The process finished. On Monday, March 11, the Executive Board of the International Monetary Fund (IMF) gave its approval to the credit of $ 4.2 billion granted to Ecuador under the Extended Service (SAF). Of that amount, in the next three days the country will receive from the agency a first payment of $ 652 million.
From Washington the Directory remarked that the support to the economic policies of the Ecuadorian Government will be for the next three years. The IMF loan is part of the $ 10,279 million that Ecuador managed with seven multilateral organizations, including the World Bank.
In order to obtain financing, the Government presented the Prosperity Plan that includes state optimization, social protection and more aspects. “The Ecuadorian authorities are implementing a broad program of reforms with the objective of modernizing the economy and paving the way for solid, sustained and equitable growth,” said Christine Lagarde, IMF Managing Director. He added that the objective is to reduce the debt / GDP ratio through a combination of a rebalancing of the wage bill, careful and gradual optimization of fuel subsidies, prioritization of capital expenditure and goods and services, and a fiscal reform.
“The savings generated will increase spending on social assistance throughout the program,” he said. Lagarde also mentioned that the strengthening of crisis preparedness and supervision capacities of banks and cooperatives will strengthen the recovery capacity of the financial sector. He stressed that the efforts, already underway, to increase the autonomy of the Central Bank of Ecuador and establish a greater buffer of reserves, “will promote the institutional foundations of dollarization in Ecuador.”
The Extended Service Agreement (SAF) imposes an interest rate that is around 3% and a 10-year term repayment, with a four-year grace period. This type of program was designed to help countries facing serious balance of payments problems due to structural deficiencies or slow-growing economies and a weakened balance of payments. SAFs attend comprehensive programs that include policies to correct structural deficiencies over a prolonged period, says the official website of the IMF. “To protect the most vulnerable we need these resources, which will allow us to guarantee economic sustainability,” said Richard Martinez, Minister of Economy and Finance.
The Minister spoke from Paris (France), where today he will make an exhibition to begin Ecuador’s accession process to the development center of the Organization for Economic Cooperation and Development (OECD).
The analyst José Orellana explained that the amount approved for the first disbursement “exceeded expectations”, which will reduce the needs of the treasury. He explained that the resources will reach the International Reserves of the ECB, which will positively influence country risk. This allows the international image of Ecuador to improve and that later the re-profiling of the country’s public debt can be considered.
The approval of the financing by the IMF would also mean a green light to make the rest of disbursements from the other multilaterals. The economist Walter Spurrier said that the announcement issued by the international organization is a formality of the approval of the financing and its disbursement.
Analysts expect the Government transparent the concrete actions of the economic plan. Martínez will hold a press conference to inform more details of the agreement with the IMF upon his return to the country. (I)