The International Monetary Fund (IMF) published, on Thursday, March 21, 2019, the documents that contain the details of the agreement with Ecuador, which seeks to provide financing for 4,200 million dollars plus 6,000 million from other multilateral organizations, in the next three years.
But not only recent documents were disclosed. The IMF and the Ecuadorian officials decided to make public the last report of the Article IV consultation to the government of Rafael Correa, the annual audit carried out by the agency to its partner countries.
The authorities of each country decide whether or not to disclose the document and, at that time, the former president did not want to publish the results of the audit.
In July 2016, the Fund indicated in the report that an assertive fiscal adjustment plan will be necessary to preserve macroeconomic and financial stability.
The agency mentioned that Ecuador must address the great imbalance between expenditures and revenues created in particular by the recent decline in oil prices and the multi-year policy agenda of heavy public investment, high wages and limited dependence on non-oil revenues.
According to the IMF, although a gradual path would be desirable, it is likely that limited access to finance will require a sudden and early adjustment. The multilateral said that a package of active policies would mitigate the negative impact on growth in the short term and, in the medium term, help protect financial stability, address currency overvaluation and restore confidence.
Some measures recommended by the IMF at that time are similar to those that the current government seeks to implement within the framework of the current agreement. For example, the agency suggested greater labor flexibility, eliminate tax exemptions, maintain the VAT at 14% that was set after the earthquake of April 16, 2016.
In addition, he congratulated the initiative of the Government of Correa of wanting to concession public assets, a measure that currently seeks to provide liquidity to the treasury. (I)