IMF Executive Board Approves US$4.2 Billion Extended Fund Facility for Ecuador

March 11, 2019

The Executive Board of the International Monetary Fund (IMF) today approved a US$ 4.2 billion (435 percent of quota and SDR 3.035 billion) arrangement under the IMF’s Extended Fund Facility (EFF) for Ecuador. The Board’s decision enables the immediate disbursement of US$652 million (equivalent to SDR 469,7 million, or 67.3 percent of Ecuador’s quota). This arrangement provides support for the Ecuadorean government’s economic policies over the next three years.

The Ecuadorian authorities’ plan aims to create a more dynamic, sustainable, and inclusive economy for the benefit of all Ecuadorians. It is centered around four major priorities; boosting competitiveness and job creation; strengthening fiscal sustainability and the institutional foundations of Ecuador’s dollarization; protecting the poor and most vulnerable; and improving transparency and bolstering the fight against corruption.

Following the Executive Board discussion, Ms. Christine Lagarde Managing Director and Chair, summarized the Board’s findings:

“The Ecuadorian authorities are implementing a comprehensive reform program aimed at modernizing the economy and paving the way for strong, sustained, and equitable growth. The authorities’ measures are geared towards strengthening the fiscal position and improving competitiveness and by so doing help lessen vulnerabilities, put dollarization on a stronger footing, and, over time, encourage growth and job creation.

“Achieving a robust fiscal position is at the core of the authorities’ program, which will be supported by a three-year extended arrangement from the IMF. The aim is to reduce debt-to-GDP ratio through a combination of a wage bill realignment, a careful and gradual optimization of fuel subsidies, a reprioritization of capital and goods and services spending, and a tax reform. The savings generated by these measures will allow for an increase in social assistance spending over the course of the program. The authorities will continue their efforts to strengthen the medium-term fiscal policy framework, and more rigorous fiscal controls and better public financial management will help to enhance the effectiveness of fiscal policy.

“The authorities are committed to supporting job creation, restoring competitiveness and catalyzing private sector-led growth while increasing transparency and forcefully countering corruption. A more efficient tax system, public wage restraint, facilitating the hiring process, and a more efficient energy sector are important components of the authorities’ plan in this area.

“Building crisis-preparedness capabilities and strengthening the oversight of banks and cooperatives will help to strengthen financial sector resilience. The institutional foundations of dollarization will be supported by the authorities’ efforts, already underway, to increase the operational autonomy of the central bank and to build reserve buffers.

“Protecting the poor and most vulnerable segments in society is a key objective of the authorities’ program. In this context, the authorities plan to extend the coverage of, and increase the nominal level of benefits under the existing social protection programs. Work is also underway to improve the targeting of social programs.”

Ecuador: Selected Economic Indicators

2016

2017

Est. 2018

Proj. 2019

Proj. 2020

Output

Real GDP growth

-1.2

2.4

1.1

-0.5

0.2

Employment

Unemployment (%)

5.2

4.6

3.7

4.3

4.7

Prices

Inflation, average (%)

1.7

0.4

-0.2

0.6

1.2

Public sector 1/

Revenue (% GDP)

30.3

32.0

36.3

35.2

38.3

Expenditure (% GDP)

38.6

36.6

37.2

35.2

34.6

Overall balance (% GDP)

-8.2

-4.5

-0.9

0.0

3.8

Debt (% GDP)

43.2

44.6

46.1

49.2

46.8

Money and credit

Broad money (% change)

16.5

10.0

5.6

1.7

4.2

Credit to the private sector (% change)

6.2

16.4

14.9

4.4

5.7

Balance of payments

Current account (% GDP)

1.3

-0.4

-0.7

0.4

1.4

FDI (% GDP)

0.8

0.6

0.9

1.1

1.1

GIR (in months of imports)

2.7

1.1

1.0

2.5

3.9

External debt (% GDP)

36.6

39.5

40.5

42.8

42.9

Sources: Central Bank; Ministry of Finance; National Statistical Institute (INEC); and Fund staff estimates/projections.

1/ Consolidated at the level of the non-financial public sector.

IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Raphael Anspach

Phone: +1 202 623-7100Email: MEDIA@IMF.org