On Wednesday, December 1, 2021, the Executive Board of the Inter-American Development Bank (IDB) approved a guarantee of $ 400 million to Ecuador, in a new demonstration of the continued support of the international community for the economic program of the Government of the Meeting.
According to the IDB, the $ 400 million is part of a program structured as a guarantee in support of policy reform (GARP).
The guarantee will cover future debt to be contracted by Ecuador under a sovereign bond or a loan of up to $ 400 million.
The guarantee has the potential to mobilize private resources for at least the same amount as the resources provided by the IDB, while improving the general profile of Ecuador’s public debt, explained the multilateral organization, by reducing the costs of financing. indebtedness and longer repayment terms, compared to an issuance of unsecured debt.
“The guarantee will allow the Government to leverage international resources to strengthen the country’s sustainable and inclusive economic development,” said the Minister of Economy and Finance, Simón Cueva, in a press release.
The agency on its website indicates that it offers guarantees to improve the financing of sovereign borrowers with sovereign guarantee. IDB guarantees optimize the financial terms of projects and capital market instruments and help promote investment in the countries of the region.
What will the debt that the Government will acquire with the IDB guarantee be used for? The agency indicates that the program will support macroeconomic stability and promote a set of reforms to strengthen the business climate and trade regulation, and to improve the institutional framework for economic reactivation and competitiveness.
In addition, in specific measures indicated by the IDB, the resources obtained from the financing will support the reduction of commercial tariffs and simplification of procedures, the improvement of public-private collaboration to promote investment, and the promotion of the development of the private sector with a focus environmental.