The government of Ecuador announced this Monday that he waits a second disbursement of $ 2 billion by the International Monetary Fund (IMF), which today concluded a first review of the debt agreement reached last September for 6,500 million.
Ecuadorian President Lenín Moreno, in a Twitter message, explained that the review of the agreement and the approval of the second loan disbursement is due to the “orderly management” of the national economy. “Thanks to the orderly management of public finances, the second disbursement of the IMF to Ecuador, for 2,000 million dollars, is approved,” Moreno said on his Twitter account. In addition, he mentioned that these resources will arrive in the country “in the next few days” and stressed that the payment of the credit agreement is agreed for a 10-year term, with four years of grace and an interest rate of 2.9%.
For his part, the Minister of Economy, Mauricio Pozo, insisted on the level of confidence of the international financial community in the country and pointed out that the possibility of having passed the IMF technical review was basically due to the decisions of the Ecuadorian Government to combat corruption. “Once again, the international community has shown its confidence in the country with the approval of the second disbursement of 2,000 million from the IMF,” Pozo wrote on his Twitter account. In addition, he reiterated that “the decisions promoted by the Ecuadorian government to combat corruption were decisive” for the IMF to have approved the disbursement.
The Ministry of Economy also posted on its social networks the IMF statement on the first technical review of the so-called Expanded Service agreement for Ecuador and on the immediate disbursement approved by the agency.
Antoinette Sayeh, deputy managing director and interim president of the IMF, assured that the Ecuadorian economy, which had fallen into a crisis aggravated by the effects of the pandemic of the coronavirus. “The Ecuadorian economy is showing initial signs of economic recovery after hitting bottom in the second quarter. New infections and deaths from covid-19 have moderated compared to the high levels registered in the spring,” he said.
However, he warned that economic activity is projected to contract by 9% in 2020, “which represents an improvement” compared to an initial estimate that warned of a fall in Gross Domestic Product (GDP) of 11%.
The report highlights the improvements applied by the Government to target social assistance, especially with the extension of the protection network to more than 270,000 low-income families since last July. This, he added, exceeds the goals estimated for the end of December and contributes to “mitigating the impact of the crisis on the most vulnerable groups.”
He also highlighted the anti-corruption amendments approved in the National Assembly (Parliament) and public access to the assets declarations of politically exposed persons. Furthermore, the measures taken to “strengthen the foundations of dollarization, aligning the internal audit function of the Central Bank with the best international practices.”
Sayeh said that “going forward,” the IMF expects “a further reorientation of spending as the recovery takes hold,” which “will strengthen fiscal sustainability and reduce public debt as a percentage of GDP.” In addition, it suggests a “credible medium-term fiscal strategy” that includes an “ambitious and progressive tax reform that better aligns Ecuador’s spending levels with its regional peers”, or that will reduce the burden of foreign debt of future generations.
However, the IMF warned that the program supporting Ecuador “continues to face considerable risks” internationally, such as the uncertainty about “the depth and duration of the pandemic.” Also at the national level, the IMF expects a “broad consensus and acceptance across the political spectrum of the program’s key objectives and policies.”
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