Press Release: Statement by IMF Staff Mission to Ecuador
June 4, 2005
The following statement was issued by the International Monetary Fund (IMF) resident representative's office in Quito on June 3, 2005 on behalf of a recent staff mission:
"An IMF mission visited Quito between May 23 and May 26, 2005. The objective of the mission was to get acquainted with the new economic authorities, to learn about and exchange views on their economic policy plans, and to hear from them how best the IMF can continue to support the country. The mission met with his Excellency President Alfredo Palacio; Mr. Wilfredo Lucero, President of the National Congress; Minister of Economy and Finance Rafael Correa; officials of the Ministry of Economy and Finance (MEF) and of the Central Bank of Ecuador (CBE); and representatives of economic and social groups. The mission would like to thank all those involved, and in particular counterparts at the MEF and the CBE, for their generous help throughout and for productive and open discussions.
"During the discussions, the authorities emphasized to the mission their strong commitment to addressing the important social needs of the country, while also confirming that they would keep total government spending this year with the limits of the 2005 budget and ensuring future fiscal discipline. The authorities explained their proposed changes to the Fiscal Responsibility Law (FRL) and their reform objectives in the electricity and hydrocarbons sectors.
"The mission emphasized that a prudent fiscal stance is fundamental to attaining the authorities' social objectives and their goals of sustained economic growth and employment generation. In this context, it will be important to enhance the quality of government spending through improved targeting in order to create space for the government's priorities while keeping total spending under control.
"The mission advised that changes in the FRL would need to be consistent with the objective of ensuring a transparent and predictable framework for fiscal policy discipline, which is an essential anchor for dollarization and sustained growth. Further, a fiscal responsibility framework should ensure that temporary oil revenues are saved, providing resources for counter cyclical fiscal policy and for reducing the country's financial obligations, which remain high and are a source of vulnerability.
"More broadly, the mission considers that structural reforms are urgently needed to improve competitiveness in the context of the dollarized economy and to ensure sustainable growth and poverty reduction. The mission welcomes the authorities' intentions to reform key public enterprises, which are a drag on economic growth and a drain on fiscal resources. Reforms to improve their efficiency and to open markets to competition and private investment are essential to encourage growth of the non-oil economy, where employment generation actually takes place.
"At the end of the visit, the staff team agreed with the Ecuadorean authorities to maintain a close and cooperative relationship, including that IMF staff would assess the government's economic program on a quarterly basis. To help in this process, the authorities agreed that in the next few weeks they would provide a quarterly path for the 2005 fiscal program, fiscal projections for 2006, and a description of their structural reform agenda. We look forward to continue helping Ecuador achieve its economic and social objectives."