The effectiveness of EU support to priority sectors in Honduras. Special report No 30, 2016.
Date: 2017-01-11
Institutions: European Court of Auditors
Subjects: EU aid, European Commission, Honduras, audit, development aid, economic priority, forestry development, legal system, poverty, public safety, report

EN 

2016 

NO 30

Special Report  The effectiveness of EU 

support to priority sectors 
in Honduras

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EN 

2016 

NO 30

Special Report

The effectiveness of EU 
support to priority sectors 
in Honduras

(pursuant to Article 287(4), second subparagraph, TFEU)

Audit team

02

The ECA’s special reports set out the results of its performance and compliance audits of specific budgetary areas or 
management topics. The ECA selects and designs these audit tasks to be of maximum impact by considering the risks 
to performance or compliance, the level of income or spending involved, forthcoming developments and political 
and public interest.

This performance audit was produced by Audit Chamber III — headed by ECA Member Karel Pinxten — which 
specialises in external action, security and justice. The audit was led by ECA Member Bettina Jakobsen, supported 
by Katja Mattfolk, head of private office; Kim Storup, private office attaché; Alejandro Ballester-Gallardo, principal 
manager and Werner Vlasselaer, head of task. The audit team consisted of Thomas Arntz, Aurelia Petliza and Ainhoa 
Pérez-Infante.

From left to right: A. Pérez-Infante, W. Vlasselaer, B. Jakobsen, T. Arntz, A. Petliza. 

Contents

03

Paragraph

Abbreviations and acronyms

I - VIII 

Executive summary

1 - 9 

1 - 4 

5 - 9 

Introduction

Honduras faces significant development challenges

Within Central America, Honduras receives most EU development support

10 - 11  Audit scope and approach

12 - 62  Observations

12 - 20 

The EU approach was generally relevant and well‑coordinated but insufficiently focused

13 - 16 

EU strategies addressed important needs but the funding was spread over too many areas

17 - 20 

Despite a good donor coordination structure there is not yet an effective division of labour

21 - 31 

Budget support was mostly provided for relevant national policies but the Commission’s 
management was affected by some weaknesses

22 - 23 

Budget support was generally provided in support of relevant and credible national strategies

24 - 30 

Providing budget support involved substantial risks that the Commission has to some extent mitigated

31 

The EU Delegation lacked the expertise to manage budget support operations in the field

32 - 38 

EU actions generally delivered the expected outputs but weaknesses in the monitoring tools 
hindered the assessment of the results achieved

33 - 35 

Expected outputs were generally realised, with some delays owing mainly to the difficult context

36 - 38 

Notwithstanding the use of diverse tools, performance monitoring displayed some weaknesses

 
Contents 

04

39 - 45 

The Commission made good efforts to have a constructive policy dialogue contributing to 
positive changes

40 - 42 

The Commission has developed relevant policy dialogue strategies for most priority sectors

43 - 45 

The Commission’s policy dialogue facilitated the implementation of EU actions and led to some tangible 
improvements

46 - 62 

In difficult country circumstances, EU actions have contributed to positive developments but the 
overall situation in Honduras remains worrying

47 - 56 

The level of poverty increased

57 - 59 

EU support prompted reforms in forestry management, but it is too early to see an overall impact

60 - 62 

EU support has helped justice and public security institutions to work more closely together, but the 
situation in the country remains critical

63 - 67  Conclusions and recommendations

Annex I  —  Map of Honduras

Annex II  — 

Indicative allocations to priority sectors in Honduras for 2007‑2013 and 2014‑2020

Annex III  —  Bilateral support to Honduras: decisions during 2007‑2015

Annex IV  —  Conditions set in financing agreements for EU actions

Reply of the Commission

 
 
 
 
 
Abbreviations and 
acronyms

05

APN: Support to the National Plan (Apoyo al Plan Nacional)

CSP: Country Strategy Paper (multiannual programming instrument)

EuroFor: European support programme to the Forestry Sector (Programa de apoyo europeo al sector forestal)

Eurojusticia: Promoting a fast and accessible Justice in Honduras (Promoviendo una Justicia Rápida y Accesible en 
Honduras)

EUROSAN: Food Safety, Nutrition and Resilience in the Dry Corridor (Seguridad Alimentaria, Nutrición y Resiliencia 
en el Corredor Seco)

GDP: Gross Domestic Product

MADIGEP: Support measures for Institution Building and Public Policy Management (Medidas de Apoyo al 
Desarrollo Institucional y la Gestión de Políticas Públicas)

MOSEF: Project for the modernization of the Honduran Forestry Sector (Proyecto Modernización del Sector Forestal 
de Honduras)

MIP: Multiannual Indicative Programme (Strategic objectives of the EU´s relationship with Honduras for the period 
2007-2013)

NIP: National Indicative Programme (the time-span of the 2007-2013 CSP was split into two successive NIPs, 
respectively covering the periods 2007-2010 and 2011-2013)

PAAPIR: Support programme for the Public Administration and Regional Integration (Programa de Apoyo a la 
Administración Pública y a la Integración Regional)

PAPSAC: Sector support programme for Water and Quality (Programa de Apoyo Sectorial Agua y Calidad)

PASS: Support programme to the Honduran Security Sector (Programa de Apoyo al Sector Seguridad en Honduras)

UNICEF: United Nations International Children´s Emergency Fund

WHO: World Health Organisation

Executive summary

06

I
Honduras is a Central American country that suffers from high poverty rates and widespread violence. In recent 
years the EU and its Member States have strengthened their cooperation with Honduras, notably with the signature 
of an Association Agreement in 2012. The EU has channelled its development cooperation funding to Honduras in 
the form of both projects and budget support.

II
We assessed the effectiveness of the EU’s bilateral development support to priority sectors in Honduras. We there-
fore examined the Commission’s management and the degree to which the EU’s development support objectives 
have been achieved. The audit focused on the 2007-2015 period where the EU payments amounted to 119 mil-
lion euro. The priority sectors examined were poverty reduction, forestry, and security and justice.

III
We concluded that the EU’s development support to priority sectors in Honduras during the audited period was 
partially effective. It contributed to a number of positive developments in these sectors, but difficult country 
circumstances and a number of management weaknesses hindered its impact. The overall situation in the country 
remains worrying. The level of poverty has increased, the area of forest land had decreased and there is still wide-
spread violence and a very high homicide rate.

IV
The EU’s actions were relevant and generally delivered the expected outputs, albeit with significant delays mostly 
due to exogenous factors. The Commission’s approach was insufficiently focused because the financial assistance 
spread over many areas, thus increasing the risk of jeopardising its impact. We found shortcomings in the tools used 
by the Commission to monitor the performance of the EU actions.

V
Although there is a good donor coordination structure in Honduras, actual collaboration was relatively limited 
which led in some specific cases to overlapping support. The Commission is nevertheless making efforts towards 
joint programming with EU Member States as from 2018.

VI
The Commission has developed dialogue strategies to structure its policy dialogue in various areas with the Govern-
ment of Honduras. This is good practice, although it has not made written assessments of the degree to which the 
objectives set by its dialogue strategies have been achieved. Overall, the Commission has implemented a construc-
tive policy dialogue, which contributed to achieving the objectives of EU actions.

Executive summary 

07

VII
The EU Delegation in Honduras lacked the necessary macro-economic and public financial management expertise 
to manage budget support operations. Furthermore, providing budget support in Honduras involved substantial 
risks due to the unstable macroeconomic framework and weak public financial management. The Commission man-
aged to partly mitigate these risks. However, it did not assess budget support eligibility in a sufficiently structured 
manner to demonstrate that the progress achieved by the country was in line with clearly defined benchmarks 
and targets. Furthermore, the Commission did not always react consistently when the partner country did not 
respect the budget support eligibility conditions. This sent contradictory messages that could be detrimental to aid 
effectiveness.

VIII
We make a number of recommendations for the Commission to strengthen the EU approach, the management of 
budget support operations, the performance measurement of EU actions and policy dialogue in the priority sectors.

Introduction

08

Honduras faces significant development challenges

01 
Honduras is a lower middle income country located in Central America (see map 
in Annex I) with a population exceeding 8 million. Since the general elections 
that took place in November 2009 after a ‘coup d’état’, the country has been con-
tinuously ruled by the same political party.

1  Human Development Report 

2015, United Nations 
Development Programme.

2  According to 2014 data of the 
National Institute of Statistics 
(‘Instituto Nacional de 
Estadística’).

02 
Honduras was ranked 131 out of 188 on the 2015 United Nations human develop-
ment index list1 and is therefore considered to have a medium human develop-
ment. The country has one of the highest poverty rates in Latin America 68.2 % 
of the population are affected, with 39.7 % of the population in a situation of 
extreme poverty2. Honduras is also one of the most inequitable societies in Latin 
America.

03 
Over the years, Honduras has adopted several strategies to address its develop-
ment challenges (see Box 1).

1
x
o
B

Government development strategies

In 2001, the Government adopted a Poverty Reduction Strategy Paper as a framework for channelling devel -
opment aid. It was the only country in Latin America to do so. This was a requirement to benefit from debt 
relief under the Highly Indebted Poor Countries initiative. The Government reviewed the Poverty Reduction 
Strategy during period 2006-2008 to improve its focus on the very poor, but never officially endorsed the 
modified strategy.

Following the 2009 ‘coup d’état’, the political parties agreed on a long-term plan called ‘Country Vision 2010-
2038’3 and a medium-term plan called ‘National Plan 2010-2022’4. The long-term plan outlines four ambitious 
general objectives that relate to social, political and economic policies to be achieved by 2038. It is to be 
implemented by two national plans and seven government plans. The national plan for 2010-2022 focuses on 
11 strategic areas.

3 

4 

‘Visión de País 2010–2038’.

‘Plan de Nación 2010–2022’.

 
09

5  Budget support is an aid 

modality that involves the 
transfer of funds by the 
Commission to the national 
treasury of a partner country 
in order to provide additional 
budgetary resources to 
support a national 
development strategy or 
a sector strategy. It is 
accompanied with policy 
dialogue, performance 
assessment and capacity 
development.

Introduction 

04 
Macroeconomic instability has been identified as one of the causes of low 
growth and insufficient poverty reduction. Honduras is also known as a very 
violent country with a per capita murder rate that is among the highest in the 
world. Together with impunity and corruption, this is a fundamental obstacle to 
development in Honduras.

Within Central America, Honduras receives most EU 
development support

05 
The EU is Honduras’ second largest trading partner, after the United States. In 
June 2012, the EU and its Member States signed an Association Agreement with 
the Central American countries. The Agreement relies on three pillars; political 
dialogue, cooperation, and trade. The trade pillar provisionally entered into force 
for Honduras in July 2013, while the political dialogue and cooperation pillars will 
be activated once all EU Member States have ratified the Agreement.

06 
The EU and its Member States have also signed a Political Dialogue and Coopera-
tion Agreement with the Central American countries: this entered into force on 
1 May 2014. The Agreement provides for a political dialogue at several levels and 
includes the possibility of cooperation in the field of foreign and security policy.

07 
Among the dozen major donors in Honduras, the EU ranks fourth, represent-
ing 11 % of all official development assistance in the country. The Commission 
programmes the EU’s bilateral support for periods of seven years. The over-
all envelope was increased from 223 million euro for the 2007-2013 period to 
235 million euro for 2014-2020 (see  Annex II). The main priorities identified for 
2007-2013 were poverty reduction, natural resources and security and justice. The 
main priorities for 2014-2020 are food security, with a focus on family agriculture; 
employment and decent work and rule of law.

08 
From 2007-2015, these allocations resulted in contracts totalling 194 million euro 
and payments totalling 119 million euro (see Figure 1 and Annex III). About half 
the value of bilateral support is provided through budget support5, both general 
budget support and sector budget support. The other half is implemented in 
the form of projects. The Commission accompanies the EU’s actions with policy 
dialogue.

Introduction 

10

Projects support

Technical assistance

Budget support

1
e
r
u
g
i
F

Payments for EU actions decided in the period 2007‑2015

million euro

40
35
30
25
20
15
10
5
0

2010

2011

2012

2013

2014

2015

Source: European Commission.

09 
As well as programmed bilateral cooperation, Honduras has also benefited from:

(a)  regional cooperation programmes for Latin America. These concern social 
cohesion, good governance, urban local development, water sector knowl-
edge, energy for isolated communities and climate change. The total regional 
allocation has risen substantially: from 556 million euro for 2007-2013 to 
805 million euro for 2014-2020;

(b)  the Central America sub-regional programme, which focuses on security 

and justice, climate change and private sector development for generating 
employment. The overall allocation has also been markedly increased: from 
75 million euro for 2007-2013 to 120 million euro for 2014-2020;

(c)  47 projects financed from thematic budget lines such as education, decen-
tralisation, food security and human rights. The expenditure concerned 
amounts to 24 million euro;

(d)  the Latin America Investment Facility which for Honduras has committed 

7 million euro to a road project and has an electricity project in the pipeline;

(e)  A project of 1.1 million euro financed under the Instrument for Stability to 
support the Truth and Reconciliation Commission after the ‘coup d’état’ in 
2009 (see paragraph 1).

 
Audit scope and approach

11

10 
We assessed the effectiveness of EU development support to priority sectors in 
Honduras. We therefore examined the Commission’s management and the de-
gree to which the EU’s development support objectives have been achieved. The 
audit focused on the 2007-2015 period and was carried out between November 
2015 and April 2016. The priority sectors examined were poverty reduction natu-
ral resources, and security and justice. These sectors received 89 % of expendi-
ture under bilateral support over the 2007-2015 period (see Annex III).

11 
Our audit work consisted of a desk review, interviews of staff from Commission 
headquarters and the European External Action Service, and a visit to Honduras. 
The objective of the visit was to collect further information and interview staff of 
the EU Delegation, representatives of the national authorities, beneficiaries, other 
donors and civil society organisations.

Observations

12

The EU approach was generally relevant and 
well‑coordinated but insufficiently focused

12 
We examined whether the Commission, in collaboration with the European Exter-
nal Action Service prioritised sectors for support by addressing the main country 
needs in a consistent manner. We also examined whether the Commission had 
appropriately coordinated its approach with other donors active in Honduras.

6 

The Commission identified six 
‘priority sectors’ for the 
2007-2013 and the 2014-2020 
period. These priority sectors 
covered many different areas 
such as education, health, 
water and sanitation, forestry, 
renewable energy, security 
and justice and more. For 
details see Annex II.

EU strategies addressed important needs but the funding 
was spread over too many areas

13 
When programming its bilateral support for Honduras, the Commission targeted 
many priority areas6. The Commission’s programming documents generally 
provided convincing arguments for engaging in new areas as they responded 
to high needs that were covered by relevant and credible national strategies. In 
some cases, however, the Commission’s strategy for 2011-2013 provided for sup-
port in areas (i.e. renewable energy, energy efficiency and quality systems for im-
proving competitiveness) for which the Honduran Government had not adopted 
a sector strategy. It is therefore not demonstrated that the Commission support 
in these areas was also a priority for the Government.

14 
The Commission implemented its strategies through actions that involved 
providing financial assistance (see Annex III). The objectives of these actions 
(see Box 2) were broadly defined, in particular for poverty reduction which was 
a priority sector for the 2007-2013 period. They related to many areas includ-
ing education, health, water and sanitation, quality systems, statistical systems 
and public financial management. The limited focus meant that the efforts 
and the financial assistance were spread over many areas, which jeopardised 
their potential impact. In addition, the Commission’s strategic choices involved 
frequent changes as it reacted flexibly to changes in the national strategies. As 
a result, some of these areas received support only for a relatively short period of 
time. The main examples concerned support for basic education, health, quality 
systems and water and sanitation which were priority areas during three or four 
years.

Observations 

13

2
x
o
B

Objectives of the EU actions in the priority sectors examined

Poverty reduction

APN (2009) 

 Support the implementation of the national plans and strategies with a focus on quality in 
basic education and health strategies to reduce maternal and child mortality. To a lesser 
extent, provides support for the civil service reform and the National Institute of Statistics7.

PAPSAC (2012) 

 Improve water and sanitation conditions and the competitiveness of the agri-food sector 
with a focus on quality.

Natural resources

MOSEF (2011) 

Strengthen the Forest Conservation Institute8 and local level forest management.

EuroFor (2013) 

 Support the implementation of the National Forestry Programme and community-based 
forest management.

Security and Justice

PASS (2008) 

 Support the security sector through the adoption of the National security and justice 
policy, the development of institutional capacities, prevention and rehabilitation policies 
and improvements in detention conditions.

Eurojusticia (2013)   Mainly focused on justice, strengthen institutional capacities to prosecute and punish cor-

ruption and violent crime, develop internal and external controls in the sector and improve 
access to justice.

7 

8 

‘Instituto Nacional de Estadística’.

‘Instituto de Conservación Forestal’.

15 
Activities under the actions used to implement the Commission’s strategies were 
complementary and well-coordinated with other EU support in the form of bilat-
eral, regional and thematic programmes. Furthermore, in most cases the objec-
tives and activities were in line with the needs of the sector supported. The audit 
nevertheless identified the following two exceptions:

(a)  Some of the support provided by MOSEF to municipalities did not address 
needs in the forestry sector. Examples included training on the principles 
of general hygiene, the construction of water reservoirs for general water 
supply purposes, the installation of garbage bins at primary school, the 
construction of paths and kiosks in an urban park and the installation of solar 
panels. However, EU actions insufficiently addressed land tenure uncertainty, 
which is one of the main weaknesses in the forestry sector. The uncertainty is 
caused by the fact that title to forest land has been granted by three institu-
tions without coordination. This has an adverse effect on the fight against 
deforestation, forest fires and illegal logging.

 
14

9  As stated in the National 
Education Plan (‘Plan de 
educación 2010-2014!Para el 
cambio ya!’).

10  PAAPIR and MADIGEP.

11  Canada, France, Germany, 

Italy, Japan, the Netherlands, 
Spain, the United Kingdom, 
the USA, Sweden, Switzerland, 
the Central American Bank for 
Economic Integration, the 
Inter-American Development 
Bank, the World Bank, the 
International Monetary Fund 
and the European 
Commission.

Observations 

(b)  Like other donors, the EU supported the education sector by focusing on 
pre-primary and basic education (grades 1st to 6th) instead of on the third 
cycle (grades 7th to 9th) although the latter required more attention according 
to the national authorities9.

16 
Technical assistance was provided as part of the actions or, in the case of poverty 
reduction, by dedicated actions10. Technical assistance was prioritised by the 
national authorities. This allowed relevant needs to be addressed while avoid-
ing duplications. However, as the Commission addressed many areas (see para-
graphs 13 and 14), the funding available was not sufficient to address significant 
needs in the priority sectors - despite specific requests by the responsible line 
ministries. These requests concerned relevant needs that were also not ad-
dressed by other donors.

(a)  A number of technical assistance requests from the Ministry of Health were 
not honoured, including requests for a study into vitamin and mineral defi-
ciencies in the population and for the development of an integrated health 
system and the related information systems.

(b)  Only a few local authorities that became empowered to manage water and 
sanitation were able to benefit from capacity development support and cer-
tain general requests for technical assistance in the water and sanitation sec-
tor were not met. The needs that were not addressed concerned assistance in 
the drafting of legislation, formulating local projects and the development of 
a water management information system.

(c)  The technical assistance delivered to enhance the quality systems for improv-
ing competitiveness did not address some of the main needs identified by 
the Government, such as the drafting of a regulation to implement the law 
promoting quality, the validation of methods for detecting toxic residues 
in food, the consolidation of various national strategies and development 
a strategic plan for the Honduran Accreditation Office.

Despite a good donor coordination structure there is not yet 
an effective division of labour

17 
The main coordination mechanism brings together most significant donors11 and 
is organised at three levels (see Figure 2) including at sector level where donors 
share information and exchange views. The Commission actively participates in 
several of these working groups.

Observations 

15

2 Donor coordination in Honduras
e
r
u
g
i
F

High-level group of ambassadors and multilateral resident representatives 
Political level

Technical group with heads of cooperation 

13 sector working groups

Gender

Infrastructure
and energy

Decent
employment and
economic
development

Security, justice,
human rights

Electoral
monitoring

Transparency
and good
governance

Aid
eﬀectiveness

Food security
and nutrition

Agri-forestry,
environment 
and risks 
management

Decentralisation
and local
development

Health

Education

Water and
sanitation

Source: European Court of Auditors.

18 
The Commission has closely cooperated with EU Member States, in particular by 
concluding delegation agreements with Germany and Spain in the forestry and 
justice sectors respectively. There has not yet been an effective division of labour 
but the Commission is making efforts towards joint programming as from 201812.

12 

In 2013, a joint programming 
roadmap was agreed between 
the EU and the Member States 
active in Honduras.

 
Observations 

16

19 
Cooperation with other donors has been less intensive. At the time of the audit 
there was no real division of labour which meant that several donors with dif-
ferent approaches were active in the priority sectors, in particular education13, 
health and water and sanitation. In some cases this even led to an overlap in 
funding (see Box 3). The main obstacles to better donor coordination were the 
lack of cooperation by the Honduran Government and resistance on the part of 
some donors.

13  Donors focused on the first 
two cycles of primary 
education, but little support 
was provided for the third 
cycle of primary education or 
secondary education.

3
x
o
B

Overlaps in funding

In the security and justice sector, there was to some extent an overlap in funding at the level of the Security 
Ministry, where training in criminal investigation for the National Police was delivered by multiple donors us-
ing different approaches and doctrines.

In the water and sanitation sector, half of all municipalities received no support at all, but many others re-
ceived support from multiple donors simultaneously.

20 
Another obstacle was the absence of a good overview of the support provided 
by donors. The necessary mapping exercises were not carried out for all sectors 
(e.g. quality systems for improving competitiveness), were incomplete and/or 
were not often updated.

Budget support was mostly provided for relevant 
national policies but the Commission’s management 
was affected by some weaknesses

21 
We examined whether budget support was provided in support of relevant and 
credible national strategies. We also examined whether there was an appropri-
ate response to risks associated with providing budget support and whether the 
Commission employed sufficient appropriately qualified staff at the EU Delega-
tion to manage the budget support operations.

 
17

14 

‘Programa Nacional Forestal 
2004-2021’.

15  This region covers the central 

part, the west and the south of 
Honduras.

16  According to the European 

Commission Budget support 
guidelines, Sector Budget 
support programmes are 
subject to the existence of 
relevant and credible sector 
strategies.

17  Quality systems are concerned 
with normalisation, metrology, 
accreditation and ensuring 
conformity.

18 

‘Estrategia nacional de 
competitividad’.

19  The National Quality System 
and the Ministry of Planning 
and External Cooperation.

Observations 

Budget support was generally provided in support of 
relevant and credible national strategies

22 
The Commission provided a significant part of its financial assistance in the form 
of budget support (see paragraph 8). It did so for poverty reduction since 2010 
(APN and PAPSAC) and in combination with project support for the forestry sec-
tor since 2013 (EuroFor). More recently, a commitment was also made to use this 
aid modality to support food security (EUROSAN) from 2016. By providing budget 
support, the Commission in most cases supports the national development 
strategies (see Box 1), which included objectives in the areas concerned, and to 
relevant and credible sector strategies:

(a)  In the poverty reduction sector, for the period 2010-2014 the Government 
had an education strategy (‘Plan de educación!Para el cambio ya!’) and 
a health strategy (‘Plan nacional salud’), both of which were directed towards 
the Millennium Development Goals. The country also had a strategic plan for 
modernisation of the water and sanitation sector.

(b)  The forestry sector was governed by the 2004-2021 National Forestry Pro-

gramme14, which aims to reduce environmental vulnerability and to develop 
the sector’s ability to contribute to the economy.

(c)  For food security, the National Food Security and Nutrition Strategy was 
updated in 2010 and aims to increase food security, food availability and 
the level of nutrition. The President of Honduras declared in 2014 that the 
main priority was the so-called ‘dry corridor’, a region15 concerned by chronic 
under-nutrition. The Government implements its strategy through a national 
programme called the ‘Dry Corridor Alliance’.

23 
There was, however, no clear Government strategy16 for the PAPSAC objective to 
enhance quality systems for improving competitiveness17. Although the National 
Plan refers to the need to increase the country’s competitiveness and produc-
tivity, it does not identify the need to improve quality systems. The National 
Strategy for Competition18 also does not consider that improving quality systems 
is a priority. Furthermore, national efforts to improve quality systems were frag-
mented and had no specific budget, and the institutions involved19 lacked the 
competence to develop policies and reforms.

Observations 

18

Providing budget support involved substantial risks that the 
Commission has to some extent mitigated

24 
There are substantial risks related to providing budget support in Honduras, 
in particular in relation to macroeconomic instability and weaknesses in public 
financial management, such as fraud and corruption. In line with its risk assess-
ment framework20, the Commission described these risks and sought to mitigate 
them.

20  The risk assessment 

framework was introduced in 
line with the recommendation 
in the Court’s Special Report 
No 11/2010 ‘The Commission’s 
management of General 
Budget Support in ACP, Latin 
American and Asian Countries’ 
(http://eca.europa.eu) and 
COM(2011) 638 final of 
13 October 2011 ‘The future 
approach to EU budget 
support to third countries’.

Macroeconomic stability

25 
Macroeconomic stability of the beneficiary country is a key condition for ensur-
ing that EU budget support is effective. Honduras’ macroeconomic policy was 
not stable. In 2008, the International Monetary Fund was unable to reach agree-
ment with Honduras after assessing that the Government did not comply with its 
recommendations in relation to the monetary and exchange policy, the control of 
costs and supervision of the banking system. A new agreement with the Interna-
tional Monetary Fund was not concluded until October 2010, but it was shelved 
again in March 2012 after disagreement about the necessary macroeconomic 
policy, in particular the need for liberalisation of the foreign exchange market. In 
December 2014, the International Monetary Fund finally came to a new under-
standing with the Honduran Government on a macroeconomic policy, and this 
has been implemented successfully ever since. The country nevertheless remains 
vulnerable to external shocks, in particular in relation to the growth of the United 
States economy and the price of oil.

26 
Mitigating measures implemented by the Commission comprise dialogue, which 
has been particularly strong with the Ministry of Finance thereby also enhancing 
its competence. Technical assistance is also used, in particular to help analyse the 
situation, assess the risks and make economic projections. The Commission’s con-
ditions for the disbursement of funds (see Annex IV) included the requirement 
for a credible and relevant stability-oriented macroeconomic policy. However, 
there was little detail on just what was expected. Reference was made to a num-
ber of indicators, but no targets or thresholds were defined. The Commission’s 
decisions to commit and disburse budget support were therefore not based on 
a sufficiently structured assessment that progress was satisfactory. This approach 
is of particular concern with regard to decisions made during the years that Hon-
duras had no agreement with the International Monetary Fund as the risk of an 
unstable macroeconomic framework was more likely (see paragraph 25).

Observations 

19

27 
Owing to the macroeconomic situation in 2012 and the lack of agreement be-
tween the country and the International Monetary Fund, on several occasions 
the Commission withheld its budget support payments until the prospects for 
macroeconomic stability had improved and the International Monetary Fund was 
negotiating a new agreement. This good practice sent a strong signal to the Hon -
duran Government that helped to redress the situation. During the period that 
the Commission withheld budget support21, it nevertheless signed the EuroFor 
financing agreement providing for additional budget support. We consider that 
this sent contradictory messages that could be detrimental to aid effectiveness.

21 

22 

In total, budget support for 
the APN and PAPSAC was 
withheld for 17 and 23 months 
respectively.

‘Plan para la mejora de la 
gestion, transparencia 
y escrutinio de las finanzas 
públicas 2012-2014’.

23 

‘Tribunal Superior de Cuentas’.

Public financial management

28 
Sound public financial management systems are critical to policy implementa-
tion and the delivery of public services, and are therefore another key condition 
for effective budget support. Public financial management in Honduras is affect-
ed by significant weaknesses, but the Government has adopted successive plans 
to improve the situation. A reform plan22 adopted in June 2011 did not meet the 
Commission’s expectations as it was not sufficiently detailed and did not have 
quantifiable indicators and targets. The Commission considered the improved 
reform plan of May 2012 to be credible though still rather general.

29 
Public financial management has improved, if not as fast as expected. Overall, it 
remains weak. Persistent problems according to the Commission are:

(a)  Government spending exceeds the approved budget and the available 

income;

(b)  the level of payment arrears remains unknown;

(c)  the budget is not fully managed through the treasury single account;

(d)  the effectiveness of the Honduran Court of Audit23 is limited;

(e)  the e-platform for public procurement is not transparent;

(f)  the level of corruption remains problematic.

Observations 

20

30 
The Commission has made efforts to mitigate the risks with regard to public 
financial management.

24  The condition was included in 

the financing agreement for 
APN.

(a)  The Commission has contributed to Public Expenditure and Financial Ac-

countability assessments, and the technical assistance action PAAPIR provid-
ed expertise leading to the proposal of more efficient and required actions. 
Capacities were developed within the Presidency, the Ministry of Finance and 
internal control units. Assistance was also provided for the analysis of reforms 
and compliance with budget support conditions. Lastly, short-term assistance 
was used to improve the reform plan, elaborate budgetary availability certifi-
cates to avoid extra budgetary expenditure and familiarise staff with budget 
support.

(b)  Since 2012, following the drafting of its policy dialogue strategy (see para-
graph 42), the Commission has become more active in policy dialogue on 
public financial management. The main focus of this dialogue has been 
improvements to budgetary management, covering topics such as fiscal 
revenue, budgetary transparency and controls on public-sector deficit and 
expenditure (e.g. wages). The dialogue had a positive impact on, for instance, 
the approval of the first multiannual budget (for 2016-2018) and the intro-
duction of expenditure certificates to limit extra-budgetary spending. The 
system of certificates requires ministries to ensure that funding is available 
before making commitments.

(c)  The Commission’s conditions have included the requirement24 for a pro-

gramme of improvements covering political priorities, programmes and pro-
jects, reforms, indicators, targets and baselines. This requirement contributed 
to the adoption of the 2011 reform plan (see paragraph 29). As regards the 
implementation of the reform plan, since 2012 the Commission has prepared 
structured assessments of public financial management so that reform ex-
pectations can be compared with progress made. This is a good practice – al -
though because the expectations were not precisely defined it is not clear to 
what extent or by when reforms are expected (see Box 4).

4
x
o
B

Examples of unspecific reform expectations

 ο

Extra-budgetary expenses to be substantially reduced, but no indication when or by how much.

 ο

The introduction of an accrual accounting system without specifying a deadline.

 ο

The use of a Treasury Single Account without specifying a deadline.

 ο Audit coverage to be increased, but no targets specified.

 
Observations 

21

The EU Delegation lacked the expertise to manage budget 
support operations in the field

31 
Budget support management requires different skills to project management. 
The EU Delegation in Honduras lacked the necessary macroeconomic and public 
financial management expertise to manage budget support operations in the 
field. Until 2013, the EU Delegation relied on assistance from the regional Del-
egation in Nicaragua to deal with budget support issues and macroeconomic 
analysis. Although the Delegation in Honduras can to some extent rely on head-
quarters, the lack of in-country expertise still affects the management of budget 
support. This is particularly important in Honduras, where budget support was 
provided despite chronic macroeconomic instability (see paragraphs 25 and 26).

EU actions generally delivered the expected outputs 
but weaknesses in the monitoring tools hindered the 
assessment of the results achieved

32 
We examined whether actions were implemented as planned and outputs were 
delivered as intended. We also examined whether the Commission monitors the 
implementation and performance of its actions appropriately.

Expected outputs were generally realised, with some delays 
owing mainly to the difficult context

33 
The activities planned under Commission actions in the priority sectors exam-
ined generally took place and outputs were mostly realised. In the security and 
justice sector, however, outputs were only partially achieved. This was due to 
the difficult context following the 2009 ‘coup d’état’ and also to the fact that the 
national authorities did not sufficiently cooperate in the implementation of the 
projects. As a result, the harmonisation of the legal framework, which was one of 
the main objectives of the PASS programme, did not materialise.

34 
Although outputs were generally achieved, implementation delays occurred in 
all priority sectors owing to the 2009 ‘coup d’état’, the lack of agreement between 
the country and the International Monetary Fund in the period 2012-2014 (see 
paragraph 35) and capacity constraints affecting the national authorities.

Observations 

22

35 
Delays were most noticeable in the forestry sector, mostly caused by the 2009 
‘coup d’état’. After the cancellation of the initial forestry programmes in 2009, the 
Commission was unable to sign the MOSEF and EuroFor financing agreements 
until the second half of the programming period (2011 and 2013 respectively), 
and implementation did not begin until the end of the period (2012 and 2014). 
MOSEF was also affected subsequently by contracting and implementation 
delays. All local grants and most of the projects targeting the Forest Conserva-
tion Institute were signed in the last month before the final contracting deadline. 
As a result of all this, EU assistance to the forestry sector will probably remain in 
place until 2019 although it was initially planned to be concluded by 2014.

Notwithstanding the use of diverse tools, performance 
monitoring displayed some weaknesses

36 
The Commission used several tools to monitor EU support, such as indicators, 
field visits, results-oriented monitoring and evaluations. The selection and use of 
indicators was affected by weaknesses.

(a)  Almost half of the PASS indicators were not sufficiently relevant as they did 

not relate to action objectives.

(b)  The progress of some action objectives was not monitored by means of 

indicators. Examples were the improvement of service quality in the water 
and sanitation sector, the reduction of maternal and child mortality and the 
creation of decent jobs in the forestry sector.

(c) 

In the water and sanitation sector, indicators only related to activities and not 
to outcomes, and were not fully in line with national strategies. For example, 
they referred to the number of people given new or improved access to wa-
ter and sanitation instead of the national share of households with access to 
drinking water in rural areas.

(d)  Indicators frequently did not have baselines. An accurate starting point is 

necessary for measuring progress and for assessing whether targets are 
realistic but also sufficiently ambitious. Where baselines were set, they were 
not always reliable due to weaknesses in data collection by the Honduran 
authorities.

(e)  During our interviews, the Government of Honduras and various ministries 

questioned the quality and relevance of the monitoring data collected by the 
National Institute of Statistics, which sometimes differed from the monitoring 
data produced by the ministries concerned.

(f) 

In some cases indicators were not credible (e.g. zero illegal logging) or only 
defined after funds had been committed. Indicators and targets for the APN 
were not selected until the financing agreement had been signed.

Observations 

23

37 
Field visits were also used by the Commission as a monitoring tool. Although the 
Commission documented its field visits, they were not planned on the basis of 
a risk analysis.

38 
Results-oriented monitoring was conducted by external consultants during or af-
ter the implementation of actions. During the period examined, monitoring was 
carried out in every priority sector and for all actions with a significant progress. 
The consultants issued recommendations which were not consistently followed 
up. In some cases (APN) this was because the recommendations were only issued 
towards the end of the implementation period, while in others it was simply 
that the national authorities did not take the necessary action to implement the 
recommendations.

The Commission made good efforts to have 
a constructive policy dialogue contributing to positive 
changes

39 
We examined whether the Commission had a structured approach to policy 
dialogue that included clear objectives, frequent interaction, record-keeping 
of progress and the assessment of results. We also examined whether policy 
dialogue was in line with the objectives of EU actions, and whether it was active, 
constructive and sufficient to bring about a real impact.

The Commission has developed relevant policy dialogue 
strategies for most priority sectors

40 
The terms of the EU’s policy dialogue with Honduras were established in the 
Political Dialogue and Cooperation Agreement (see paragraph 6) and will in 
future be covered by the Association Agreement (see paragraph 5). The overall 
framework for policy dialogue is appropriate. Since 2012, the EU Delegation in 
Honduras has developed eight policy dialogue strategies covering macroeco-
nomic policy, public financial management, development policy, decent work, 
food security, forestry, water and sanitation, and quality systems for improving 
competitiveness.

Observations 

24

41 
These strategies, which were updated in 2013 and 2015, contain the objectives 
for policy dialogue. They represent good practice, although they do tend towards 
generalities and lack clarity with regard to the number and level of contacts 
required. Furthermore, they do not provide exhaustive coverage: there is not yet 
a specific dialogue strategy for poverty reduction or security and justice.

42 
Important aspects of policy dialogue are documented in country reports pre-
pared by the Delegation for Commission headquarters. The dialogue is also 
partly documented by project managers, which file ‘back-to-office’ reports to 
the Commission on important meetings. Reports of this kind have been filed, for 
example, in relation to health, education, forestry and quality systems for improv-
ing competitiveness. However, the implementation of policy dialogue strategies 
is not exhaustively documented. Furthermore, the Commission has not assessed 
the achievement of the objectives set by its policy dialogue strategies.

The Commission’s policy dialogue facilitated the 
implementation of EU actions and led to some tangible 
improvements

43 
Policy dialogue is led by the donors rather than the national authorities, which 
amounts to a second-best approach. The Commission has made considerable 
effort to have a relevant and constructive policy dialogue at all levels. When 
dialogue is coordinated with other donors, the Commission is involved in most 
initiatives. The Commission also conducts dialogue bilaterally or in steering com-
mittees overseeing the actions it finances, for example in the areas of forestry or 
security and justice. Overall, the Commission’s dialogue has been in line with the 
action objectives and contributed to their implementation.

44 
Although the EU is one of the main donors in Honduras, its financial contribution 
over the period under examination amounted to an average of only 0.2 % of the 
country’s GDP. The leverage it can expect to exercise through policy dialogue is 
therefore limited – far lower, for instance, than that of the United States as Hon-
duras’ largest trading partner. The Commission’s dialogue nevertheless also had 
an impact that went beyond the action objectives. For example:

Observations 

25

(a)  In addition to its actions, the Commission’s dialogue in the forestry sector 
also addressed other relevant issues, such as the fight against bark beetle 
infestation and negotiations for a voluntary partnership agreement between 
the EU and Honduras on forest law enforcement, governance and trade. 
These negotiations were successful, and an agreement likely to be signed 
in 2016 will commit Honduras to trading only in legally harvested timber 
products and to developing a system to verify the legality of its timber. The 
negotiations also helped to enhance capacities in the forestry sector.

(b)  In the area of human rights25, the Commission’s policy dialogue was instru-

mental in promoting the opening of an Office of the UN High Commissioner 
for Human Rights in Honduras. The Honduran Government has expressed 
agreement and the Office is expected to open soon. The Commission has 
successfully promoted legislative reforms, such as a law on the protection of 
human rights defenders. It has also helped to create a platform for dialogue 
with civil society on human rights and for exchange with the Government.

25  This area is closely related to 

security and justice.

26  Two meetings in 2011, one in 

2012 and one in 2013.

27  The other observatory was 
planned by the Mission 
against Corruption and 
Impunity in Honduras, an 
international commission set 
up to investigate corruption. 
The Organisation of American 
States proposed the 
observatory to provide the 
authorities with support over 
four years in the investigation 
and prosecution of crimes and 
reforms to the justice system.

45 
Certain factors weakened the potential impact of the Commission’s dialogue:

(a)  We found little evidence that the Commission addressed, through its dia-
logue, some of the areas supported by the APN. There were, for example, 
only few bilateral technical meetings with the national authorities to address 
major difficulties in achieving the education targets26. The dialogue with 
other donors in this area covered general aspects, such as management sys-
tems and the new education act. It did not tackle the high levels of repetition 
and abandonment in education. Furthermore, there is no evidence that the 
Commission’s policy dialogue covered the implementation of the national 
statistics strategy for 2011-2015 or the civil service reform, although this was 
an intended part of the action.

(b)  The Honduran authorities were not always receptive to the Commission’s 
policy dialogue. Despite EU efforts, for example, the Government did not 
adopt a national security and justice sector policy. Furthermore, the Commis-
sion has not successfully promoted the Judiciary Observatory set up with EU 
support. Its visibility and effectiveness are threatened by Government sup-
port for the creation of a different observatory27.

Observations 

26

In difficult country circumstances, EU actions have 
contributed to positive developments but the overall 
situation in Honduras remains worrying

28  Gini coefficient of 0.58 % in 

2014.

46 
We examined whether EU actions had made a positive impact. To do so, we as-
sessed developments in the priority sector as well as any links between those 
developments and the EU support.

The level of poverty increased

47 
Despite increased social spending, the level of poverty, calculated on the basis 
of income and basic needs, increased during the 2007-2015 period (see Figure 3). 
Although poverty is predominant in rural areas, extreme poverty has sharply 
increased in urban areas. Honduras remains one of the poorest and most inequi-
table28 countries in Latin America.

3 Poverty level in Honduras (%)
e
r
u
g
i
F

Poverty rate (%)

72

70

68

66

64

62

60

2007

2008

2009

2010

2011

2012

2013

2014

2015

Source: National Institute of Statistics.

 
27

29  General Law on Education 
(‘Ley Fundamental de 
Educación’).

30  The number of days at school, 
lower secondary education 
rates and the average number 
of years in school.

31  As concluded by the 

Honduran Court of Audit.

32  The net coverage of pre-basic 
education, the net coverage of 
the third cycle of basic 
education, competence in 
mathematics in the third 
grade of basic education, the 
rate of children abandoning 
the system, competence in 
Spanish in both the first and 
second cycles of basic 
education.

Observations 

Education

48 
A number of positive results have been achieved in education. The Ministry of 
Education has adopted a new education act 29 and several regulations. The major 
area of progress recognised by the international community is compliance with 
the minimum of 200 days/year of classes in the public schooling system. In addi-
tion, around 400 pre-basic educational centres have been opened each year in 
disadvantaged areas, and improvements to the Human Resources Administration 
System have led to the elimination of around 15 000 ghost teacher posts.

49 
However, the 2015 target defined by the Millennium Goals for the number of chil-
dren completing primary school was not reached. Only three of the seven targets 
for 2013 in the national plan for 2010-2022 (see Box 1) were achieved30. Of the 
education indicators defined by the 2010-2014 Government Plan, seven were not 
measurable, ten showed good progress and eleven were below expectations31. 
None of the eight targets to be reached by 2014 under the APN were achieved. 
The results for six of them even fell below the baseline32.

50 
There is no evidence that the APN had much impact in the education sector. 
Although the budget of the Ministry of Education increased significantly during 
2007-2010, it then stagnated during the implementation of the APN. Efficiency 
increased, however, with a better financial allocation for pre-basic education and 
a decline in salary costs from 55 % of expenditure in 2007 to 49 % in 2014.

Health

51 
Four of the five APN targets relating to health were achieved. The number of in-
stitutional births increased, as did the rate of prenatal and postpartum care. The 
number of medical consultations in rural centres was also up. The overall health 
objective of the APN was achieved as child and maternal mortality rates slightly 
decreased over the period under review. Nevertheless, the targets set by the 
2010-2014 national health plan and the Millennium Development Goals were not 
reached (see Table 1).

Observations 

28

1 Child and maternal mortality rates
e
l
b
a
T

Child mortality rate 
(per 1 000 live births)

Maternal mortality rate 
(per 100 000 live births)

Situation in 2009

Targets

2010-2014 National health plan 
(targets for 2014)

Millennium Development Goals 
(targets for 2015)

Situation in 2014

26

15

16

24

Source: National Institute of Statistics, National health plan, Millennium Development Goals.

108

60

45

73

52 
The existence, nevertheless, of the necessary political will was demonstrated 
by the significant increase in the budget of the Ministry of Health in the period 
2007-2015 and the efforts to make spending more efficient. In this regard, central 
spending declined, with salary costs falling from 18 % to 15.4 % of expenditure. 
Together with other donors, the EU played a part in these improvements. Howev-
er, structural weaknesses, recurrent outbreaks of disease33 and frequent ministe-
rial changes hindered further progress.

Water and sanitation

53 
Honduras has a relatively high rate of access to water (86 % of households in 
2012) and sanitation (80 % of households in 2012)34. This is close to, or exceeds, 
the Millennium Development Goals for 2015 (88 % and 75 % respectively). There 
are nevertheless significant disparities between rural and urban areas. Drink-
able water also poses a major challenge. It is estimated that only 10 % of the 
rural population has access to water treated with chlorine, versus 70 % in urban 
areas35.

54 
Since the beginning of the implementation of PAPSAC in 2012, there was no 
improvement in access to tap water (see Figure 4) and sanitation rates36 due to 
insufficient levels of investment37. The budget allocated to the national water 
provider38 increased in the 2007-2014 period, but the additional funds received 
by the service provider were mainly absorbed by non-discretionary expenditure 
such as salaries and debt payments.

33  Such as chikungunya, dengue, 

malaria and Zika fever.

34  National Demographic and 
Health Survey 2011-2012, 
Government report on the 
National Plan 2010-2014 and 
Foro Nacional de Convergencia, 
a civil society organisation 
that monitors the 
implementation of national 
development strategies.

35  National programme to 
improve drinking water 
quality, a part of the National 
Drinking Water and Sanitation 
Plan.

36  WHO/UNICEF Joint Monitoring 
Programme for water supply 
and sanitation. Honduras. 
Updated June 2015. Also data 
obtained from the National 
Institute of Statistics.

37  World Bank, 2013. Honduras 

- A Public Expenditure Review: 
Decentralisation of water and 
sanitation services.

38  Servicio Autónomo Nacional de 
Acueductos y Alcantarillados.

 
Observations 

4 Households with access to tap water in Honduras
e
r
u
g
i
F

100 %

95 %

90 %

85 %

80 %

75 %

70 %

29

total

urban

rural

2007

2008

2009

2010

2011

2012

2013

2014

2015

Source: National Institute of Statistics.

55 
Within this context, the EU contribution to the sector was relatively limited. The 
national authorities used funding from several donors to provide 13 957 people 
with access to water and sanitation, while also strengthening 20 municipal water 
boards and local supervision and control units, establishing three river basin 
councils and approving the National Drinking Water and Sanitation Plan and the 
related financial rules.

39  2 800 million kilograms worth 
a total of 2 100 million dollars 
(source: Central Bank of 
Honduras).

Quality systems for improving competitiveness

56 
The PAPSAC targets were achieved. These were output targets relating to the 
number of processes accredited, producers certified and awareness campaigns. 
However, the ultimate impact of this support on the competitiveness of Hon-
duran products cannot be measured. There are indications that the impact 
was rather limited. From 2012 to 2015, exports increased slightly by volume but 
declined overall by value. The volume of exports to the EU fluctuated, but the 
peak of 201139 was not subsequently achieved again despite the conclusion of the 
Association Agreement in 2012 (see paragraph 5).

 
30

40  Honduras Statistical Forestry 
Yearbooks for 2011 and 2014.

41  A forest management plan is 

a technical, legal and 
operational document that 
sets out how to manage 
a particular forest in 
a sustainable way during 
a period of at least five years. It 
includes objectives, an 
investment plan and an action 
programme.

42  The funds transferred each 
year from the Honduran 
National Treasury to the Forest 
Conservation Institute did not 
increase in 2013 and 2014. 
There was an increase in 2015 
(1.3 million euro), but this was 
considerably smaller than the 
EU budget support disbursed 
to that point (1.8 million euro).

Observations 

EU support prompted reforms in forestry management, but it 
is too early to see an overall impact

57 
EU support to the forestry sector prompted additional reforms. Combining pro-
ject support with the possibility of receiving sector-specific budget support from 
the EU hastened the formulation and adoption in 2013 of a single sectoral policy 
empowering the Forest Conservation Institute. The EU support also contributed 
to reforms aimed at improving governance in the sector, strengthening munici-
pal forest management and simplifying administrative procedures.

58 
The reforms have not yet achieved much overall impact. The percentage of forest 
land in Honduras actually decreased from 59 % in 2011 to 48 % in 2014 40. This not 
only reduced the country’s forest cover but also affected biodiversity. A main 
contributing factor was the reduced area under forest management, as evi-
denced by a fall in the number of forest management plans 41. As a result, one in 
every two hectares was no longer subject to a management plan. Consequently, 
cross-cutting issues such as forest fires have become more difficult to address. 
The number of fires and the area affected have increased steadily since 2012.

59 
The reasons for the absence as yet of much apparent impact include the 
following:

(a)  The strengthening of the Forest Conservation Institute was affected by legis-
lative delays. As a result, the Institute was not at full operational strength by 
the time EuroFor started. This was a missed opportunity to achieve efficiency 
gains in the implementation of forestry policy in general and EuroFor in 
particular.

(b)  The national authorities made very little use of the additional budgetary 

resources resulting from EU support to achieve forestry sector objectives42.

(c)  The sector was faced by significant additional challenges, such as the bark 

beetle plague (see 44 (a)).

Observations 

31

EU support has helped justice and public security institutions 
to work more closely together, but the situation in the 
country remains critical

43  United Nations Office on 

Drugs and Crime, Global Study 
on Homicide 2013, available at 
https://www.unodc.org/gsh/

60 
Since 2011, the fight against violence, impunity and corruption has gained con-
siderably in momentum in Honduras. With the support of the EU, this has result-
ed in some progress. The PASS and Eurojusticia steering committees improved 
the exchange of information between justice and public security institutions, one 
positive result of which was the emergence of interinstitutional agreements on, 
for example, shared training. Interinstitutional coordination nevertheless remains 
limited by the fact that each institution follows its own strategy. Furthermore, 
moves to adopt a single national security and justice sector policy and harmonise 
the legal framework were unsuccessful owing to institutional weaknesses and the 
difficult context following the 2009 ‘coup d’état’.

61 
Widespread violence remains a problem. While the homicide rate does not 
perfectly reflect the overall security situation, it is an important indicator (see 
Figure 5). Despite a decline since 2012, the homicide rate remains very high for 
the region (less than 30 deaths per 100 000 inhabitants in Central America) and 
by global standards (less than ten deaths per 100 000 inhabitants 43).

5 Annual homicide rate per 100 000 inhabitants in Honduras
e
r
u
g
i
F

90

80

70

60

50

40

2007

2008

2009

2010

2011

2012

2013

2014

2015

Source: Honduras police.

 
Observations 

32

62 
There are different interpretations as to the reasons for the decline in the homi-
cide rate. The government relies on a hard-handed approach, for example by 
deploying military police instead of focusing more on prevention. While it is pos-
sible that prevention activities and the strengthening of public security institu-
tions have contributed to the decline, there is no hard evidence for this. As the 
EU’s financial contribution was relatively small and some of the main objectives 
of PASS were not achieved, it is likely that the impact of EU funding was fairly 
limited.

Conclusions and 
recommendations

33

63 
The audit examined the effectiveness of EU development support to priority 
sectors in Honduras. We found that, in difficult country circumstances, the EU ac-
tions were relevant, generally delivered the expected outputs, and contributed to 
a number of positive developments in these sectors. At the same time, the overall 
situation in the country remains worrying. The level of poverty has increased, the 
area of forest land has decreased and there is still widespread violence and a very 
high homicide rate. We also found weaknesses in the Commission’s management 
of EU assistance. Based on these elements, we conclude that the EU’s develop-
ment support to priority sectors in Honduras was partially effective.

64 
The Commission’s approach to providing development support in Honduras cor-
rectly targeted areas with high needs that were in most cases covered by relevant 
and credible national strategies. However, the flexibility of the approach meant 
that various areas received EU support only for a relatively short period of time, 
which increased the risk of jeopardising its potential impact. Furthermore, we 
found that the EU actions for delivering support had very broad objectives, and 
hence the financial assistance was spread over many areas or did not address 
some priority needs. Although there is a good donor coordination structure in 
Honduras, actual collaboration was relatively limited, which led in some specific 
cases to overlapping support. The Commission is nevertheless making efforts 
towards joint programming with EU Member States as from 2018 (see para-
graphs 12 to 20).

Recommendation 1 ‑ Strengthen the EU approach by 
enhancing its consistency and focus

For the next change in its strategy for supporting priority sectors in Honduras, 
the Commission should strengthen its approach by:

(a)  ensuring that support to priority sectors is provided sufficiently long to be 

able to reach the targets set;

(b)  narrowing the focus of its actions to fewer well-defined areas that involve as-

sisting a limited number of institutions;

(c)  pursuing its efforts towards joint programming with EU Member States and 

better coordinating its approach with other donors.

Conclusions and recommendations 

34

65 
The Commission provided a significant part of its financial assistance in the form 
of budget support thereby generally supporting relevant and credible national 
strategies. However, the EU Delegation lacked the necessary macroeconomic and 
public financial management expertise to manage budget support operations in 
the field. Furthermore, providing budget support in Honduras involves substan-
tial risks relating to the macroeconomic framework and public financial manage-
ment. The Commission was able to partly mitigate these risks through dialogue 
and technical assistance, and by setting conditions that had to be met before the 
disbursement of budget support. The Commission did not assess budget sup-
port eligibility in a sufficiently structured manner to demonstrate whether the 
expected progress was being achieved in line with targeted and clearly defined 
benchmarks. In one case, it made a commitment to deliver budget support while 
at the same time withholding disbursements for non-compliance with the overall 
eligibility conditions. This sent the partner country inconsistent messages that 
jeopardised aid effectiveness (see paragraphs 21 to 31).

Recommendation 2 ‑ Strengthen the management of budget 
support operations

The Commission should further strengthen the management of its budget sup-
port operations by:

(a)  ensuring the consistency of the messages given when taking decisions on 
new budget support contracts. In particular, the Commission should avoid 
making budget support commitments while at the same time withholding 
disbursements because eligibility conditions relating to the macroeconomic 
framework and/or public financial management have not been met;

(b)  better structuring its future assessments of budget support eligibility to 

demonstrate whether the expected progress is being achieved in line with 
targeted and clearly defined benchmarks;

(c)  ensuring, at the next rotation of delegation staff, that the EU Delegation in 

Honduras obtains further macroeconomic and public financial management 
expertise.

66 
Most of the activities and outputs planned for Commission actions have been 
realised, albeit with significant delays mostly due to exogenous factors. The Com-
mission’s monitoring of performance was affected by weaknesses in the selection 
and use of indicators, the planning of field visits, the timing of results-oriented 
monitoring and follow-up of the resulting recommendations (see paragraphs 32 
to 38).

Conclusions and recommendations 

35

Recommendation 3 ‑ Strengthen the performance 
measurement of EU actions

The Commission should further strengthen the performance measurement 
of future EU actions by timely selecting sufficient, relevant and quantifiable 
performance indicators and setting baselines for them. In this connection, it 
should consider strengthening national systems for obtaining reliable data on 
demographic and other trends, in particular the National Institute of Statistics. It 
should improve the timing of its results-oriented monitoring and systematically 
follow up the resulting recommendations.

67 
The Commission has developed dialogue strategies to structure its policy dia-
logue in various areas with the Government of Honduras. This is good practice, 
although these strategies tend to be rather general and do not cover all relevant 
areas, such as poverty reduction and security and justice. Moreover, the Com-
mission has not made written assessments of the degree to which the objectives 
set by its dialogue strategies have been achieved. The Commission has generally 
made a substantial effort at all levels to obtain a relevant and constructive policy 
dialogue, which contributed to achieving the objectives of EU actions (see para-
graphs 39 to 45).

Recommendation 4 ‑ Strengthen the policy dialogue in the 
priority sectors

The Commission should further strengthen its policy dialogue in the priority 
sectors before 2018 by generalising the use of dialogue strategies in all relevant 
areas. This should include a clear definition of the expected results/outcomes of 
dialogue. The Commission should subsequently make written assessments of the 
extent to which the objectives of its dialogue strategies have been achieved.

This Report was adopted by Chamber III, headed by Mr Karel PINXTEN, Member 
of the Court of Auditors, in Luxembourg at its meeting of 25 October 2016.

For the Court of Auditors

Klaus-Heiner LEHNE
President

 
 
 
Annexes

36

Map of Honduras

I
x
e
n
n
A

Caribbean Sea 

Pacific Ocean 

 km 

 km 

Cartography: Eurostat — GISCO, 06/2016 

Administrative boundaries: © EuroGeographics © UN-FAO © Geonames 

 
Annexes 

37

I
I
x
e
n
n
A

Indicative allocations to priority sectors in Honduras for 2007‑2013 and 2014‑2020

Period

Priority Sector

Areas covered

Amount Priority Sector (Mio)

Priority Sector

Areas covered

NIP 1 (2007-2010)

Education

Health

65.5

NIP 1 (2007-2010)

Forestry

Amount Priority Sector (Mio)

21

2007-2013

Poverty reduction

NIP 2 (2011-2013)

Water and sanitation

Strengthening quality systems

45.5

111

Natural resources

NIP 2 (2011-2013)

Forestry

Renewable energy sources

Energy efficiency

47

68

2014-2020

Food security

Family agriculture

100

Priority Sector

Areas covered

Justice and public security

Rule of law

NIP 1 (2007-2010)

Security

NIP 2 (2011-2013)

De facto change from Security 
(PASS) to Justice (Eurojusticia)

Fight against corruption
Increasing citizen participation

3

44

Amount Priority Sector (Mio)

41

Priority Sector

Areas covered

Amount Priority Sector (Mio)

Total Amount (Mio)

223 

Source: European Commission.

40

Employment

Decent employment and social 
protection

85

Support measures

10

235

 
Annexes 

I Bilateral support to Honduras: decisions during 2007‑2015 (in euro)
I
I
x
e
n
n
A

Programme name

Initially allocated 

Decision 
year

Contracted 
as of 31.12.2015

38

Paid 
as of 31.12.2015

2007-2013 programmes

Poverty reduction

219 100 000.00

180 704 286.95

116 339 650.22

102 600 000.00

81 004 660.17

68 906 315.17

Apoyo Presupuestario al Plan de Nación (APN)

60 500 000.00 

38 921 310.17 

38 921 310.17 

2008

2011

 Programa de Apoyo Presupuestario Sectorial Agua y Calidad 
(PAPSAC)

Natural ressources

2010

2012

Modernización del sector forestal (MOSEF)

Programa de Apoyo Europeo al Sector Forestal - EuroFor

Security and Justice

42 100 000.00 

42 083 350.00 

29 985 005.00 

68 000 000.00

66 387 310.95 

26 655 622.36 

47 000 000.00 

21 000 000.00 

46 420 000.00 

19 967 310.95 

11 781 637.00 

14 873 985.36 

36 500 000.00 

19 148 940.82 

10 306 872.92 

2007

2013

Programa de Apoyo al Sector Seguridad en Honduras (PASS) Fase 1

9 000 000.00 

6 811 509.16 

6 588 572.38 

Promoviendo una Justicia Rápida y Accesible en Honduras 
(Eurojusticia)

27 500 000.00 

12 337 431.66 

3 718 300.54 

Other 2007-2013 programmes

12 000 000.00 

14 163 375.01 

10 470 839.77 

2008

2009

Proyecto de Apoyo a la Modernización de la Administración Pública 
y a la Integración Regional (PAAPIR)

Phasing Out - Programa de Apoyo a la Seguridad Alimentaria en 
Honduras (PASAH)  

5 000 000.00 

7 548 932.69 

6 264 996.94 

2 000 000.00 

1 978 008.79 

1 978 008.79 

2011

Programa de Apoyo a los Derechos Humanos (PADH)

5 000 000.00 

4 636 433.53 

2 227 834.04 

2014-2020 programmes

53 200 000.00

13 395 500.00

2 479 100.00

Food security

2014

Seguridad Alimentaria, Nutrición y Resiliencia en el Corredor Seco 
(EUROSAN)

Employment

2014

Fortalecimiento Institucional del Empleo Decente y la Seguridad 
Social en Honduras (EURO +LABOR)

Rule of law

 - 

30 000 000.00 

3 997 700.00 

799 540.00 

30 000 000.00 

3 997 700.00 

799 540.00 

11 600 000.00 

4 698 900.00 

839 780.00 

11 600 000.00 

4 698 900.00 

839 780.00 

-

-

-

-

-

-

Other 2014-2020 programme (Technical assistance)

10 000 000.00 

5 952 150.00 

1 187 830.00 

2014

Medidas de Apoyo al Desarrollo Institucional y a la Gestión de 
Políticas (MADIGEP)

10 000 000.00 

5 952 150.00 

1 187 830.00 

TOTALS

272 300 000.00

194 099 786.95

118 818 750.22

Source: European Commission.

 
Annexes 

39

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Reply of the  
Commission

Executive summary

42

III
The Commission is doing its utmost to help the country improve its level of development. It considers that under 
difficult circumstances, the EU’s development support has demonstrated a real impact in the areas of intervention.

The Commission will continue to improve identified weaknesses in the management of its aid following the sug-
gestions made by the Court. It would like to point out, however, that it is not possible to establish to what extent 
the ‘management weaknesses’ hindered the EU’s development impact, especially in the context of a wide array of 
external factors.

As regards the area of forest land, the Commission stresses the fact that exogenous factors have been the main rea-
son of the loss of forest lands. For instance, pine beetle is the cause of loss of 11% of country’s forests.

IV
Focal areas in the country had to change in a flexible manner in order to respond to the changing needs of the 
country.

The EU’s Multiannual Indicative Programmes, guarantee coherence, while at the same time allow for flexibility 
to take into account new developments and national policy options. Hence, the need to strike a careful balance 
between a rigid cooperation agenda that is not responsive to national priorities and one that strives to address 
changing circumstances in countries of operations, all while maintaining the sustainability of long-term goals.

Over time, the Commission focused on more narrowly defined sectors which was evidenced in changes in the pri-
oritisation from the 2007/2013 CSP to the 2014/2020 MIP. In this context, when negotiating the MIP 2014-2020, there 
was a common understanding with the Government that there would be no rupture with the CSP 2007-2013 and the 
level of alignment with national priorities was highly appreciated by the Honduran stakeholders.

In addition, the Commission considers that it has a wide range of adequate performance monitoring tools, including 
policy dialogue, monitoring missions, and ROM (results-oriented monitoring).

V
The G16 Donor Coordination Group in Honduras is a very useful tool for coordination between donors. It has been 
working continuously since its inception in 1998, all while implementing aid-effectiveness principles.

The G16 has the merit of allowing a long-term political dialogue between the Government of Honduras and major 
donors. Donor coordination in Honduras has been therefore well-articulated and structured, minimising overlaps in 
cooperation efforts.

The joint programming, due to start in 2018, will further enhance cooperation efforts bringing them to an even 
higher level.

Reply of the Commission 

43

VI
Policy dialogue strategies are spelt out in sectors subject to budget support in which they constitute one of many 
instruments alongside others (financial support, technical assistance, monitoring etc.).

The degree to which the sector objectives were achieved is assessed in writing in each budget support disburse-
ment file. The achieved impact is a combined result of all types of instruments, not only of the policy dialogue.

Nevertheless, the Commission will continue to reinforce its policy dialogue mechanisms, in particular the assess-
ment and monitoring of policy dialogue progress and its proper documentation.

VII
The Commission ensures macroeconomic expertise at all times in all its Delegations, based on a cost-benefit 
approach. Despite the fact that the Delegation did not have a macro- and PFM- (public finance management) expert 
in place, until recently, it received technical support from the Delegation in Nicaragua.

In addition, the EU Delegation in Honduras has been benefitting from a wide array of expertise on PFM and mac-
roeconomic issues: from the Headquarters, through missions to the field, technical assistance (PAAPIR - Support 
Programme for the Public Administration and Regional Integration) and daily contacts with the Headquarters on 
specific issues.

In addition, the Commission conducted HQ missions to Honduras and Washington to monitor the situation engag-
ing not only with the Honduran Government but also with the IMF.

As a general remark, the Commission gives the utmost importance to recruiting the right candidates for Delegations 
and its staff members participate in regular training programmes and refresher courses in this regard.

The Delegation also strictly applies the Budget Support Guidelines at all times in its assessment of the eligibility 
criteria.

The provided budget support has been coherent and consistent, based on a close dialogue with the partner coun-
try and ensuring continuous policy dialogue and adaptation to difficult circumstances.

Furthermore, all the disbursement dossiers are carefully analysed with final decisions made by the Budget Support 
Steering Committee (BSSC). BSSC is a decision body that is always documenting the decisions taken by its members.

The Budget Support Guidelines allow for the respect of the dynamic approach as introduced in the Communication 
on budget support COM(2011) 638 final and the relevant Council Conclusions: ‘In all forms of budget support, the EU 
will apply a tailor-made and dynamic approach to eligibility, focusing on progress in the implementation of credible 
and relevant sector reform strategies, to maximise the impact on the ground’ (Council Conclusions 9371/12).

Reply of the Commission 

44

Observations

13
As regards the support in the area of renewable energy and energy efficiency, no cooperation activities took place 
in years 2011-2013. The actions foreseen in the National Indicative Programme (NIP) 2007-2013 in these areas were 
proposed as a follow-up to previous actions in the electricity sector, i.e. to GAUREE and GAUREE 2 projects (Autono-
mous Management and Rational Use of Electric Energy).

However, in the Mid-Term Review (2009), the Government, through the Minister in charge of the electricity sector, 
indicated that support concerning renewable energy and energy efficiency was not required. The national authori-
ties responsible for the energy sector observed that the law incentivising renewable energies had produced new 
sources of renewable energy through private investment.

This is the reason why the EU Delegation included actions related to renewable energy and energy efficiency in 
its forestry programmes (MOSEF and CLIFOR). These activities have been carried out as climate change adaptation 
mechanisms and incentives for forest resource management (and not as energy sector interventions).

Regarding quality systems for improving competitiveness, this sector was a complementary component of the Com-
mission’s strategy to support the implementation of the EU Association Agreement with Central America.

The signature of the EU Association Agreement with Central America on 29 June 2012 and the provisional applica -
tion of Part IV of the Association Agreement from 1 August 2013 also justify the EU’s intervention in this respect.

14
The EU assistance in these sectors was implemented because they were considered a priority in the Government’s 
Poverty Reduction Strategy (PRS).

In addition, in 2006, the Delegation participated in the joint discussions that donors carried out with the Govern-
ment under the PRS Consultative Advisory Board (Consejo Consultivo de la ERP) in order to review the PRS. Budget 
investment (domestic and external funds) concentrated in the following sectors: education, health & nutrition, 
social protection, infrastructure, production and access to assets, and governance. Therefore, these areas became 
also priority sectors for the EU actions of cooperation.

As regards the short period of provided support, a degree of flexibility in the EU programmes was necessary to 
react and adjust the activities to a changing situation after a political crisis caused by the coup d’état in 2009 (please 
see Commission reply to paragraph IV.).

15 

(a)
The Commission stresses that the forestry sector is also related to water and sanitation management and to soil pro-
tection. In this light, the support provided by MOSEF to municipalities was assessed by the Delegation as coherent 
with the objectives of the project.

Reply of the Commission 

45

MOSEF is the main project in the international community of donors that is strengthening the coordination 
between the three institutions granting titles to forest land.

Land tenure is a political issue by nature and a major concern across Latin America. While it cannot be solved by 
cooperation projects only, it has been addressed through a mix of other channels and instruments: (i) the EU-led 
FLEGT (forest law enforcement, governance and trade) initiative which is the most effective instrument to foster 
reform, (ii) policy dialogue in the context of negotiations for a bilateral FLEGT VPA (voluntary partnership agree-
ment) with the EU, and (iii) specific contracts that provide assistance (e.g. PROCORREDOR project - ‘Gestión Sosteni-
ble de Recursos Naturales y Cuencas del Corredor Biológico Mesoamericano en el Atlántico Hondureño’).

In addition, the Commission notes that land conflicts in a country of a rich cultural diversity with strong patrimonial 
heritage values can be addressed in two ways: land regularisation and consultation mechanisms of indigenous com-
munities. The EU support to regularise land is therefore a ‘step -by-step’ approach. 

(b)
It is during the audited period that Honduras changed its law on education to extend primary education up to 
grade nine. Donors aligned their support accordingly.

16
There were always more demands than available offers for technical assistance. Prioritisation mechanism was 
implemented through technical committees with participation of the EU, the Honduran Government and relevant 
institutions (on health, quality, water and sanitation).

Donor coordination was well-structured. Therefore, relevant needs that were not addressed underwent the same 
cost-effectiveness analysis.

Relevant areas that did not receive funding will be closely analysed to see what alternative actions/measures can be 
taken to support them.

Common reply to paragraphs 16 (a) to (c)
Through the demand-driven PAAPIR programme, the Commission was able to provide TA to sectors with crucial 
needs, following a careful assessment and prioritisation.

The Commission points out that it was impossible to meet all the demands.

(a)
In addition to the common reply above, in the specific case of the health sector, the study on vitamin and mineral 
deficiencies was approved by the Technical Committee of PAAPIR in 2013, but not subsequently carried out.

Reply of the Commission 

46

18
The Commission considers that good progress has been made in the process towards achieving an effective division 
of labour between donors. For instance, GIZ took up the issues of climate change and forestry and Spain of govern-
ance and reforms in the justice sector.

At the Delegation level, a Road Map for joint programming after 2018 has been developed. In the course of 2016, an 
analysis of the national context in Honduras in this regard will be carried out.

19
The Commission is continuously striving to enhance cooperation with the Honduran Government and all donors. 
The main coordination is done with the EU Member States. The EU Delegation is also very active in the G16 aiming 
to reach the best coordination possible with the main donors present in Honduras.

Box 3 – Overlaps in funding
The Commission considers that even if the approaches of the donors were different, they can be complementary.

In the water and sanitation sector, all municipalities involved in the project received support but not all received 
investments in infrastructure. In addition, COMAS (the Municipal Commission on Water and Sanitation) and USCL 
(the Monitoring Unit and Local Control) were created covering all the municipalities. The support for municipalities 
was based on capacity-building through these two entities.

20
The Delegation considers being very active in the coordination with other donors which is reducing the risk of over-
lap. While time-consuming, donor mapping is not always the most effective tool. Coordination by the beneficiary, 
based on empowerment and policy dialogue, seems to yield better results.

23
The eligibility of the sector was fully assessed according to the Budget Support Guidelines. Based on that, it was 
concluded that the sector policy was sufficiently credible and relevant to allow a satisfactory budget support 
programme.

As long as the sufficient credibility and relevance elements exist, a sector policy can be improved in time and 
enhanced. This is part of a continuous budget support programme and result of policy dialogue and technical 
assistance.

Moreover, the Commission notes that support to quality systems was implemented in the context of the EU Associa-
tion Agreement with Central America, and it was validated by the Government.

26
The Commission considers that a structured analysis for the eligibility criterion of macro-economic stability is 
important and executed based on Budget Support Guidelines.

Reply of the Commission 

47

In the cases mentioned by the Court, progress was based on a number of specific indicators. The evolution of these 
indicators provided proof of positive progress and non-deterioration in a very complex conjuncture.

Concerning the lack of an agreement between the Government of Honduras and the IMF, such a situation is referred 
to in the Budget Support Guidelines. Paragraph 5.1.2 of the guidelines states the following: ‘On the other hand, the 
absence of an IMF programme need not automatically imply that the macroeconomic eligibility criterion is not met (…). 
Where implementation is unsatisfactory or there is no IMF programme in place because of difficulties to agreed one with 
the IMF, a country may still be eligible if the budget support programme objectives are not at risk, particularly for SRC’.

Even taking into account the decision of the IMF, the Commission concluded that this disagreement in a very techni-
cal, minor point did not preclude an overall positive assessment and further support to the Government’s efforts to 
re-establish macroeconomic stability.

27
Budget support programme preparation in a specific sector can take place while other programmes are not making 
disbursements. This is part of the continuous policy dialogue and support to the Honduran Government in different 
sectors/policies. The overall message is to support the partner country despite difficulties in more than one sector 
via budget support.

Moreover, the Delegation pursued policy dialogue during the periods mentioned in the footnote, which should not 
be considered as a contradictory message of withholding budget support.

In addition, signing a Financial Agreement for budget support is also providing an additional negotiation opportu-
nity for the EU.

The Commission sees no contradiction in the signature of Eurofor. It should be noted that this programme con-
tained a very robust element of technical assistance managed through the delegated cooperation. It needed to 
start immediately and it was made clear through policy dialogue that no disbursement would take place until the 
macroeconomic situation was solved.

28
The Commission has strongly supported the PFM reform in Honduras and maintained a very close and continuous 
dialogue to support improvements and progress in this domain.

The improvement of public finances is monitored by successive PEFA exercises, which are a comprehensive joint 
undertaking of donors and the Government.

29
While the Commission recognises weaknesses, progress is notable and gradual improvements are taking place.

The macroeconomic and political conjuncture in the country made reform efforts slower. However, progress was 
registered. This positive evolution is even more relevant, important and difficult to achieve in a complex environ-
ment such as Honduras.

Reply of the Commission 

48

In addition, the Commission considers that it is very difficult to fulfil expectations on the pace of the reform. 
Although challenges exist, there have been important milestones achieved, particularly through the EU support, 
e.g.: the creation of the budget availability certificate to avoid deviations from planned expenditure by the line min-
istries. This innovation was introduced following missions from the HQ and dialogue with the local TA and the IMF.

Common reply to paragraphs 29 (a) to (c)
The Commission agrees with the Court’s findings and makes every effort to monitor both policies and performance 
in this domain.

As noted by the Court in paragraph 30, this accurate assessment has served the Commission to rightly target the 
policy dialogue and capacity development initiatives in PFM areas that require most attention and in coordination 
with other donors.

Doing so, the Commission consistently and coherently supports the Government’s efforts to improve PFM 
performance.

(d)
The latest available PEFA assessment allows for establishing a number of actions to improve this situation. This issue 
is addressed through the Commission’s policy dialogue with the Government of Honduras.

(e)
This issue is addressed through the Commission’s policy dialogue with the Government of Honduras.

(f)
Corruption presents a challenge to democratic governance and the rule of law.

At the same time, however, despite a challenging backdrop, the new Criminal Code (Código Penal) is currently under 
revision with the support of Spain and the Eurojusticia programme (through the socialisation process of the new 
draft Criminal Code). In addition, a project addressing corruption is being formulated under the MIP 2014-2020.

The Commission is also supporting an initiative with the youth for them to ascertain their rights and to reject 
corruption practices (‘Participación e incidencia a multinivel y multiactor en el marco de procesos de veeduría social 
en Honduras, en tema de violaciones, promoción y defensa de los derechos fundamentales de la juventud’, reference 
EIDHR/2015/369-295).

30 

(c)
The Commission will continue its efforts in further defining benchmarks against which progress is to be measured.

For some criteria (notably PFM), progress against initial reform milestones is particularly important; for others (mac-
roeconomic, for example), maintaining stability-oriented policies is sufficient to confirm eligibility.

Reply of the Commission 

49

Moreover, the ongoing policy dialogue will accompany the reform process and give opportunity to clarify 
expectations.

Box 4 – Examples of unspecific reform expectations
Please see Commission reply to the paragraph 27.

31
The Head of Cooperation and Project Managers involved in budget support operations followed technical training 
on budget support and are using their professional experience to ascertain the necessary PFM expertise.

In addition, there was a strong technical assistance in place (PAAPIR) supporting budget support activities (please 
see also Commission reply to paragraph VII.).

Furthermore, the Delegation benefits from a wide range of PFM and macroeconomic expertise: from the Headquar-
ters, through missions to the field, technical assistance and regular contacts with the Headquarters on issues of 
concern.

33
As regards the security and justice sector, some highly positive outputs were achieved despite the particular dif-
ficulties in the sector.

For instance, the start of the inter-institutional trainings of the justice operators (judges, police and state attorneys) 
was very much successful. These were initiated and conducted for the first time as formal training courses leading 
to accreditation by academia.

Also, the support to the NGOs financed through PASS was successfully implemented, as well as the component to 
equip the beneficiary.

35
Due to the coup d’état in 2009, it was not feasible for the Delegation to further formulate the project, especially as 
the government was not officially recognised until mid-2010.

The delay in the implementation of MOSEF project was partly due to the fire in the offices of ICF (Institute of Forest 
Conservation) where MOSEF was located.

36 

(a)
The Commission considers that it is necessary to take into account the context of the design and approval of PASS. 
Indeed, when the programme was approved in 2008, PASS objectives were without any doubt ambitious but realis-
tic. The actions were deemed appropriate in that context.

Reply of the Commission 

50

The institutional crisis of 2009 that led to a coup d’état altered dramatically the panorama and all the efforts of the 
new administration were absorbed in restoring the ‘institutionality’ of the Honduran state. Furthermore, organised 
crime took advantage of the coup d´état and its aftermath to gain influence. Institutions of the Government were 
significantly weakened, particularly the Ministry of Security demonstrating a low capacity and political will.

Considering all these challenges, it would be appropriate to say that regardless of adverse circumstances generated 
by the political instability of 2009, PASS yielded significant outputs, despite not reaching the initial expectations.

(b)
Not all areas of a sector policy have to be translated into specific indicators. Only a limited number can be taken for 
specific indicators. In addition, overall sector progress, and therefore, all action objectives are monitored in the sec-
tor policy progress assessment.

In the case of APN, the progress of actions was monitored but the indicators of the Honduran National Plan were 
used to report the achievements of the budget support programme.

(c)
Given that at the time of design, indicators of national strategies were in the process of validation and were not 
detailed enough to be measured, it was necessary to propose an ad hoc indicator in the water and sanitation sector.

(d)
The Commission provided specific support to improve statistic data.

(e)
The Commission is engaged with the Government to redress that situation.

(f)
In the case of APN, the country’s political situation was not favourable for the selection and adoption of indicators 
for the programme when the Financing Agreement was signed.

This was also communicated by the Delegation in the Standard Explanatory note for the adoption of Rider 1 to the 
Financing Agreement of the APN which states that during 2008 and 2009, the country’s political and economic crisis 
made it impossible to negotiate an operational Financing Agreement given that the pre-conditions for a budget 
support programme where lost shortly after the Commission took the decision to fund the agreement.

Therefore, after rule of law was restored in the country, negotiations were carried out in order to define the indica-
tors based entirely on the new Government’s strategies.

Reply of the Commission 

51

37
Field visits are planned on the basis of different criteria, including prioritisation of visits to projects/programmes 
with difficulties in order to provide close monitoring to mitigate the risks.

The KPI dashboard for 2015 indicates that the percentage of problematic projects that were subject to monitoring 
or evaluation activity during that year was 100%.

The Commission will monitor closely all projects with identified weaknesses or risks, inter alia through targeted field 
visits.

38
A methodology to monitor budget support as part of the result-oriented monitoring (ROM) was designed by the 
Commission in recent years and tested for the first time in Honduras.

Although the ROM performed for the APN in September 2013 did not provide specific recommendations for the 
APN, the observations reported by the experts have been considered useful by the Delegation in the identification 
and formulation of budget support interventions under the MIP 2014-2020.

The Commission will pursue a systematic integration of ROM recommendations in their ongoing programmes.

41
All dialogue strategies developed by the EU Delegation are in the context of poverty reduction.

The Delegation will further refine their policy dialogue in the future.

42
Policy dialogue strategies are defined for sectors subject to budget support and are regularly updated by the EU 
Delegation. They are also considered before each budget support disbursement.

In addition, as such, they form part of a wide spectrum of other instruments (e.g. technical assistance and financial 
support). Hence, their impact is a combined result of all types of tools and they should not be looked at in isolation.

Nonetheless, the Commission will continue making efforts to improve the documentation of its policy dialogue and 
its assessment.

44
Leverage depends on many factors including financial contribution political, social, cultural and trade aspects. Lev-
erage cannot be compared to other countries based only on financial and trade terms.

Although EU funds represent a small proportion of the Government’s budget, the Commission sees the actual lever-
age obtained in light of the technical capacity that the EU was able to deliver.

In the case of, for example PFM and macroeconomic stability, this support was both important and beneficial to 
Honduras and it allowed the EU to have policy leverage of an important scale.

Reply of the Commission 

52

45 

(a)
Bilateral meetings took place to address, through policy dialogue, the areas supported by the APN. The EU policy 
dialogue on education took place in the context of the Donors Education Working Group called MERECE. Meet-
ings were numerous and constant throughout the period. The number of meetings was considered sufficient and 
adapted to the resources available.

National statistics strategy and civil service reform were both part of the indicators under the APN programme. 
Therefore, they had to be included in the political dialogue with the Honduran authorities.

(b)
The creation of a different observatory was a risk with the arrival of the Mission to Support the Fight against Corrup -
tion and Impunity in Honduras (MACCIH). The EU Delegation’s strong involvement in the coordination with other 
donors has mitigated the risk of the duplication of efforts.

The EU is now one of MACCIH’s donors and is in a leading position to ensure complementarity in the sector.

47
The evolution of poverty needs to be assessed taking into account also external factors.

It would need to be assessed how poverty levels would have evolved without the impact of EU’s cooperation 
programmes.

The Commission considers that without the EU’s intervention, the impact of the 2008 global financial crisis on pov-
erty levels would have been much worse.

49
The indicators were negotiated with the Government based on a national sectoral reform strategy.

The Commission uses technical assistance support and policy dialogue to address these issues.

50
The Commission considers an achievement in itself the fact that the salary costs declined from 55% to 49% in the 
education sector in a country as challenging as Honduras.

Since no systematic evaluation of APN and its impact on the education exists, it is rather difficult to objectively 
assess the impact of budget support.

Reply of the Commission 

53

51
The Commission considers that APN has been one of the most successful interventions in the health sector. The 
Financing Agreement targets, which are the same for the National Development Plan (Plan de Nación), were met for 
the period 2010-2014. The results were the following:

—  66% of births in 2013 were delivered in health institutions (an increase from 53% in 2009). The increase repre-

sents 20,555 births.

— 

In 2013, 61% of new mothers had access to postnatal care during the first six weeks after childbirth (up from 51% 
in 2009).

—  The prevalence rate (per thousand) of diarrhoea in children under five years of age decreased from 148 in 2009 

to 126 in 2013.

—  The prevalence rate (per thousand) of acute respiratory infections (pneumonia/bronchopneumonia) in children 

under five years of age decreased from 49 in 2009 to 45 in 2013.

52
The Commission considers that the indicators demonstrating progress in the sector are very encouraging, notwith-
standing the mentioned persistent weaknesses.

54
The EU has been working in the sector that featured an increase of 24% in rural water and of 45% in improved rural 
sanitation based on the Joint Monitoring Programme (led by the UN and carried out every two years). This signifi-
cant improvement as regards access to drinking water and rural sanitation took place in the period 1990-2015.

55
These indicators are related to official activity reports for specific indicators of PAPSAC. They do not represent all 
the results of the EU contribution to the sector.

It is important to highlight the achievements of the EU intervention in the sector policy framework such as the 
approval of national water and sanitation policies and operational plans.

In addition, the EU technical assistance contributed to several studies to support the institutions within the sector.

56
To influence the volume of Honduran exports to the EU is a very ambitious goal as it depends on external factors. 
The effects of the Association Agreement will only be fully seen in the longer term.

Reply of the Commission 

54

58
This overview of the sector illustrates well the magnitude of the challenges to be faced for improving the forestry 
sector in a country of high vulnerability to climate change. There is no doubt that the improvement of the sector 
governance is a key issue, bearing in mind the scenario and risk of non-intervention in addition to analysing the 
situation before and after the completion of the project.

The situation is further aggravated by the bark beetle crisis that hinders efforts made in this sector.

59 

(a)
The fact that the Institute was not fully operational was due to legislative delays which are beyond the control of 
the Commission. In addition, the EU is contributing to the institutional strengthening in the sector improving the 
implementation of the forest policy.

(b)
The rationale of budget support is to monitor the compliance with the indicators and not necessarily to increase the 
budget allocation of the institution. In order to implement a sector strategy by the Government, it is not required to 
have an increased budget of the relevant institution.

60
Violence, impunity and corruption are among the most difficult problems to address in any country. The Commis-
sion considers that PASS and Eurojusticia helped to forge a more coordinated institutional response. The Com-
mission agrees that a single national security and justice sector policy has not yet been achieved and is doing 
its utmost through programmes under implementation and general efforts in the sector to work towards that 
objective.

In addition, although the interinstitutional coordination remains limited, the EU is the only donor promoting the 
coordination between the three institutions in the sector: the Ministry of Human Rights, Justice, Governance and 
Decentralization (Secretaría de Derechos Humanos, Justicia, Gobernación y Descentralización); the Judiciary (Poder 
Judicial) and the Prosecutor’s Office (Ministerio Público).

62
PASS was developed under particular political conditions. Following the coup d’état of 2009, cooperation was sus-
pended for a year. When it resumed, the political conditions and priorities had changed significantly. They contin-
ued to do so in the course of the programme due to a surge in homicides. The project was significantly adapted, in 
a practical way, by simplifying the log frame.

Reply of the Commission 

55

Conclusions and recommendations

63
The Commission acknowledges the positive assessment of its interventions by the Court.

There are external factors outside the EU control that affect outcomes and impact of the Commission’s interven-
tions. The political crisis of 2009 has affected all activities in the country. If the EU had not supported priority sec-
tors, the conditions in these sectors would have been even more difficult.

As regards deforestation rates in years 2000-2014, a new assessment will be published by the end of 2016. Fur-
thermore, losses in forest areas are largely due to exogenous factors (such as the pine bark beetle crisis) which are 
outside of the Commission’s control.

64
The Commission finds that cooperation was encouraging.

The current programming with medium- and long-term interventions in each sector, through the same leading 
institutions, ensures consistency in the EU cooperation and reduces the risk of jeopardising its impact. The strong 
component of delegated cooperation and joint programming with Member States (Germany and Spain) contributes 
to minimising such risks.

Recommendation 1 ‑ Strengthen the EU approach by enhancing its consistency and 
focus 

(a)
The Commission accepts the recommendation.

(b)
The Commission accepts the recommendation and will continue to strike the right balance and to concentrate on 
the areas which guarantee highest impact.

(c)
The Commission accepts the recommendation.

The Delegation is already working towards joint programming and it will redouble its efforts to achieve it by 2018.

Joint programming is ongoing, according to the road map. Various actions are implemented via delegated coopera-
tion under the same leading institutions, e.g.: UTSAN (Technical Unit for Food Security and Nutrition) in the food 
security sector (EU and FAO); Ministry of Employment in the employment sector (EU and Spain); Ministry of Environ-
ment in the forestry sector (EU and Germany).

Reply of the Commission 

56

65
The Budget Support Guidelines provide very detailed instructions on risk management and related tools. The main 
tool used is the Risk Management Framework which has been progressively introduced in the management of 
budget support programmes in Honduras.

On assessing eligibility, budget support rules for disbursement are strict and clear. Four eligibility criteria must be 
fulfilled to allow for a disbursement. This includes progress and developments in macroeconomic stability-oriented 
policies.

The Government demonstrated efforts and progress in trying to maintain and support macroeconomic stabil-
ity-oriented policies based on a comprehensive analysis carried out by the Delegation. This was documented in the 
provided eligibility reports.

Recommendation 2 ‑ Strengthen the management of budget support operations 

(a)
The Commission accepts the recommendation as it is of the opinion that messages to the Government of Hondu-
ras are already consistent. Currently, the Budget Support Steering Committee confirms strategic options and only 
allows the Delegation to implement Budget Support programmes considering the short, medium and long-term in 
a consistent manner.

The Commission has a wide-ranging policy dialogue approach with Honduras. The Government’s commitment 
towards reforms is a key element of policy dialogue and eligibility for budget support.

(b)
The Commission accepts the recommendation.

The Commission considers that this recommendation is already being implemented.

The Budget Support Guidelines include the instructions for a structured assessment and detailed templates and are 
fully and consistently applied.

The guidelines allow also for the respect of the dynamic approach as introduced in the Communication on budget 
support COM(2011) 638 final and the relevant Council Conclusions:‘In all forms of budget support the EU will apply 
a tailor-made and dynamic approach to eligibility, focusing on progress in the implementation of credible and relevant 
sector reform strategies, to maximise the impact on the ground’ (Council Conclusions 9371/12).’

(c)
The Commission accepts the recommendation.

Macroeconomic and public financial management expertise is a factor in the selection of staff that is taken into 
account during the rotation process.

Reply of the Commission 

57

As of 1st September 2016, an expert with a budget support expertise has been assigned to the Delegation in 
Honduras.

In addition, the Commission will also continue to ensure additional macroeconomic and PFM expertise by alterna-
tive means.

Recommendation 3 ‑ Strengthen the performance measurement of EU actions
The Commission accepts the recommendation and will continue to take it into consideration in its new programmes 
to strengthen sectoral monitoring and evaluation systems. For instance, Eurosan Budget will support the national 
agriculture census. This will strengthen the capacity of the National Institute of Statistics (INE).

67
The sectoral strategies, developed by the Delegation, are used as instruments to support the EU policy dialogue 
in the focal sectors. Every policy dialogue is documented in a written report. Assessments of the degree to which 
objectives have been achieved are done during sector analysis for the release of payments.

Recommendation 4 ‑ Strengthen the policy dialogue in the priority sectors
The Commission accepts the recommendation.

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Event

Adoption of the Audit Planning Memorandum/Start of audit

Official sending of draft report to Commission (or other auditee)

Adoption of the final report after the adversarial procedure

Commission’s (or other auditee’s) official replies received in all languages

Date

17.11.2015

20.7.2016

25.10.2016

3.11.2016

 
We assessed the effectiveness of the bilateral EU 
development support to priority sectors in Honduras. We 
therefore examined the Commission’s management and 
the achievement of the EU development support objectives. 
The audit focused on the 2007 2015 period. The priority 
sectors examined were poverty reduction; forestry; and 
security and justice. 
We concluded that the EU’s development support to 
priority sectors in Honduras during the audited period was 
partially effective. It contributed to a number of positive 
developments in these sectors, but difficult country 
circumstances and a number of management weaknesses 
hindered its impact. The overall situation in the country 
remains worrying. The level of poverty has increased, the 
area of forest land had decreased and there is still 
widespread violence and a very high homicide rate.

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