Executive Agreement 355-2022

Approve the General Guidelines for the Formulation of the Draft Budget 2023, which are oriented towards the construction of a zero-based budget that breaks with the paradigm of traditional budgeting, founded on quantitative increases without measurement of results and moves to be based on the financing of the priorities of the Honduran People and within a framework of fiscal sustainability, for which the institutions of the Public Administration (Centralized and Decentralized) must ensure that in the programmatic structures (Programs, Subprograms, Projects, Activities and/or Works) are reflected the budgetary allocations, the products for the benefit of the population and the Bicentennial Government Plan for National Refoundation. I. OBJECTIVES The Draft Budgets of the institutions of the Centralized and Decentralized Public Administration must comply with the following objectives: -- General Objective: To develop and implement a Zero-Based Budget (ZBB), oriented to finance the priorities of the Honduran People, annual or multi-annual, defined in the Bicentennial Government Plan, within a framework of fiscal sustainability. Specific Objectives: 1. Comply with the pre-assigned global ceilings in accordance with what is established in the Medium-Term Macro Fiscal Framework (MMFMP) and the Fiscal Responsibility Law published on the electronic pages of the Secretariat of Finance. 2. Formulate programs and projects with a medium-term perspective, ensuring financing for their continuity (2023 - 2025). 3. Make efficient use of the allocated resources. II. GOALS 1. 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 and the Results Management Program. 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 which must include: mission, vision, strategic objectives, institutional results, operational objectives, production, goals, indicators, target population and budget. 3. The institutions must review both administrative structures (Administrative Managements and Executing Units) and programmatic structures (Programs, subprograms, projects, Activities, works) to identify the products (public production), ensure the budget (Plan-Budget linkage) 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 results of the government plan properly linked to the goals of strategic planning in the short, medium and long term and the sustainable development objectives (SDO) which constitute a "global call of the United Nations to action to end poverty, protect the environment and the climate of the earth and ensure that people can enjoy peace and prosperity". III. GOVERNMENT PRIORITIES The Government of the Republic defines five strategic development sectors and three cross-cutting axes: 1. Participation and Democracy: Construction of a Democratic Socialist State that is based on equity, guarantees common prosperity, the protection of the rights of persons, communities (indigenous peoples) and nature. It includes: State Planning; Open State and Digital Republic; International Relations; Transparency, Anti-Corruption and Against Abuse of Power. 2. Social Development: Access with equity of the population to social protection and welfare, promotion of art, science, culture and sports; free and quality education and health. 3. Economic Development: Alternative Economic Model to correct market distortions; face the challenge of diversifying the productive matrix with activities of greater added value and increase productivity. Participation of the State in the economy, reserving strategic areas and public services not privatized; promoting private investment, support for the informal economy sector, cooperatives, rural savings banks and solidarity enterprises, the generation of decent employment and agricultural development, which guarantees food sovereignty and security. 4. Environmental Development: Protection of natural common goods: ecosystem services, water resources for human consumption, production, clean energy generation, irrigation and other uses; combat climate change, protection of forests and biodiversity. 5. Security and Justice: Citizen security and effective access to an integrated justice system. Cross-Cutting Axes 1. Defense of Human Rights: To guarantee the protection, promotion, defense and full enjoyment of all rights of the citizenry individually and collectively. 2. Gender: To guarantee the integral development, opportunities and access free of violence for Honduran women and girls through the implementation of public policies and practices with a gender perspective. 3. Territorial Development: Strengthen territorial planning to contribute to social, economic and environmental development. IV. FISCAL RULES 1. The Fiscal Responsibility Law (LRF) was approved in 2016 as an instrument to reduce the fiscal deficit and achieve debt sustainability. In the period from June 2009 to 2014, a balance of public debt of US$8,565.5 million (44.4% of GDP) was reached in the Centralized Administration, representing an increase of US$5,260.9 million in relation to the debt balance as of June 28, 2009 (US$3,304.6 million and 27.7% of GDP). With the effectiveness of the Fiscal Responsibility Law, the fiscal deficit was reduced, but the increase in public debt continued, reaching US$15,679.2 million at the close of 2021 (55.8% of GDP), directly affecting the Honduran people, which is why its review is mandatory. 2. The macro fiscal rules contained in the Fiscal Responsibility Law severely punish public and social investment, reaching the point of conceptualizing fiscal responsibility as a policy of discipline and fiscal adjustment that aims to prevent discretionary execution of spending and indebtedness to achieve macroeconomic stability, financial system security and an increase in private investment; however, and despite the fact that they theoretically extensively regulate exemptions by prohibiting simultaneity in the enjoyment of more than one benefit and migration between regimes, the annual fiscal sacrifice reaches the enormous percentage of around 7% of GDP, so that if for this year 2022 GDP is L759,533.0 million, the State with the application of exemptions will fail to receive income in the amount of L53,167.3 million which represents 44.8% of Tax Revenues approved in the General Budget of Income and Expenses of the Republic for Fiscal Year 2022, representing the largest sacrifice of budgets in the Central American and Caribbean region. 3. The implementation of the priorities of the Socialist-Democratic Government, within the five strategic development sectors already described, maintaining the consistency of budget policy, guaranteeing fiscal consolidation (income and expenses) and debt sustainability, requires reforms to the Fiscal Responsibility Law, which must be incorporated in the General Provisions of the 2023 Budget, to ensure Public Investment, which is why we must modify the fiscal rules, establishing a new way of recording current spending, differentiating it from social spending and excluding the payment of interest and commissions of public debt. The foregoing will allow for proper management of the fiscal deficit, in which, the increase in sustainable and growing public investment, with a climate change focus towards the conservation of life, human rights and the environment, as well as social investment aimed at serving the most vulnerable population; will not affect the deficit ceilings. 4. For the estimation of income and expenses, the institutions of the Public Administration will use the following macroeconomic variables observed as of June 2022: a. Real GDP growth estimated in a range of 3.5% to 4.5% year-on-year variation. b. Accumulated inflation as of June 2022 of 6.57%. c. Average projected exchange rate at current values per dollar. 5. Below are presented in accordance with current values, the Fiscal Goals for the Central Administration and for the Non-Financial Public Sector, established in the Medium-Term Macro Fiscal Framework, and which are based on the interpretation (Legislative Decree No. 30-2022) of the exception rule contained in the Fiscal Responsibility Law. This 6% of GDP deficit is reduced to 4.4% of GDP when consolidating the entire public sector due to the effect of the surplus in the pensions and social security sector, which reaches 2.0% of GDP. Fiscal Goals for the Central Administration (AC) 2023 Description Millions of L. Percentage of GDP Tax Revenues 134,325.9 16.2 Salaries 61,034.4 7.4 Capital Expenditure 51,986.4 6.3 Deficit of the Central Administration 49,556.4 6.0 Fiscal Goals Non-Financial Public Sector (SPNF) 2023 Description Millions of L Percentage of GDP Tax Revenues 139,836.5 16.9 Salaries 89,154.1 10.8 Capital Expenditure 57,015.3 6.9 Deficit of the SPNF 36,775.1 4.4 The fiscal deficit as it corresponds to the Central Administration of 6.0% of GDP for 2023 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, agriculture, natural resources and environment, energy, youth training, access to credit and infrastructure, in line with the Government's Social Program of the Republic. V. CEILINGS 1. The 2023 budgetary ceilings contemplate the values that correspond to payment of both internal and external debt; the Public Investment program and the expenses necessary for the functioning of the Public Sector. 2. The Secretariat of State in the Office of Finance has the responsibility to set the budgetary ceiling that corresponds to each institution of the Public Administration for Fiscal Year 2023. VI. INCOME AND EXPENSES 1. Income: Correspond to the different categories of items that give rise to budget financing, these are classified as: Current, Capital and Financial Sources. 2. Within Current Income we have: Tax Income (taxes); Non-Tax Income (fees, rights, royalties and canons, fines); Other Non-Tax Income; Contributions to Social Security; Sales of Goods and Services; Operation Income and Non-Operation Income and Current Transfers.- In Capital Income we have: Property Rents (interest on loans, on deposits and on titles and securities, other property rights); Capital Transfers.- In Sources of Financing (sales of titles and securities, loan recovery and loan acquisition). 3. Expenses: Constitute the financial transactions carried out by public institutions to obtain the goods and services required for public management, these are classified as: Current, Capital and Financial Applications. 4. Within Current Expenses are found: Personal Services, Goods and Services, Current Transfers, Debt Service (interest), Other current expenses and Current Global Allocations.- In Capital Expenses, Capitalizable Goods, Capital Transfers, Other capital expenses and Global Capital Allocations are classified; and, Financial Applications correspond to Financial Assets (granting of loans, investment in titles and securities) and Debt Service (amortization). VII. GENERAL INCOME AND EXPENSE POLICY 1. Regarding Income: a. The budget does not provide for new taxes. b. The Revenue Administration Service (SAR) and the Honduran Customs Administration (ADH) will continue applying measures to modernize the institution, combat evasion and improve collection. c. With regard to exemptions, strict compliance with the requirements and obligations established in each regime, the laws of the Republic, including the Tax Code and the Fiscal Responsibility Law must be controlled in relation to: 1. Commitments and objectives for generating additional employment and foreign exchange in the country. 2. Import of machinery and equipment that were not intended solely and exclusively for the project or projects. 3. Find data and information provided by the beneficiary that are false or inaccurate. 4. Transactions carried out through the use of electronic media that are not in accordance with the exemptions of the Sales Tax according to the Law. 5. Acts, contracts or transactions originated or carried out outside the Free Trade Zone. 6. Destining all of its production to the domestic market. 7. Obligation to register in the Register of Exempted Parties (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. The other legal obligations provided. d. Income administered through trust agreements that have been liquidated will be incorporated in the 2023 budget, and will be allocated to the financing of programs and projects in the terms established by Law, as well as compliance with pending contractual obligations and public and social investment. The Regulation establishes with specificity the procedures to be applied. e. Emergency funds from the Loan of the Central Bank of Honduras that are not executed in the present year will be incorporated in the 2023 budget to continue financing investment programs and projects. f. The National Children's Welfare Board (PANI) and the National Port Authority (ENP) based on the programming established in the General Provisions of the 2023 Budget, will transfer to the General Treasury of the Republic–CUT, L450.0 and L100.0 million respectively. g. The tax pressure of the Central Administration for fiscal year 2023 reaches 16.2% (Tax Income/GDP). h. Continue programming own income from the provision of services generated by Institutions of the Central Administration (fines, assessments, notarial paper, certifications, translations, certificates). 2. Regarding Expenses: a. Measures must be implemented to contain and reallocate non-priority current spending and create fiscal space for social spending aligned with the priorities established by the Government of the Republic. Employment and Salaries: a. In matters of employment and salaries, a wage mass goal of the Central Administration will be established, adequate to the fiscal and financial crisis that has been declared. b. The Secretariat of State in the Office of Finance (SEFIN), in coordination with the Secretariat of State in the Office of the Presidency, through the General Directorate of Civil Service, will regulate the organization and administration of human resources and its budgetary effect, for which they will define guidelines in salary matters, applicable to institutions governed by the Civil Service Directorate or special laws. c. In the cases of Collective Labor Agreements, the institution must demonstrate that it has the financial capacity of own resources (source 12) to meet these commitments. d. Salary equality between men and women must be respected: equal work equal compensation. e. The Detailed Annex of Basic Salaries and Wages of the institution must contain, based on the amounts allocated; 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 public service must be in relation to the compensation earned by employees and officials of equal category in the Central Administration. g. In subgroup 11000 of permanent personnel, a reserve must be provided to cover inescapable legal commitments such as: seniority benefits, increases due to IPC, minimum wage, its effect on collateral and employer contributions. Public Investment: a. Prioritize the incorporation of social investment projects and job generation, especially in the sectors: social, education, health, agriculture, 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 for real investment through budget reallocation. c. Support social spending and infrastructure in the short and medium term. Record of Public-Private Partnerships (PPP): a. Record the PPP accountably in the Financial Account of the Non-Financial Public Sector and not budgetarily, attending to the concept of economic ownership of the asset. All PPP that have been canceled or are in force must be ordered to conduct a comprehensive audit. b. Complementary investments (firm commitments acquired) that are an obligation of the State within the framework of the PPP, must be incorporated into the budget of income and expenses in accordance with the investment program of the project. Contingencies: a. For coverage of contingencies, a Reserve Fund will be established. If the risks determine important adjustments to the Medium-Term Macro Fiscal Framework (MMFMP) and the reference fiscal scenario, macroeconomic assumptions can be updated and the annual macro-fiscal framework adjusted. Population Security Tax. Distribution of Funds: The funds collected by the Population Security Tax for the 2023 budget will be distributed in the following manner: From the projected spending of the Population Security Tax (TS), in the amount of L3,546.1 million, L721.0 million must be subtracted for payment of the annual installment of the debt acquired with the national private banking system, leaving an available balance of L2,825.1 million to allocate to the institutions benefited by such collection, as well as for recurring projects that were executed by the Technical Committee, which will be transferred to the institutions responsible for their execution following the regulatory policy. Expenditures made with Population Security Tax funds must be submitted to a comprehensive audit. VIII. SPECIFIC POLICY BY EXPENSE GROUP 1. Personal Services: a. Make correct use of expense items related to the hiring or appointment of personnel, both for permanent personnel and temporary personnel. b. The registration of new positions or new hirings within the Public Administration must include the procedures provided by the Public Employees Register System (SIREP), in the same way registration must continue to be made in the Human Resources Administration System (SIARH) of the 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 System for Administration of Teaching Human Resources (SIARHD). c. The expense item 11100 basic salaries is exclusive for payment of payroll of personnel who hold permanent positions in the different institutions of the Public Administration. d. The expense item 12200 wages is exclusive for paying personnel whose salary is established by day or by hour, and in no case should it be used to pay personnel who perform administrative or technical functions. e. The Expense Item 12910 Special Contracts, has the purpose of providing technical and professional services on a personal and individual basis, obligates monthly payments, compliance with on-site hours and attendance control, includes hiring to cover personnel absence due to the enjoyment of acquired rights in accordance with current regulations and contracts should not exceed ninety (90) days in the fiscal period. f. The payroll of public employees must be stabilized considering the repeal of the decrees that authorized agreements and contracts in the months of November and December 2021, and January 2022. The exception is the Secretariats of State that must adjust the number of new positions to the assigned budgets. g. Salary amounts are considered for the 2023 Budget in accordance with inflation published by the Central Bank of Honduras as of June 2022. In the case of decentralized institutions, they must be governed by what is established in the General Provisions of Fiscal Year 2023. 2. Non-Personal Services: a. Contracts for Professional and Technical Services (Consulting) may be subscribed with natural persons when the assigned tasks cannot be performed by regular or career employees, either due to the specialty of the tasks or for another qualified reason. This modality may also be used to contract qualified personnel required for the execution of programs and projects. b. The following are recognized as Professional and Technical Services contracts: legal fees or recognition of experts, specialists, technicians, artists and athletes without a relationship of dependency; studies, research, analysis, audits, computerized systems, legal services, accounting and audit services, training services, computer services, studies, advice and investigations such as: interpretations of technical, economic and social matters; social, statistical, scientific, technical, economic investigations related to engineering or architecture and other professional services of a similar nature, among others; services provided by companies, foundations and NGOs. Professional service contracts provided on a personal basis that do not require monthly payments. Likewise, professional services include: medical, sanitary and social services, services to third parties hired for the performance 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. Formulate the budget with the total values that are invoiced for the provision of services provided by ENEE, SANAA and HONDUTEL. 3. Materials and Supplies: a. The Annual Plan of Purchases and Contracts (PACC) must be prepared in accordance with what is established in the 2023 budget provisions, the State Contracting Law and special decrees. b. The projection and budget estimation of the requirements for goods, works, consulting and services will be based on the demands arising from the programs, projects and activities that are established in the respective Operating Plans and in the Annual Plan of Purchases and Contracts. All these instruments, reformed and adjusted to the priorities established by the Government of the Republic. c. During the planning of its purchases, institutions must consult the electronic catalogs available at the Normative Office for State Contracting and Acquisitions (ONCAE). If the demanded products are included in the catalogs, their purchase must comply with its provisions except for legal exceptions. If there is no catalog, the procedure to follow must be that established in the State Contracting Law and the 2023 Budget Provisions. 4. Capitalizable Goods: a. The General Directorate of Public Investment will issue the guidelines corresponding to the formulation of programs and projects using the Methodological Guide, from the Pre-investment Stage to the Closure Stage. b. Projects must have, where applicable and in accordance with their financing sources, the Annual Plan of Acquisitions and Contracts; Annual Operating Plan and updated Project Execution Plans, as well as the Monthly Budget Execution Projection, and must be sent to the General Directorate of Public Investment after publication of the General Budget of the Republic. c. Resources acquired through financing from internal credit from the Central Bank of Honduras in 2022 and which were allocated in the Modified 2022 Budget will continue to be executed in 2023, following the guidelines issued by SEFIN. d. Institutions that fail to complete registration in the National System of Public Investment of Honduras (SNIPH) may complete the same during execution of fiscal year 2023 and will be incorporated upon meeting the requirements established by Law from pre-investment. 5. Transfers: a. Transfers by law will be calculated by SEFIN and will be remitted within the ceiling sent to each institution. b. The Central Administration will receive transfers from the National Children's Welfare Board (PANI) in the amount of L450.0 million and from the National Port Authority (ENP) in the amount of L100.0 million. c. Transfers to Private Development Organizations (NGO): If you formulate transfers for Non-Governmental Entities or Organizations (NGOs) with public funds from the National Treasury in your budget, you must ensure that they comply with the following requirements: 1. Updated certification of being registered in 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 deed of incorporation 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 Board Members and of the legal representative, treasurer and secretary if 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, the audited report of the same corresponding to the five previous years is required. For the scheduling of disbursements of transfers to NGOs, the following must be considered: 1. 40% the first disbursement, as an advance. 2. 40% subject to liquidation of the first disbursement. 3. 20% subject to liquidation of previous disbursements. 4. The last disbursement must be liquidated no later than 2 months after the project is completed, presenting a results report that contains evidence of the solution of the problem for which they requested the resources through: testimonies, satisfaction and perception surveys, videos and other applicable means, Financial Statements certified by an authorized accountant immediately after the funds have been used and the Audit Report. 6. Debt Service: a. For the 2023 budget, the obligations (interest, amortization and commissions) of both internal and external debt that must be met in a timely manner are estimated. b. No entity of the Non-Financial Public Sector may initiate proceedings to carry out external public credit operations without written authorization from SEFIN. c. The prioritization of public credit operations to be entered into for public investment, by the institutions of centralized and decentralized administration, representatives of the State before financial organizations and multilateral banks, will be established by the Secretariat of Finance based on public investment goals, contracting ceilings and the priorities of the Government of the Republic 2022-2026. d. For programs and projects to be financed with external loan funds, an amount of US$715.9 million is set. e. Municipalities, Public Enterprises and the rest of the institutions of the Non-Financial Public Service may not negotiate or acquire any indebtedness without the approval of the Secretariat of Finance. f. Institutions of the Non-Financial Public Sector may conduct liability 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 criterion ordered by the Secretariat of Finance. 7. Trust Contracts that were registered as Financial Assets: a. The resources that were recorded in the Budget as Financial Assets, coming from trust contracts, will be verified and incorporated in the Budget of each of the Secretariats or Executing Institutions of the programs or projects in the expense items that correspond. IX. PUBLIC INVESTMENT All Public Investment initiatives 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 organizing and monitoring the process to carry out 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 has the objective of assessing the convenience of carrying out a particular Public Investment Project (PIP); that is, at this stage it is necessary to have studies that support that it is socially profitable, sustainable and consistent with the policy guidelines established by the authorities. a. The institution must request 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 evidence the budgetary 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. Public Sector Institutions requesting 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 of the same, in order to obtain the Priority Note. c. New projects from the formulation must identify the expenses for their operation and maintenance; as well as an analysis of the future fiscal burden and what it would imply having 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 an Amendment to the Priority Note in case of project modification in the Pre-investment or Investment Phase, due to changes made to the technical aspects of the project formulation, in the following cases: inconsistencies in the project name (as long as this does not affect its objective and scope), change of Executing Institution, geographic location, coverage, increase or decrease of the total project cost and Financing Source, the General Directorate of Public Investment will issue a Technical Opinion of Amendment to the Priority Note. 2. Financing for New Projects a. Management and requests for financing from Multilateral, Bilateral, International and private financial organizations are the exclusive responsibility of the Secretariat of Finance. b. Financing will be sought only for those projects prioritized by the Presidency of the Republic and that are consistent with the public spending and external debt targets defined by SEFIN through the Medium-Term Macro Fiscal Framework. c. No financing management for programs and projects may 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 the 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 over the total amount of the agreement, and in the case of donation counterpart, this will be up to 20% and preferably will be agreed in kind detailing its contribution. e. Every institution executing projects must consider within the budgetary ceiling the values corresponding to the counterpart when required. f. Only projects that have assured financing, fiscal space, signed agreement and in the process of approval by the National Congress will be included in the draft Budget of the following Fiscal Year. 3. Computer Tool of the National System of Public Investment of Honduras (SNIPH). The computer tool of the System is structured in Modules according to the life cycle of projects: 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. Duly signed and authorized forms (Director of UPEG or equivalent), attaching a copy of the User's Identification Card. 2. Letter of requests signed by the Minister or Vice Minister of the requesting institution. 3. Register and verify information relating to project formulation in the pre-investment module to obtain the BIP Code. 4. Corresponding Priority Note in order to move to the Investment stage. Investment Module: The Institution will conduct registration, verification and approval in the Investment module to proceed with the BIP-Specific Source relationship. The mapping of Public Investment will exist in a portal where different views will be visualized including the deliverables and interventions of projects in the national territory, as input for decision-making, based on the indicators of the logical framework and the coordinates registered in the SNIPH. X. 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 contracting body 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 will be uploaded to the electronic module of the Normative Office for State Contracting and Acquisitions (ONCAE) and the website of each Institution, in order 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 a direct relationship and linkage with Annual Operating Planning (POA), other plans and budgets, including budgets that correspond to declared emergencies. c. In the planning, structuring and execution of any acquisition process, the principle of fiscal responsibility must be observed. XI. FINANCING a. The balance of public debt of the Non-Financial Public Sector (SPNF) in relation to GDP (2021) will not exceed 55.0% in present value, except in cases of emergency qualified by the Presidency of the Republic. b. Obtain resources of external and internal origin, through traditional and innovative instruments, including among these, climate financing, within the framework of current regulations, maintaining the sustainability of debt in the medium term and a prudent level of risk exposure. c. The Public Debt Policy (PEP) will 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 indebtedness. d. External financing that is considered a priority and for which financing sources are not available that allow the required concessionality, may be contracted as long as the weighted concessionality of the entire external public debt portfolio remains above 20%. e. Internal indebtedness will seek the development of the domestic market, through the implementation of market practices that promote a climate of confidence, in this sense government bonds will be issued under the characteristics and limits established in the Financing Plan, mainly 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 to be executed for programs and projects with external credit financing of USD715.9 million for the year 2023, except in case of Emergency Declaration made by the Presidency of the Republic. XII. DECENTRALIZED ADMINISTRATION For the year 2023 the following guidelines will be followed with respect to the Decentralized Administration, which includes: Autonomous Institutes, Pension Institutions, Universities, Public Enterprises and Financial Institutions: a. Current income will be estimated based on prices, rates, fees and valuation plans authorized by Law (in case it applies), for review and updating of collections for consideration of services rendered. b. INPREMA, INJUPEMP, IPM and INPREUNAH, with respect to the Total Net Loan Concession, must guarantee the stabilization of social funds and ensure the benefits of their affiliates. The amounts of loans granted annually may in no case exceed the amounts of recoveries. c. Pension Institutes must formulate all income received from their investments, this includes, interest on deposits, interest on loans and dividends on shares. Likewise, they must formulate financial investments separating the investment in titles and securities that it makes with the State and private banking and identifying them in the expense item that corresponds. d. Institutions that depend on transfers from the Central Administration will formulate their budget in accordance with the assigned ceiling, that is, if they have commitments to meet, they must make the budget adjustments and reallocations that correspond to be able to meet expenses. If the allocation of source 11 is not sufficient, it must proceed to adjust its programming and cut expenses until reaching the amount that was assigned to it. e. Institutions that generate own resources (Source 12) and that based on collective contracts or internal instruments formulate salary adjustments in their budget, must do so in the additional expense item 11400. If this guideline is not followed, the Secretariat of State in the Office of Finance will not process any type of request, including the Budget Modification referred to this purpose at the time of executing the budget. f. All institutions must review the income items and expense items that they are using to formulate their budget, for the purpose that the budget imputation follows the income item and appropriate expense item, based on the Available Budget Classifiers on the official page of the Secretariat of State in the Office of Finance. XIII. ENERGY SECTOR (ENEE) The State has the duty to provide access to electricity equally and equitably to all the population, ensuring economic and social well-being. Electricity is a basic good to reduce poverty and facilitate development. During the last decade, a model of privatizations and trust agreements was imposed that broke the company and failed utterly. Technical and non-technical losses of the state electricity company exceed 38% while accumulated debt is L75,600.0 million, added to this, the onerous energy supply contracts, arising in the last decade without respecting any rule of transparency, are the most expensive in the Central American region. Having promulgated the Special Law to guarantee the provision of electricity service as a public good of national security and a human right of economic and social nature, the activities of generation, transmission, distribution and commercialization of electricity will be carried out under the principles of public interest. The National Electricity Company (ENEE) must: 1. Implement the National Program for Loss Reduction, with administrative, functional, budgetary, financial autonomy and independence and for the contracting of goods, services and human resources in order to ensure the reduction of at least eight (8) percentage points of losses and the recovery of income for 2023. 2. Finalize the process of negotiating Energy Supply Contracts that have costs higher than those in the Central American region, as well as the comprehensive audit of the same. 3. Maintain the subsidy to electricity for the most vulnerable families with consumption of less than 150kwh per month. 60% of the financing will be covered by the Government of the Republic through the Secretariat of State in the Office of Finance (SEFIN) and the remaining 40% will be covered in a subsidiary manner by customers classified as high non-residential consumers, targeted. 4. Correct the financial statements and establish a plan for monitoring and follow-up of financial and operational performance, and reprofile the debt by lengthening the average life of the total portfolio. XIV. GENDER APPROACH The State will promote transversely the application of the National Policy on Women and the National Plan Against Violence towards Women, through the incorporation of the gender perspective in the design, implementation and evaluation of policies, plans and budgets of the Public Administration. Gender-Sensitive Budgeting (GSB) is a democratic tool of affirmative action in the allocation of resources intended to implement actions to close the gap of discrimination between men and women ensuring that funds are used equitably from a gender perspective. For the formulation of planning and budget with a gender approach, the following guidelines must be considered: a. Incorporate in the Strategic Plan the implementation of public policies and specific institutional programs with a gender perspective that respond to the needs and interests of both men and women, guaranteeing women's participation in design, implementation and evaluation processes. The information on programs and projects for gender equity will be reported as required in the Information Sheet of the Integrated Financial Administration System (SIAFI), and the specifications will be issued by the Secretariat of Strategic Planning (SPE) and the Secretariat of Finance (SEFIN).

The Secretariat of Finance, in accordance with what is established in the Constitution and laws of the Republic, is the institution responsible for issuing the directives and instructions for the formulation of the Draft Budget 2023, which must be complied with by all institutions that make up the centralized and decentralized administration.

This Executive Agreement is effective immediately and must be published in the Official Gazette "La Gaceta". Given in the City of Tegucigalpa, municipality of the Central District, on the 8th day of the month of August of the year two thousand twenty-two (2022). LET IT BE KNOWN AND PUBLISHED: XIOMARA CASTRO SARMIENTO Constitutional President of the Republic RIXI MONCADA GODOY Secretary of State in the Office of Finance.