The public sector in the Honduran economy: A forecasting model to determine revenues and financial requirements

This study analyzes the public sector of the Honduran Economy, with special focus on financing requirements and its links with the monetary sector. To evaluate the effect of the fiscal measures on strengthening the fiscal sector, a model is estimated. The general methodology utilized is Ordinary Least Squares (OLS). After the model is estimated, exogenous variables are given and three scenarios are projected for the period (1989-1995). The simulation results show that the actual path of the Honduran public sector is untenable. Fiscal measures are needed to correct the fiscal disequilibrium. The public sector ought to increase its savings capacity if higher rates of investment are to be pursued. The increase in public savings could be possible only if revenues were increased. Moreover, scrutiny has to be focused on the allocation of government expenditures; spending programs have to evolve with a careful comparison of the relative priorities.