficiency of the use of resources allocated in the 2024 Budget Formulation and ensure its effective execution. 3. Formulate programs and projects with a medium-term perspective 2025-2026. 4. Distribute the budget allocation strictly adhering to planning in order to overcome the administrative delays caused by hundreds of requests and procedures for budget modifications.

General Application Guidelines. The following general application guidelines are detailed below and must be complied with by all institutions that make up the Centralized and Decentralized Administration:

• 1)

  Based on the Budget Classifiers available, the categories of revenues and objects of expenditure that are being used to formulate their budget must be reviewed, with the purpose that the budget imputation is precise. The technical team of the General Budget Directorate shall monitor the formulation to ensure that the institutions make proper use of the classifier. If inconsistencies are identified, these shall be reported to the institution so it can proceed to make the pertinent adjustments. If the institution does not correct it at the stage that corresponds to it, SEFIN shall make the adjustments at the stage that corresponds to the General Budget Directorate;

• 2)

  All expenditures that public institutions distribute in the formation of the Budget Draft in accordance with the ceilings assigned in the formulation must comply with the Zero-Based Budget Methodology, justified and documented;

• 3)

  Review the programmatic categories defined in their budgets to identify their programs, projects and/or activities, in order to ensure that they are linked to the goals and indicators established in the priorities of the Government Strategic Planning (PEG) and these in turn comply with the products of medium and short term within the Institutional Strategic Planning (PEI) and the Annual Operating Plan (POA);

• 4)

  Identify in the Programmatic Structures of each institution the strategies, the indicators of the Government Plan and its transversal axes, with the purpose of facilitating their monitoring. The General Budget Directorate shall authorize the Programmatic Structures once they are defined by each institution;

• 5)

  Formulate the POA-Budget 2024, based on the methodology of reviewing expenditure for all budget programs of fiscal year 2023, identifying all areas that should be allocated to the priorities of the Government for the benefit of the Honduran people.

Goals: 1. The goals must be prepared by each institution of the Centralized and Decentralized Public Administration and incorporated in the Institutional Strategic Plans (PEI) and Annual Operating Plans (POA), which must be aligned with the Priorities established by the Government of the Republic for the Construction of the Democratic Socialist State 2022-2026. 2. Each institution must make use of the budget formulation manuals of the Integrated Financial Administration System (SIAFI) for the registration of the PEI and POA that must include: mission, vision, strategic objectives, institutional results, operational objectives, production, goals, indicators, target population and budget. 3. Institutions must review the administrative structures: Administrative Managements and Executing Units; programmatic structures: Programs, subprograms, projects, Activities, works, to identify the products public production, ensure the budget linkage Plan – Budget and the impact of these on the population. 4. The Secretariat of Strategic Planning (SPE) must register in the Integrated Financial Administration System (SIAFI) the Cabinets, Strategic Axes, Objectives of the Strategic Axis and Sectoral Results of the Plan for the Construction of the Democratic Socialist State and the Integral Development of the Honduran People 2022-2026 and advance in the context of the sustainable development objectives SDG. The Secretariat of Strategic Planning (SPE) is responsible for technically assisting the Institutional Strategic Planning (PEI) to all institutions of the Executive Branch, as well as conducting the validation and Annual Operating Plans (POA). It must issue through the Directorate of Institutional Planning, the Alignment Report of the PEI and POA's of all public institutions in the budget formulation. It is the responsibility of the Secretariat of Strategic Planning (SPE) to ensure that the information registered in SIAFI is properly aligned with the objectives, goals and indicators that are monitored by the Directorate of Management for Results (DIGER) in its process of evaluation of physical and budget execution during the entire Fiscal Year.

Ceilings: It is the responsibility of the State Secretariat of Finance (SEFIN) to set the budget ceiling for each institution of the Public Administration for the 2024 Fiscal Year, as well as to make the estimation of the Medium-Term Budget Framework for the period 2024-2026, in accordance with the Organic Budget Law. The 2024 budget ceilings assigned by group of expenditure contemplate the values corresponding to payment of internal and external debt; Public Investment Program and expenditures necessary for the functioning of the Public Sector; therefore, each institution is responsible for distributing the budget in accordance with the Institutional Strategic Plans (PEI), Annual Operating Plan (POA) and Annual Plan of Purchases and Contracts (PACC) previously approved by the State Secretariat of Strategic Planning (SPE) and ONCAE. The plans must be reflected in the SIAFI-Ges system. Each institution must have an estimation of its expenditures in accordance with government planning and priorities. When making the distribution of the ceilings assigned for the year 2024 and the medium term 2025-2026, the budget allocations that correspond to expenditures that have an impact in the formulation year must be considered, as well as in the medium term, such as: allocations for projects that have duration beyond the fiscal year; and all expenditures corresponding to the total billing of the year for public services. In case of existing final judicial demands, make the corresponding provision.

Government Priorities: The Government of the Republic defined Sectoral Cabinets, Strategic Axes, Objectives of the Strategic Axes, Sectoral Results, to be achieved in the short, medium and long term, with three transversal axes: gender, human rights and territorial development: 1. Economic Cabinet: Its coordination corresponds to the State Secretariat of Finance (SEFIN), and its 5 strategic axes are: Economic, fiscal and monetary policy, agricultural development and food sovereignty, fair trade and sustainable tourism, energy and dignified employment. As results, the approval of a tax reform of a progressive, fair and equitable nature that creates a new model of exemptions to attract investments and generate jobs stands out, integration into the unified state fund of resources from tax collection, reprising and renegotiation of public debt, eradication of price speculation, especially of basic necessities, reform to the State Purchases and Contracts Law and application of mechanisms for access to credit for the population, among others. The management of the Cabinet will also ensure the approval of the energy policy 2023-2038 to achieve universal access to electricity in 7 years, advance in the management processes for the beginning of dam construction, approve the Law of Reforms to the Sector and recover the National Telecommunications Company. 2. Social Cabinet: Coordinated by the Secretariat of Social Development SEDESOL, comprises a total of 6 strategic axes: Protection and social provision, universal public education with quality, comprehensive universal and free public health, culture and heritage of peoples, childhood, youth and women, sports and recreation. As sectoral results, capacity to assist the most vulnerable population through a comprehensive system of protection and social provision is envisioned; ensure a public, free, universal educational system; guarantee a single system of universal and free public health, with emphasis on prevention, access to medicines, treatments, and immediate procedures; promote arts and culture in general through support for individual and collective creators. 3. Infrastructure Cabinet: coordinated by the Secretariat of Infrastructure and Transport (SIT), through its 3 axes: Logistical Infrastructure and Transport; Universal Housing, Water and Sanitation; and Communications. The improvement of connectivity will be ensured, maintaining the national road, port and airport network to support production and foster economic growth; facilitate access to decent housing, expand the coverage of drinking water and sanitation and internet in rural, urban and suburban areas and improve the installed capacity of aqueducts and sewers. 4. Natural Resources Cabinet: Coordinated by the Secretariat of Natural Resources and Environment (SERNA), through its strategic axis: Natural Resources and Environment Sustainable and Sovereign. As results, it is envisioned to nationalize strategic natural resources such as oil and rare earths, reverse deforestation, forest degradation due to illegal logging, recover water recharge areas, regulate artisanal mining and establish free, prior and informed consultation for peoples and communities. 5. Security, Defense and Governance Cabinet: Coordinated by the Secretariat of Governance, Justice and Decentralization (SGJD), in its 5 strategic axes: Risk Management, Security and Citizenship, Defense, Transparency and Fight Against Corruption and Human Rights, for the protection of life, physical integrity and the property of the population, risk management, a model of citizen security and community police that prevents crime and dismantles networks of drug trafficking and organized crime, to drastically reduce rates of violence and crime. Likewise, promote the rehabilitation and social reintegration of those deprived of liberty. 6. International Relations Cabinet: Which is composed of the Secretariat of Foreign Affairs and International Cooperation and the National Migration Institute; as goals, creating new international relations with other countries and strengthening existing ones under conditions of independence, solidarity and complementarity are established.

Fiscal Rules: For the estimation of revenues and expenditures, the institutions of the Public Administration shall use the following macroeconomic variables according to the Monetary Program of the Central Bank of Honduras (BCH) published in April 2023:

• a)

  Real GDP growth estimated in a range of 3.5% to 4.0% year-over-year variation.

• b)

  Inflation (year-over-year percentage change of CPI) for 2024 is estimated in a range of 4.0% to 5.0%.

• c)

  Average exchange rate projected at current values per dollar. The Fiscal Goals for the Central Administration (AC) and for the Non-Financial Public Sector (SPNF), established in the Medium-Term Macro Fiscal Framework 2024-2027 approved on April 24, 2023 through PCM-19-2023 and published in the Official Gazette La Gaceta No. 36,212 dated April 25, 2023 and on the portal of the State Secretariat of Finance at the following link: https://www.sefin.gob.hn/documentos-e-informes/. This deficit of 3.6% of GDP is reduced to 2.4% of GDP, when consolidating the entire public sector due to the effect of the surplus of the pensions and social security sector, which reaches 1.6% of GDP. Fiscal Goals for Central Administration (AC) 2024 Description Millions of L. Percentage of GDP Tax Revenues 160,205.8 17.5% Salaries 71,656.8 7.8% Capital Expenditure 37,526.0 4.1% AC Deficit -33,254.1 -3.6% This deficit of 3.6% of GDP is reduced to 2.4% of GDP, when consolidating the entire public sector due to the effect of the surplus of the pensions and social security sector, which reaches 1.6% of GDP. Fiscal Goals Non-Financial Public Sector (SPNF) 2024 Description Millions of L. Percentage of GDP Tax Revenues 166,360.0 18.1% Salaries 104,727.2 11.4% Capital Expenditure 41,584.6 4.5% SPNF Deficit -21,975.3 -2.4% The fiscal deficit corresponding to the Central Administration is 3.6% of GDP for 2024, which incorporates sustainable and growing public investment projects with a climate change approach towards the conservation of life, human rights and the environment, and social investment aimed at serving the most vulnerable population, especially in the sectors: social, education, health, agricultural, natural resources and environment, energy, youth training, access to credit and infrastructure, in line with the Government Social Program of the Republic.

General Policy of Revenues and Expenditures: Below is presented the conceptualization of Revenues and Expenditures: 1. Revenues correspond to the different categories of items that give rise to budget financing; these are classified into: Current, Capital and Financial Sources. a. Current Revenues: Tax Revenues (taxes); Non-Tax Revenues (fees, rights, royalties and rents, fines); Other Non-Tax Revenues; Social Security Contributions; Sales of Goods and Services; Operating and Non-Operating Revenues and Current Transfers; b. Capital Revenues: Property Income (interest from loans, deposits and securities and other property rights); Capital transfers; and, c. Financing Sources: sales of securities, loan recovery and loan acquisition. 2. Expenditures constitute the financial transactions carried out by public institutions to obtain the goods and services required for public management; these are classified into: Current, Capital and Financial Applications. a. Current Expenditures: Personnel Services, Goods and Services, Current Transfers, Debt Service (interest), Other expenditures and current Global Allocations; b. Capital Expenditures: are classified Capitalizable Goods, Capital Transfers, Other capital expenditures and capital Global Allocations; and, c. Financial Applications: correspond to Financial Assets (granting of loans, investment in securities) and Debt Service (amortization). The fiscal deficit corresponding to the Central Administration is 3.6% of GDP for 2024, which incorporates sustainable and growing public investment projects with a climate change approach towards the conservation of life, human rights and the environment, and social investment aimed at serving the most vulnerable population, especially in the sectors: social, education, health, agricultural, natural resources and environment, energy, youth training, access to credit and infrastructure, in line with the Government Social Program of the Republic.

General Policy of Revenues and Expenditures: Below is presented the conceptualization of Revenues and Expenditures: 1. Revenues correspond to the different categories of items that give rise to budget financing; these are classified into: Current, Capital and Financial Sources. a. Current Revenues: Tax Revenues (taxes); Non-Tax Revenues (fees, rights, royalties and rents, fines); Other Non-Tax Revenues; Social Security Contributions; Sales of Goods and Services; Operating and Non-Operating Revenues and Current Transfers; b. Capital Revenues: Property Income (interest from loans, deposits and securities and other property rights); Capital transfers; and, c. Financing Sources: Sales of securities, loan recovery and loan acquisition. 2. Expenditures constitute the financial transactions carried out by public institutions to obtain the goods and services required for public management; these are classified into: Current, Capital and Financial Applications. a. Current Expenditures: Personnel Services, Goods and Services, Current Transfers, Debt Service (interest), Other expenditures and current Global Allocations; b. Capital Expenditures: Capitalizable Goods are classified, Capital Transfers, Other capital expenditures and capital Global Allocations; and, c. Financial Applications: Correspond to Financial Assets (granting of loans, investment in securities) and Debt Service (amortization). General Revenue Policy a. The budget does not provide for new taxes. b. The Revenue Administration Service (SAR) and the Honduran Customs Administration (AADH) will continue applying measures to modernize the institution, combat evasion and improve collection. c. Regarding exemptions, the strict compliance with the requirements and obligations established for each regime must be controlled in the Tax Code, the Fiscal Responsibility Law and other regulations, in relation to: 1. Commitments and objectives for generating additional jobs and foreign exchange in the country. 2. Importation of machinery and equipment that were not intended solely and exclusively for the project or projects. 3. Finding data and information provided by the beneficiary that are false or inaccurate. 4. Transactions made through the use of electronic means that are not in accordance with the exemptions from Sales Tax according to Law. 5. Acts, contracts or transactions originated or carried out outside the Free Zone. 6. Allocating all of its production to the national market. 7. Obligation to register in the Register of Exempted Entities (PAMEH). 8. Compliance with Deadline for exemption registration. 9. Non-simultaneity of tax benefits. 10. Single Window. Systematization. 11. Sworn statement of tax sacrifice. 12. Other legal obligations provided. d. The National Patronage of Childhood (PANI) and the National Port Enterprise (ENP) based on the programming established in the General Provisions of the 2024 Budget, shall transfer to the General Treasury of the Republic–CUT, L390.0 and L100.0 million respectively. e. The tax burden of the Central Administration for the fiscal year 2024 reaches 17.5% (Tax Revenues/GDP). f. Continue programming own revenues from the provision of services generated by institutions of the Central Administration (fines, surcharges, notarial paper, authentic documents, translations, certificates). General Expenditure Policy: Measures must be implemented to contain and reallocate non-priority current expenditure and create fiscal space for social expenditure aligned with the priorities established by the Government of the Republic. 1. Employment and Salaries: a. In employment and salary matters, a salary mass goal of the Central Administration shall be established. b. The State Secretariat of Finance (SEFIN), in coordination with the State Secretariat of the Office of the President, through the Civil Service General Directorate, shall regulate the organization and administration of human resources and its budget effect. c. In cases of Collective Labor Agreements, the institution must demonstrate that it has the financial capacity of its own resources (source 12) to meet the commitments of Collective Contracting. If it does not have the financial capacity, it should not assume commitments in salary matters or collective benefits. d. Salary equality between men and women must be respected: equal work equal remuneration. e. The Detailed Annex of Basic Salaries and Wages of each public institution must contain: all positions (occupied and vacant) required for proper functioning, according to the structure of the institution in its different modalities. Likewise, the impact of salaries, collateral and benefits that these represent in the period to be budgeted. f. The salaries of employees and officials of the institutions of the Decentralized Administration and Decentralized Entities, whether permanent, by contract or any other modality that enter the public service, must be in relation to the remuneration earned by employees and officials of equal category in the Central Administration. g. In subgroup 11000 of permanent personnel, expenditure object 11400 (additional items) must provide for the reserve to cover inescapable legal commitments such as: benefits from mandatory increases for public employees for CPI, general increase negotiation, salary adjustment in relation to the Minimum Wage Law, effects of all collateral and employer contributions that correspond and also those benefits that have their normative support such as location allowance, allowances, shift rotation, among others. 2. Public Investment: a. Prioritize the incorporation of social investment projects and job generation, especially in the sectors: social, education, health, agricultural, natural resources and environment, energy, youth training through sports and culture, access to credit and infrastructure, in line with the priorities of the Government of the Republic. b. Create spaces prioritizing real investment through budget reallocation. c. Support social and infrastructure expenditure in the short and medium term. 3. Public-Private Partnership Registry (APP): a. Register APP transactions in the Financial Account of the Non-Financial Public Sector and not budgetarily, taking into account the concept of economic ownership of the asset. All APP's that have been terminated or are in force, the practice of a comprehensive audit must be ordered. b. Complementary investments (firm acquired commitments) that are an obligation of the State within the framework of APP's shall be incorporated in the budget of revenues and expenditures in accordance with the investment program that the project has. 4. Contingencies: a. To cover contingencies, a Reserve Fund shall be established. If risks determine significant adjustments to the Medium-Term Macro Fiscal Framework (MMFMP) and to the reference fiscal scenario, the macroeconomic assumptions can be updated and the annual macro-fiscal framework adjusted.

Specific Policy by Expenditure Group 1. Personnel Services: The guidelines to consider regarding Human Resources in budget formulation with impact on execution, without prejudice to the Labor Regime and in accordance with articles 259, 262 and 271 of the Constitution of the Republic; for application by all public institutions: a. Make correct use of the Expenditure Classifier to select the expenditure objects related to the hiring or appointment of personnel, both for permanent personnel (expenditure group 11000) and temporary personnel (expenditure group 12000). b. The provision for benefits from mandatory increases for public employees for CPI, general increase negotiation, salary adjustment in relation to the Minimum Wage Law, effects of all collateral and employer contributions that correspond, as well as those benefits that have their normative support in the Statutes or internal regulations of the corresponding public institutions such as location allowance, allowances, shift rotation, among others, must be formulated in the additional expenditure object 11400. In the execution stage, the State Secretariat of Finance will not process any type of request, including the Budget Modification referred to for this purpose, so every public institution must formulate in the additional expenditure object 11400 all the benefits described in the previous paragraph. c. In budget formulation, vacant positions should not be considered for increases or adjustments, since they must comply in the execution stage with the procedures established in the General Provisions. d. The registration of new positions or new hiring within the Public Administration must include the procedures provided for by the Public Employees Registration System (SIREP); likewise, registration must continue to be made in the Human Resources Management System (SIARH) of SIAFI, for the Administrative personnel of the Central Administration, and in the case of Teaching personnel of the Secretariat of Education it must be done through the Teaching Human Resources Management System (SIARHD). e. To consider the creation of new positions in the Central Administration, these must be provided with the basic salary established in the corresponding salary scales. Likewise, it will serve as a reference for the creation of excluded positions described in article 3 of the Civil Service Law and creation of positions for other Public Institutions not under the Civil Service Regime. f. The use of expenditure object 11100 basic salaries is exclusive for payment of payroll of personnel who hold permanent positions in the different institutions of the Public Administration. g. The use of expenditure object 12200 daily wages is exclusive for paying personnel whose salary is established by day or by hour, and in no case should it serve to pay personnel who perform administrative or technical functions. h. The use of Expenditure Object 12910 Special Contracts is for the provision of technical professional services on a personal and individual basis, obligates monthly payments, compliance with in-person schedule and attendance control, includes contracting to cover absence of personnel due to the enjoyment of acquired rights in accordance with current regulations and contracts should not exceed ninety (90) days in the fiscal period. At the time of formulation, the Budget Analyst shall request from the institution that it formulate in this expenditure object the supports that it considers necessary to validate said provision; if it is not appropriate, it shall be reallocated budgetarily to the objects that correspond. 2. Non-Personnel Services: a. Professional and Technical Services contracts (Consulting, expenditure group 24000) should only be subscribed with natural persons when the assigned tasks cannot be performed by regular or career employees, either due to the specialization of the tasks or for another qualified reason. This modality may also be used to hire qualified personnel required for the execution of programs and projects. b. Professional and Technical Services contracts are recognized as: legal fees or recognition of expert witnesses, specialists, technicians, artists and athletes with no employment relationship; studies, research, analysis, audits, computerized systems, legal services, accounting and audit services, training services, computer science services, studies, consultancies and investigations such as: interpretations of technical, economic and social matters; social, statistical, scientific, technical, economic research related to engineering or architecture and other professional services of similar nature, among others; services provided by companies, foundations and NGOs. Professional services contracts provided on a personal basis that do not obligate monthly periodic payments. Professional services include: medical, health and social services, services to third parties contracted for the conduct of studies, investigations and other technical-professional activities to facilitate the operation of the institution or that are part of an investment program or project. c. The budget must formulate the provision of total values invoiced for the provision of services provided by public utility companies: ENEE, SANAA and HONDUTEL. These companies must send before the end of June 2023 to the institutions and the State Secretariat of Finance through the General Budget Directorate the value of monthly billing during 2022 and the estimate at the end of 2023, with the purpose that it be allocated within the budget ceiling. 3. Materials and Supplies: a. The Annual Plan of Purchases and Contracts (PACC) must be prepared in accordance with the State Contracting Law, special Decrees and the guidelines issued by the Regulatory Office of State Purchases and Acquisitions (ONCAE). b. The projection and budget estimation of the requirements for goods, works, consultancies and services shall be supported by the demands originated in the programs, projects and activities established in the respective Operating Plans and in the Annual Plan of Purchases and Contracts duly aligned with the priorities established by the Government of the Republic; these plans shall be validated by ONCAE and the alignment verified by the Secretariat of Strategic Planning and the Directorate of Management for Results. c. During the planning of their acquisitions, institutions must consult the electronic catalogs available at ONCAE. If the demanded products are included in the catalogs, their purchase must comply with their provisions except for legal exceptions. If there is no catalog, the procedure to follow must be what is established in the State Contracting Law and the guidelines issued by ONCAE. 4. Capitalizable Goods: a. The General Directorate of Public Investments will issue the guidelines corresponding to the formulation of programs and projects using the Methodological Guide, from the pre-investment stage to the closing stage. b. Projects must have the updated Annual Plan of Acquisitions and Contracts (PACC); Annual Operating Plan (POA) and Project Execution Plans (PEP), as well as the projection of monthly budget execution, and must be sent to the General Directorate of Public Investments after the publication of the General Budget of the Republic, including the separation by source of financing. c. Institutions that fail to complete the registration in the National System of Public Investment of Honduras (SNIPH) may complete it during the execution of fiscal year 2024 and will be incorporated upon complying with the requirements established in the Law from the pre-investment stage. 5. Transfers: a. Legal transfers shall be calculated by SEFIN and sent within the ceiling sent to each institution. b. The Central Administration shall receive transfers from the National Patronage of Childhood (PANI) in the amount of L450.0 million and from the National Port Enterprise (ENP) in the amount of L100.0 million. c. If it formulates transfers in its budget for Non-Governmental Entities or Organizations (NGOs) with public funds especially those from the National Treasury, it must ensure that the following requirements are met: 1. Updated certification of being registered with the Directorate of Regulation, Registration and Monitoring of Civil Associations (DIRRSAC) as a non-governmental organization, foundation, development institute, community association, professional association, church or other civil society structure. 2. Certification from DIRRSAC of the registration of the Board of Directors and its validity. 3. Copy of the constitutive act or legal personality of the organization with the names of the members of the Board of Directors and the term of validity of their appointment. 4. Copy of the National Identification Document (DNI) of the members of the Board of Directors and of the legal representative, treasurer and secretary as applicable. 5. Financial statements certified by a licensed accountant. 6. Certification of being registered as a beneficiary in the Integrated Financial Administration System (SIAFI). 7. In case of having received transfers from the State in previous years, the corresponding audited report for each year is required. For the programming of transfer disbursements to NGOs, the following must be considered: 1. 40% the first disbursement, as advance. 2. 40% subject to settlement of the first disbursement. 3. 20% subject to settlement of previous disbursements. 4. The last disbursement must be settled no later than two (2) months after the project ends, presenting a results report containing evidence of the solution of the problem for which the resources were requested, through: testimonies, satisfaction and perception surveys, videos and other applicable means, Financial Statements certified by an authorized accountant immediately after having used the funds and the Audit Report. 6. Debt Service: a. For the 2024 budget, the obligations (interest, amortization and commissions) of both internal and external debt that must be paid in a timely manner are estimated. b. No entity of the Non-Financial Public Sector (SPNF) may initiate procedures to conduct external public credit operations without written authorization from SEFIN. c. The prioritization of public credit operations to be signed for public investment by institutions of centralized and decentralized administration, directors representing the State before financial organizations and multilateral banks shall be established by the Secretariat of Finance based on public investment goals, ceilings for contracting and the priorities of the Government of the Republic 2022-2026. d. For programs and projects to be financed with external loan funds, a maximum amount of US$817.1 million is set. e. Municipalities, Public Enterprises and other institutions of the SPNF may not negotiate or acquire any indebtedness without the approval of the Secretariat of Finance. f. SPNF institutions may conduct passive management operations under international standards for the purpose of mitigating financial risks and/or improving the maturity profile of the debt portfolio, except when there is a different criteria established by the Secretariat of Finance.

Public Investment: Any Public Investment initiative must be framed within the priorities of the Government. For the preparation of the Public Investment Program, the National System of Public Investment of Honduras (SNIPH) implements a set of laws, norms, procedures, provisions, methodologies, training and computer tools, aimed at ordering and monitoring the process to implement investment initiatives in a more profitable, economic and socially beneficial manner. Below is the procedure to be followed by institutions: 1. Pre-investment: Pre-investment aims to evaluate the convenience of conducting a particular Public Investment Project (PIP); that is, at this stage it is necessary to have the studies that support that it is socially profitable, sustainable and consistent with the policy guidelines established by the authorities. a. The institution must request the Fiscal Space for financing with External Credit and/or donation funds for a project. In the case of treasury and/or own resources, these must have Availability within the budget of the executing institution which must show the budget structure in the current fiscal year. For subsequent years the fiscal space of National and/or Own Funds must be framed according to the Medium-Term Macro Fiscal Framework (MMFMP). b. Applicant Public Sector Institutions must present to SEFIN the project document in accordance with the General Methodological Guide for the Formulation and Evaluation of Projects approved for this purpose, and must be registered in the SNIPH computer tool, identifying the deliverable/final product of the project as part of the primary information thereof, in order to obtain the Priority Note. c. New projects from formulation must identify the costs for their operation and maintenance; as well as an analysis of the future fiscal burden and what it would mean to have these resources available to ensure their sustainability from the governing institution, especially those aimed at the social sector (schools, health centers, hospitals, roads among others). d. Public Sector Institutions must request the Amendment to the Priority Note in case of project modification in the Pre-investment or Investment Phase, due to changes made to the technical and methodological aspects of the project formulation, in the following cases: inconsistencies in the project name (as long as it does not affect its objective and scope), change of executing Institution, geographic location, coverage, increase or decrease in the total cost of the project, component and Financing Source; the General Directorate of Public Investments will issue a Technical Opinion of Amendment to the Priority Note. For the sole case of change of Source and/or financing Source, only the modification must be made in the SNIPH System, prior to the request of the Executing Unit, accompanied by the information that proves the change. 2. Financing for New Projects a. Proceedings and requests for financing before Multilateral, Bilateral, International and private financial organizations are the exclusive responsibility of the Secretariat of Finance. b. Financing shall be managed only for those projects prioritized by the Presidency of the Republic and that are consistent with the public spending and external borrowing goals defined by SEFIN through the Medium-Term Macro Fiscal Framework. c. No financing management for programs and projects shall begin without having the Pre-Investment of the project and its respective Priority Note, issued by the Secretariat of Finance and other requirements contemplated in current Laws. d. Percentage of Counterpart: Projects financed with resources from donations or loans, in the case of national counterpart of programs and projects when required by the financing organization, must be established in the loan agreements up to 10% of national counterpart on the total amount of the agreement and in the case of donation counterpart, this shall be up to 20% and preferably will be agreed in kind detailing its contribution. e. Every executing institution of projects must consider within the budget ceiling the amounts corresponding to the counterpart when required. f. Only projects that have guaranteed financing, fiscal space, signed agreement and in the process of approval by the National Congress shall be included in the draft Budget of the following Fiscal Year. For investments in Social Programs financed with external funds that by their nature or typology do not meet the technical characteristics defined for Public Investment Projects within the framework of the General Methodological Guide (GMG), they shall be registered in the SNIPH according to the procedure established by SEFIN, generating a BIP Code for its identification. 3. Computer Tool of the National System of Public Investment of Honduras (SNIPH) The computer tool of the System is structured in Modules in accordance with the project life cycle: Pre-Investment Module: The institution must request from SEFIN the creation of users in accordance with the established profiles and roles, attaching the following documents: 1. Properly signed and authorized forms (immediate supervisor), attaching a copy of the user's National Identification Document. 2. Official letter of requests signed by the Minister or Vice-Minister of the requesting institution. 3. Register and verify the information related to project formulation in the pre-investment module to obtain the BIP Code. 4. The priority note will be requested through the SNIPH System and also in physical form through an official letter of request addressed to the highest authority of the Secretariat of Finance. Investment Module: 1. The Institution shall register, verify and approve in the Investment module to proceed with the BIP – Specific Source relationship. 2. The mapping of Public Investment is presented on the Honduras Investments portal where different views are displayed including the deliverables and interventions of projects in the national territory as input for decision-making, taking as a basis the information registered in the SNIPH, SIAFI and ONCAE systems, which must have updated information. 3. Executing institutions of public investment projects must present to the General Directorate of Public Investments, regardless of the source of financing: Plan of Acquisitions and Contracts (PACC), Projection of execution with monthly updates, detail of Public Investment by department and municipality with semi-annual updates and any other information of relevance that is required.

Acquisitions and Contracting: The Formulation of the Annual Plan of Purchases and Contracts is based on the following principles: efficiency, transparency, publicity, agility, opportunity, free competition, equality and equity. a. Each public institution must prepare the Annual Plan of Purchases and Contracts (PACC) as established by the State Contracting Law and the Budget Provisions, except in cases of Emergency Declaration. The Plan shall be loaded into the electronic module of the Regulatory Office of Contracting and State Acquisitions ONCAE and on the website of each Institution to ensure that information reaches potential bidders. b. Annual Plans of Purchases and Contracts (PACC) must be prepared in such a way that there is direct relationship and linkage with the Annual Operating Plan (POA), other plans and budgets, including budgets corresponding to declared emergencies. c. In the planning, structuring and execution of all acquisition processes, the principle of fiscal responsibility must be observed.

Financing a. The balance of public debt of the Non-Financial Public Sector (SPNF) in relation to GDP (2021) shall not exceed 55.0% at present value, except in cases of emergency qualified by the Presidency of the Republic. b. Obtain resources from external and internal sources through traditional and innovative instruments including climate financing within the framework of current regulations, maintaining debt sustainability in the medium term and a prudent level of risk exposure. c. The Public Debt Policy (PEP) shall contain the ceilings for contracting new external financing for public investment programs and projects that have been classified with the highest priority criterion by the Government. External financing to be agreed through loan contracts must contain, to the extent possible, concessional terms and internal borrowing. d. Financing with external funds that is considered priority and for which financing sources that allow the required conditionality are not found may be contracted as long as the weighted concessionality of the entire external public debt portfolio is maintained above 20%. e. Internal borrowing shall seek the development of the domestic market through the implementation of market practices that promote a climate of confidence; in this sense, government bonds shall be issued under the characteristics and limits established in the Financing Plan, primarily under characteristics of regional standardization (national currency, fixed coupon, medium and long-term) as well as variable coupons and others. f. Under the Public Investment Program (PIP) a maximum amount is established for execution for programs and projects with external credit financing of USD817.1 million for the year 2024, except in case of Emergency Declaration made by the Presidency of the Republic.

Decentralized Administration: For the year 2024 the following guidelines shall be followed with respect to the Decentralized Administration, which includes: Autonomous Institutes, Pension Institutions, Universities, Public Enterprises and Financial Institutions: a. The projection of current revenues that is formulated must be based on prices, rates, tariffs and arbitrage plans authorized by Law (in case it applies), as well as the review and/or update of collections for consideration of the services provided, of which it must send to the Secretariat of Finance through the General Budget Directorate the supporting documents that support the projection of such resources. b. The pension institutes (INPREMA, INJUPEMP, IPM and INPREUNAH), regarding Total Net Loan Concession, must guarantee the stabilization of social funds and ensure the benefits of their members. The amounts of loans granted annually may in no case exceed the amounts of collections, which means that the granting of loans provided in expenditure for the year must equal the collection in revenues, which the technical team of the DGP must ensure by coordinating with the corresponding institutions and making the pertinent adjustments. c. The Pension Institutes must formulate all income received from their investments, this includes interest from deposits, interest from loans and dividends in stock. Likewise, they must formulate financial investments separating the investment in securities made with the State and private banking and identifying them in the expenditure object that corresponds. d. Institutions that depend on transfers from the Central Administration shall formulate their budget in accordance with the assigned ceiling, that is with the allocation of source 11 and must adjust their programming and reduce expenses until reaching the amount that was assigned to them based on ceilings and thus be able to address all the expenditures provided for in their planning, prioritizing them in accordance with the priorities established in the Government Plan. e. The PANI must make a separation of the revenues it receives from the Convention with Canada from the other revenues generated by the activity of the institution. f. Institutions that generate their own resources (Source 12) and that based on collective contracts or internal instruments formulate salary adjustments in their budget must formulate them in the additional expenditure object 11400 in compliance with what is established in Chapter VIII, numeral 1) subsection b) of these guidelines.

Energy Sector: The National Electrical Energy Company (ENEE), within the framework of the Special Law to guarantee the Electrical Energy Service as a public good of National Security and a Human Right of Economic and Social Nature must continue taking actions in line with the following: a. Follow-up, continuity and accountability of the National Program for Loss Reduction established in 2022, which was created to ensure the reduction of at least eight (8) percentage points of losses and the recovery of revenues for the year 2023 and successively. b. Report on the completion of the negotiation process of Energy Generation Supply Contracts that have costs higher than those in the Central American region, as well as the comprehensive audit of the same. c. Maintain the subsidy to electricity for the most vulnerable families with consumption of less than 150kwh per month. 60% of the financing shall be covered by the Government of the Republic through the State Secretariat of Finance (SEFIN) and the remaining 40% shall be covered in a subsidiary manner by customers classified as high non-residential consumers, targeted. d. Remedy the financial statements and establish a plan for monitoring and follow-up of financial and operational performance and reprofile the debt by extending the average life of the total portfolio.

Gender Approach: In the Bicentennial Government Plan to Refound Honduras, the Gender Approach is established as a Cross-Cutting Axis in the design, implementation, and evaluation of policies, plans, and budgets of the Public Administration. The Gender-Sensitive Budget (PSG) is a democratic tool of affirmative action in the allocation of resources intended to implement actions to close the discrimination gap between men and women, ensuring that funds are used equitably from a gender perspective. For the formulation of planning and budgeting with a gender approach, the following guidelines must be considered: a. Incorporate into the institutional Strategic Plan at the level of objectives and results the commitment to reduce gaps and substantive inequality between women and men. b. In the Operating Plan, include products and activities/works with budgetary allocations, under the logic of the public value chain and production, that account for the concrete actions to achieve gender equality in each public entity, which must be identified and marked in the budget. In order to improve transparency and accountability regarding the use of public funds allocated to gender issues, such marking must be published on the Honduras Inversiones website. c. Apply the gender approach as an analysis tool to obtain information disaggregated by sex, ethnicity, age, department, municipality, among others, through programs, projects, services, and activities carried out by public entities. d. Design, define, and apply indicators with a gender approach, human rights, and multiculturalism, that allow visibility of progress in the implementation of Policies, Plans, Programs, and Projects, with emphasis on the National Policy for Women and the National Plan Against Violence Towards Women. e. Ensure compliance with Article 8 of the Regulations of the Law on Equal Opportunities for Women, regarding the creation of the Gender Unit and the allocation of the necessary budget for its operation with the required personnel, in order to follow up on the application of the National Policy for Women in public management. f. The institutions participating in the Ciudad Mujer Program must ensure that all expenses including the payment of inputs and personnel are formulated in the budget and identified in their operating plan, so they must allocate in a differentiated manner at the Activity/Work level, the funds assigned to the different modules of Ciudad Mujer.

This Agreement shall take effect immediately and must be published in the Official Gazette La Gaceta. Done in the city of Tegucigalpa, municipality of the Central District, on the 03rd day of the month of July in the year two thousand twenty-three (2023). LET IT BE COMMUNICATED AND PUBLISHED: XIOMARA CASTRO SARMIENTO Constitutional President of the Republic RIXI MONCADA GODOY Secretary of State in the Ministry of Finance