Ecuador will pay twice as much to the IMF than it receives in 2026; Is the relationship ‘unsustainable’?

Ecuador will pay $860 million than it receives from the International Monetary Fund in 2026, according to the National Fiscal Policy Observatory. “Debt payments to the IMF will total $1.61 billion this year while the government will receive $750 million in new loans, $394 million of which has already been delivered,” says Observatory director Jaime Carrera. ‘I think it is safe to say that this not a healthy relationship.”

Ecuador’s Central Bank

Carrera added that Ecuador now ranks fifth in the world in its debt to the IMF in terms of percentage of gross national product, which stands at 10.1%.

Carrera and other economists say the country will not be able to meet the 2026 list of IMF demands presented to President Daniel Noboa. “It will be impossible to increase revenue by 1.3% of GDP in 2026 as well as to make the spending cuts they recommend to receive future loans,” Carrera says. “This is an election year and the government is facing growing fuel subsidy pressure as a result of the war in Iran.”

Although the IMF praised Noboa for reducing fuel subsidies in 2025, it reported that “fiscal performance weakened at the end of 2025 and there was a significant failure to meet fiscal targets.” Ecuador’s budget deficit reached -4.3% of GDP in 2025, well below the -1.2% goal set by IMF.

Among IMF criticisms was the agreement with the country’s transportation sector to limit fuel price increases to 5% a month. “The war in Iran and surging oil prices have made this plan untenable,” IMF said. “Prices should be determined by the market, as they are in other Latin American countries. If prices continue to rise and remain high for long period of time, as expected, the subsidy could amount to hundreds of millions of dollars or even more.”

The IMF summarizes the 2025 fiscal failure as “triple pressures”: “Lower oil revenues, higher than planned tax spending, and increased tax breaks and various other financial compensations.”

For 2026, the IMF is increasing its demands. Among the goals it sets are “significantly increasing revenue from the VAT through the elimination of exemptions and refunds, and instituting more efficient collection procedures.” It is also requiring the county to increase revenue from the petroleum and mining sectors.

Economist Jorge Calderón concurs with Carrera’s assessment that meeting IMF expectations are not possible in 2026. “Eliminating VAT exemptions and refunds and increasing other taxes are not popular measures, even less so in the face of the sectional elections in November.”

He adds: “Noboa’s decision last year to increase the VAT to 15%, which was forced on him by the IMF, probably cost him 10 percentage points of popularity. With his popularity continuing to slide, the president must be very careful in how he handles IMF demands or he could face the fate of [Lenin] Moreno and [Guellermo] Lasso.

Although it is not a formal recommendation, Calderón says the IMF has been quietly pushing Noboa to increase the VAT rate beyond 15%. “They are pointing out that many countries in the region have VATs of 19%, 20% and even 21%,” Calderón says. “If he takes this advice, it would be political suicide.”

So, what is the alternative to accepting demands from the IMF and other loan sources? “We need an overhaul of the entire tax system, top to bottom,” says Carrera. “It can’t be another VAT increase and the elimination of some tax breaks and exemptions. We must confront the issue of the informal economy and make a systematic effort to bring parts of it into the tax system. More important, the government must tell some rich and powerful people they will need to pay more to balance the ledger.”