$6 billion Loan agreement reached with the IMF with disbursements beginning immediately

Ecuador and the International Monetary Fund, IMF have reached a technical agreement that allow the disbursement of six billion U.S. dollars in loans, according to Finance Minister Simon Cueva. The accord must be approved by the IMF governing board, which is expected, but will unblock funds which have been frozen for months.

Finance Minister Simon Cueva

The money include $1,5 billion from the IMF plus $4,5 billion from other multilateral organizations such as the World Bank and the Inter American Development Bank, which will be delivered late this year and in 2022.

The accord also includes fiscal targets for social protection, strengthening government finances and economic recovery for the conservative government of President Guillermo Lasso.

“Resources included are $800 million from the IMF in 2021, scheduled to begin immediately, and another $700 million in 2022, which will ensure we will have sufficient funds to finance the government and other state-owned companies,” Cueva said at a news conference in Quito.

Guillermo Avellan, Ecuadorean Central bank chair pointed out that negotiations with the IMF will allow the government to achieve several targets, among which he underlined sustainable growth which respects the environment and generates quality jobs for Ecuadorians.

Terms of the agreement also promote transparency of public resources in the government administration plus ordering finances, strengthening the dollarization process (Ecuador’s official currency since 2000) and ensure bank and other institutions deposits belonging to citizens.

In 2020, under the administration of ex-president Lenin Moreno, IMF approved a 27-month credit for Ecuador, under the IMF Extended Service totalling some $6.5bn, most of which has been disbursed.

Credit was conditioned to a plan of reforms, including austerity and anti-corruption measures, with a fiscal deficit of $4,8bn (4,65% of GDP), bringing the poverty rate down to 48% and unemployment and underemployment to 30%.
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Credit: Merco Press