National Assembly passes market-friendly law giving the Central Bank more automomy

Apr 23, 2021 | 5 comments

Ecuador’s National Assembly approved a law late on Thursday granting autonomy to its central bank, a move celebrated by President Lenin Moreno’s government on Friday as a step toward economic stability.

Ecuador Central Bank, Quito.

Moreno’s market-friendly administration had pushed the reform as a way to prevent future governments from draining the bank’s reserves to finance public spending, a practice his allies allege was common during leftist former President Rafael Correa’s administration.

Economy Minister Mauricio Pozo said the measure would help protect Ecuador’s dollarized economic model.

“This is a very important step forward for stability, for dollarization, for the economy,” Pozo told Radio Democracia in Quito.

Ecuador’s bonds rallied on Friday, with the 2030 note up more than 3 cents to a record 82.75.

The bill passed with the support of 86 of the 135 lawmakers present in the Thursday session. Forty-one lawmakers voted against the proposal, labeling it a privatization of the central bank.

The reform had been a condition of a $6.5 billion package agreed last year with the International Monetary Fund (IMF), after one of the region’s worst coronavirus outbreaks and the plunge in crude prices reduced the oil-exporting country’s government revenue.

Moreno leaves office on May 24. His successor, president-elect Guillermo Lasso, is expected to broadly continue his market-friendly policies, though Lasso has voiced opposition to an IMF proposal to raise some taxes to help the government reduce its budget deficit.

Credit: Reuters