The International Monetary Fund (IMF) has approved a second installment of over $2.5 billion to Ecuador for economic development. The agency said that the country has 10 and a half years to pay off the debt. The interest rate is 3.2 percent.
The Ministry of Economy and Finance (MEF) reports that the loan follows a series of others accepted from the Inter-American Development Bank ($500 million), Development Bank of Latin America ($150 million) and the World Bank ($500 million). MEF Minister Richard Martinez said: The support of the international community to our economic program confirms to us that we are going in the correct route.
According to terms of the IMF, there are six key points Ecuador has agreed to as conditions for the major loan: restore a “prudential fiscal policy;” strengthen the financial system; “promote transparency and good governance;” promote the poor and vulnerable segments of the population; support job creation and competitiveness; and strengthen the institutional framework of the Central Bank from Ecuador.
In addition, the IMF is asking that Ecuador reduce public sector employment, reduce fuel subsidies for gasoline and LP gas, strengthen its commitment to of dollarization, which the country adopted in 2000, and increase taxes. To date, the government has not specified which taxes will be raised.
The government of President Lenin Moreno blames much of the country’s financial condition on mismanagement by the administration of former president, Rafael Correa, claiming that spending was not reduced when oil income plummeted in 2015 and 2016.
On his Twitter account, Correa responded, warning that the IMF deal will have negative consequences for the population this agreement. “Obviously, despite the fact that the government tried to hide it, ‘the agreement’ with the IMF obliges the country to remove almost all subsidies, but the rich will be exonerated from foreign exchange taxes, while the poor do not send money abroad.”
Reports say that since the austerity policies began implementation in December, 11,820 people have been fired from the public sector.