## 1ecuea2025001

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---

### Executive summary and context
- EFF arrangement and augmentation request:
  - 48-month Extended Fund Facility (EFF) arrangement approved in May 2024 of SDR 3 billion (430 percent of quota, about US$4 billion).
  - Authorities requested augmentation of the original arrangement from US$4 billion to US$5 billion; staff proposal to augment overall access by SDR 750.4 million (about US$1 billion).
  - Proposed Augmentation Total: SDR 3,750.4 million (537.5 percent of quota).
- Political and program engagement chronology:
  - Discussions held remotely on May 15-16, 2025; continued in Quito May 19-24, 2025; concluded remotely May 27-June 10, 2025 with staff level agreement (SLA).
  - Team led by Patrizia Tumbarello (Head) met with Minister of Economy and Finance Sariha Moya and other authorities.
  - President Noboa reelected in April 2025 (won runoff on April 13 with 56 percent of the vote; began a four-year term on May 24).
  - Sovereign bond spreads declined sharply by over 1000 basis points after the election to about 800 basis points as of early July 2025, but remain elevated.
- Program objective:
  - Recalibrated EFF intended to smooth external shocks, strengthen fiscal sustainability and buffers, catalyze additional IFI support, and advance structural reforms to boost private investment and job-rich growth.

### Recent macroeconomic developments (selected findings and indicators)
- Growth and shocks:
  - Real GDP contracted by 2 percent in 2024 amid severe security and electricity shortages caused by a historic drought.
  - Real GDP projected to recover by about 1.7 percent in 2025 and to improve to 3 percent over the medium term under full reform implementation.
- Inflation and prices:
  - Inflation hovered around 1.5 percent (y/y) through November 2024; fell to 0.5 percent (y/y) as of May 2025.
- Fiscal outcomes and deposits:
  - Overall deficit of the budgetary central government (PGE) including the CFDD: US$3.1 billion (2.5 percent of GDP) in 2024, from US$6.4 billion (5.3 percent of GDP) in 2023.
  - NFPS overall deficit: US$1.6 billion (1.3 percent of GDP) in 2024, from US$4.2 billion (3.5 percent of GDP) in 2023.
  - NFPS deposits at the Central Bank of Ecuador (BCE) increased by US$850 million during 2024.
  - Authorities cleared a net amount of US$350 million in arrears to the private sector in 2024 (vs. an envelope of US$200 million envisaged).
- External sector and reserves:
  - Goods trade surplus in 2024: US$6.8 billion (5.5 percent of GDP); exports +9.5 percent (y/y); imports -6.4 percent (y/y).
  - Current account surplus: around 5.7 percent of GDP in 2024.
  - Gross international reserves (GIR): recovered to US$6.9 billion as of end-2024; increased to US$8.3 billion as of end-May 2025.
  - GIR adequacy: 26 (43) percent of the Fund’s reserve adequacy metric excluding (including) the Liquidity Fund as of end-2024.
- Financial sector and credit:
  - Deposit growth: 16.7 percent (y/y) in April 2025.
  - Credit growth: 7.8 percent (y/y) in April 2025.
  - Cooperatives: 26 percent of financial system assets; lower asset quality but stabilizing.
  - Financial soundness indicators improved: higher capital ratios, lower nonperforming loans, improved provisioning.

### Fiscal consolidation: size, composition, and targets
- Consolidation magnitude and timing:
  - Authorities will adopt additional fiscal measures equivalent to 1.1 percent of GDP, raising total fiscal effort to 6.6 percent of GDP over the program (from 5.5 percent of GDP prior to shocks).
  - NOPBS projections:
    - NOPBS projected to rise by 1.4 percent of GDP in 2025 (0.4 percent of GDP more than projected at first review) to -4 percent of GDP.
    - NFPS overall (primary) balance projected to improve to -0.9 (0.2) percent of GDP in 2025.
    - NFPS overall (primary) balance projected to improve to a surplus of 1.3 (2.4) percent of GDP by 2028; NOPBS reaching -0.9 percent of GDP by 2028.
  - Public debt anchor: aim to achieve COPLAFIP debt target of 40 percent of GDP by 2031 (one year ahead of schedule under larger adjustment).
  - NFPS deposits projected to reach US$9.2 billion by 2028 (vs. US$8 billion at first EFF review).
- Fiscal Consolidation Plan (Change in NOPBS, percent of GDP; aggregated totals preserved):
  - Total change over 2024-28: 6.6
  - Yearly breakdown: 2024: 2.2; 2025: 1.4; 2026: 1.7; 2027: 0.9; 2028: 0.6
  - Revenue components (2024-28 totals and yearly entries preserved):
    - Revenue: 1.2, 1.4, 1.2, 0.8, 0.4, 5.1
    - Tax revenue: 1.2, 0.8, 0.4, 0.3, 0.1, 2.7
    - Other: 0.0, 0.7, 0.9, 0.6, 0.2, 2.4
  - Expenditure components:
    - Expenditure total: 0.9, -0.1, 0.4, 0.1, 0.2, 1.5
    - Wages and salaries: 0.2, 0.2, 0.2, 0.3, 0.3, 1.2
    - Goods and services: 0.6, -0.2, 0.3, 0.1, 0.1, 0.8
    - Social and capital: 0.3, -0.1, -0.2, -0.3, -0.2, -0.5
    - Other: -0.1, 0.1, 0.1, 0.0, 0.0, 0.1

### Revenue-raising and expenditure measures (selected)
- Revenue measures and sector-specific actions:
  - June 2025: introduction of new fees in the e-commerce and mining sectors.
  - June 2025: elimination of the diesel subsidy for the industrial tuna sector.
  - Reforms to streamline inefficient tax expenditures to increase corporate income tax yields.
  - Revamping fiscal framework of the mining sector (proposed SB for end-December 2025) with IMF TA.
- Expenditure consolidation and timelines:
  - Contain public sector wage bill; enhance public procurement efficiency.
  - Operationalize National Control Subsystem (SNC): end-December 2024 SB (met).
  - Develop conceptual and operational framework for upgraded Official System of Public Procurement (SOCE): end-July 2025 SB (proposed).

### Financing strategy, market access assumptions, and IMF augmentation
- Revised market access schedule (verbatim assumptions preserved):
  - No market access in 2025.
  - External bond issuance of US$1 billion in the second half of 2026, US$1.5 billion in 2027, and US$2 billion in 2028.
  - Increased IFI financing by US$600 million over the program period (World Bank, IDB, CAF).
- Remaining financing gap and augmentation proposal:
  - Staff estimates a remaining financing gap of US$1 billion in 2025-27 after additional fiscal effort and higher IFI financing.
  - Proposal: augment the EFF by an additional US$1 billion (about SDR 750 million), phased over 2025-27.
- Gross Financing Needs and Sources (US$ million; key lines preserved exactly):
  - Gross Financing Needs: 2024: 10,574; 2025: 8,201; 2026: 7,123; 2027: 7,195; 2028: 5,541
  - NFPS Deficit: 2024: 1,590; 2025: 1,147; 2026: 149; 2027: -974; 2028: -1,842
  - Amortization: 2024: 8,983; 2025: 7,053; 2026: 6,975; 2027: 8,168; 2028: 7,382
  - Domestic amortization (2024–28): 5,757; 3,638; 3,033; 3,622; 3,098
  - External amortization (2024–28): 3,226; 3,415; 3,942; 4,546; 4,285
  - Gross Financing Sources (selected):
    - IMF disbursements: 1,487; 1,750; 750; 750; 250
    - Multilateral (excl. IMF): 2,781; 3,050; 2,100; 1,900; 1,400
    - Bonds (memo): 150; 1,000; 1,500; 2,000
  - Memo: NFPS deposits stock (US$ million): 2024: 4,641; 2025: 5,198; 2026: 5,843; 2027: 7,366; 2028: 9,262

### Program implementation, performance criteria, and structural benchmarks
- Quantitative performance:
  - All end-December 2024 and April 2025 QPCs and most ITs for the second review were met; some with significant margins.
  - Examples of outcomes (US$ million, cumulative from Jan 1):
    - Nonoil primary balance of PGE (End-December 2024 Program/Adj./Actual): -2,295 / -2,295 / -1,801 (Met).
    - Accumulation of NFPS deposits at the central bank (End-December 2024): 360 / 154 / 850 (Met).
    - Change in stock of NIR (End-April 2025): -34 / -991 / 828 (Met).
    - Stock of PGE arrears to domestic private sector: instances of "Not Met" recorded.
    - Nonoil primary balance including fuel subsidies (NOPBS) of the NFPS (End-December 2024): -6,528 / -6,526 / -6,674 (Not Met).
- Structural benchmarks (SBs):
  - Substantial progress on SBs, notably fiscal, governance, and financial sector reforms.
  - Most SBs for the second review implemented (two with delay): automatized PGE payments (end-March 2025 SB, not met; proposed reset end-July 2025) and updated MEF–IESS agreement (end-March 2025 SB, not met; proposed reset end-August 2025).
  - Six new SBs added to enhance transparency, governance, domestic capital market development, energy security, and private investment.

### Financial sector safeguards, stability, and market development
- Safeguards and central bank governance:
  - 2024 safeguards assessment: safeguards strengthened since 2019, particularly after 2021 COMYF reforms.
  - Further steps needed: fully implement governance reforms, strengthen BCE financial autonomy, align BCE annual financial statements with IFRS.
  - Backing rule in COMYF aligned with 2023 reprofiling; deferral of full coverage requirement for certain balances to 2040.
- Financial stability measures and macroprudential reforms:
  - Macroprudential capital buffer regulations enacted November 2024, including minimum Tier 1 capital requirement and capital conservation buffer.
  - Inter-institutional group for resolution policy within the Financial Stability Committee created (end-January 2025 SB, met).
  - Regulatory forbearance measures introduced Nov 2024 and extended Apr 2025; recommendation to phase out forbearance appropriately.
  - Study on lending interest rate caps completed (end-March 2025 SB, completed May 2025); work underway to implement simpler, more flexible interest rate methodology.
- Domestic public debt market development (Box 1 highlights):
  - Implement competitive auctions for primary placement of bonds and CETES.
  - Upgrade Central Securities Depository (DCV) and integrate with RTGS; contract to modernize DCV implemented in March 2025 (end-Jan 2025 SB, implemented with delay).
  - Issue regulation for domestic market auctions for bonds and treasury notes (proposed SB end-November 2025).

### Structural reforms to lift potential growth and sectoral priorities
- Growth constraints and reform impacts:
  - 2024 GDP per capita (PPP) was 44 percent below average-emerging-market level.
  - Fund staff estimate: full implementation of EFF-supported reforms could add at least 0.5 percentage point to growth over the medium term, raising potential growth to 3 percent on a conservative basis.
  - Illustrative contributions preserved from source:
    - Financial Sector Reforms: +0.5 ppt
    - Governance (audits; upgraded procurement): +0.3 ppt
  - Labor market reforms and closing gender employment gap: closing gender gap over 10 years could boost annual growth by up to 1.6 percent (as presented).
- Energy and resource sectors:
  - Toachi Pilatón hydroelectric capacity increase completed April 2025.
  - Villonaco III wind project construction to begin; pipeline of solar, wind, geothermal projects prioritized.
  - Pricing reforms proposed: adopt transparent, cost-reflective pricing for medium/high-voltage tariffs (proposed SB end-August 2025); allow private sale of surplus self-generated electricity to grid (proposed SB end-August 2025).
  - Mining: reopen mining cadaster (proposed SB end-June 2026); develop new fiscal regime for mining (proposed SB end-December 2025) with IMF TA.

### Risk assessment, likelihoods, and policy responses (Annex I highlights)
- Overall risk assessment: overall risks high and tilted to the downside.
- Key downside risks (verbatim categories preserved):
  - Shortfalls in external financing; deterioration in global backdrop; further tightening in global financial conditions; further deterioration of security situation; renewed electricity crisis; extreme weather events; weakening balance sheets of financial institutions; increase in social discontent.
- Upside risks:
  - Stronger-than-expected global growth; increase in oil prices beyond program assumptions; improvement in security; renewed structural reform efforts.
- Specific scenario likelihoods and responses:
  - Trade Policy and Investment Shocks: Relative Likelihood: High; Possible Impact: Medium. Policy Response: improve trade resilience, diversify export markets, fiscal contingency measures if oil prices fall.
  - Sovereign Debt Distress: Relative Likelihood: High; Possible Impact: High. Policy Response: pursue fiscal consolidation, strengthen crisis preparedness, work with IFIs.
  - Prolonged or Deeper Security Crisis: Relative Likelihood: High; Possible Impact: High. Policy Response: prioritize fiscal spending on security and contingency measures; support vulnerable groups.
  - Other risks and mitigants detailed in Risk Assessment Matrix (Annex I).

### Debt sustainability, capacity to repay, and Fund exposure (Annex II and staff analysis)
- Public debt outlook:
  - Public debt-to-GDP: 53.8 percent in 2024 (down from 54.3 in 2023); projected to decline below 40 percent by 2031 under baseline.
  - NFPS gross debt projections and GFNs: selected indicators preserved in source tables.
- Capacity to repay and Fund exposure:
  - Total Fund credit outstanding projected to peak in 2025 at 1,032.8 percent of quota, equivalent to 7.4 percent of GDP, 98.7 percent of GIR, and 24.5 percent of exports of goods and services.
  - Total obligations to the Fund relative to GIR peak in 2025 at 15.9 percent and decline to 3.1 percent by 2034.
  - Staff assesses exceptional access criteria met (EA Criteria 1–4) subject to risks and implementation.
- Financing assurances and program financing:
  - Program described as fully financed with firm financing commitments for next 12 months and good prospects thereafter.
  - IFIs (WB, IDB, CAF, FLAR) committed to maintain or increase support.
  - External market access assumptions: approx. US$1 billion in 2026, US$1.5 billion in 2027, and US$2 billion thereafter.

### Monitoring, data requirements, and TMU key parameters
- Performance criteria and reporting:
  - Fiscal and reserve data to be provided within specified lags: e.g., fiscal data within 45 days of each test date; preliminary monthly data within 30 days (paragraphs reference preserved).
  - Specific monitoring lags preserved (examples):
    - 45 days from end of each test date; preliminary monthly data no more than 30 days.
    - Non-oil primary balance monitoring: data within 60 days; preliminary monthly data within 45 days.
    - NFPS deposits weekly within 5 business days.
- Adjustors and program-specific numeric parameters (preserved exactly):
  - Ecuador mix crude oil price (US$ per barrel): 60.08
  - Oil-price adjustor per US$1 per barrel (overall balance and certain NFPS measures): US$23.85 million
  - Alternate oil-price adjustor amount (NFPS deposits floor): US$11.93/US$23.85 million (per US$1 per barrel)
  - Oil-price adjustor cap at corresponding test dates: US$178.9 million
- Selected program targets (examples preserved):
  - Nonoil primary balance of the PGE (floor) End-December 2024 Program/Adj./Actual: -2,295 / -2,295 / -1,801 (Met).
  - Accumulation of NFPS deposits at the central bank End-December 2024: 360 / 154 / 850 (Met).
  - Nonoil primary balance including fuel subsidies (NOPBS) of the NFPS End-December 2024: -6,528 / -6,526 / -6,674 (Not Met).
  - Number of families in first three income deciles covered by cash transfers (floor) End-Dec 2024: 1,212,984 / 1,214,638 (Met); End-April 2025: 1,228,660 / 1,248,805 (Met).

### Staff recommendations and concluding appraisal
- Staff supports completion of the Second Review and the augmentation of the EFF arrangement with rephasing of the third review availability date.
- Key policy priorities emphasized by staff:
  - Steadfast implementation of revised fiscal consolidation (6.6 percent of GDP over program) while protecting social and investment spending.
  - Rebuild NFPS deposits and reserve buffers.
  - Advance structural reforms: financial sector deepening, domestic capital market development, energy resilience, mining and hydrocarbon sector reforms, governance, and AML/CFT enhancements.
  - Maintain contingency planning and continue engagement with IFIs and bilateral partners.
- Staff judgment:
  - Progress under very difficult circumstances has been significant; all QPCs through end-April 2025 met and substantial SB progress achieved.
  - Risks remain high and implementation is critical to achieve program objectives and restore market access as envisaged.

*Source: EXECUTIVE SUMMARY and IMF staff report content, 1ecuea2025001*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- The authorities implemented an economic program supported by a 48-month Extended Fund Facility (EFF) arrangement approved in May 2024 of SDR 3 billion (430 percent of quota, about US$4 billion).
- The global landscape deterioration (volatile oil prices, tighter global financing conditions) prompted the authorities to request an augmentation of the original arrangement from US$4 billion to US$5 billion.
- The authorities committed to an ambitious reform agenda to address external shocks, strengthen fiscal sustainability and buffers, and boost private investment and job-rich growth.
- The revised program is intended to catalyze additional financial support from multilateral partners and further structural reforms.
- Key governance and program engagement chronology:
  - Discussions held remotely on May 15-16, 2025; continued in Quito May 19-24, 2025; concluded remotely May 27-June 10, 2025 with staff level agreement (SLA).
  - Team led by Patrizia Tumbarello (Head) with named staff, met with Minister of Economy and Finance Sariha Moya and other high-level authorities.
- Political context:
  - President Noboa reelected in April 2025 (won runoff on April 13 with 56 percent of the vote; began a four-year term on May 24).
  - Administration increased representation at the National Assembly and built a working legislative majority.
  - Sovereign bond spreads declined sharply by over 1000 basis points after the election to about 800 basis points as of early July 2025, but remain elevated.

### Recent Macroeconomic Developments
- 2024 performance and shocks:
  - Real GDP contracted by 2 percent in 2024 amid severe security and electricity shortages caused by a historic drought.
  - The contraction was led by investment and domestic consumption; supply-side drivers included mining and quarrying; construction; and technical professional activities.
  - Energy supply: nationwide power blackouts in late 2024; energy supply began to recover in December 2024 and had normalized as of April 2025.
  - Security: homicide rates surged in recent years, declined in early 2024 with emergency measures but picked up again and remain above historical levels, concentrated in the coastal region.
- Inflation and prices:
  - Inflation hovered around 1.5 percent (y/y) through November 2024; fell to 0.5 percent (y/y) as of May 2025, mainly due to temporary electricity price reductions.
- Fiscal outcomes and deposits:
  - Overall deficit of the budgetary central government (PGE) including the oil derivatives clearing account (CFDD) declined to US$3.1 billion (2.5 percent of GDP) in 2024, from US$6.4 billion (5.3 percent of GDP) in 2023.
  - Overall deficit of the nonfinancial public sector (NFPS) narrowed to US$1.6 billion (1.3 percent of GDP) in 2024, from US$4.2 billion (3.5 percent of GDP) in 2023.
  - Fiscal outturns for the NFPS and the PGE including the CFDD were about US$0.6-1 billion (0.5-0.9 percent of GDP), respectively, better than projected at first review, mainly due to lower nonoil capital expenditure.
  - NFPS deposits at the Central Bank of Ecuador (BCE) increased by US$850 million during 2024, exceeding the first review forecast by US$488 million.
  - The authorities cleared a net amount of US$350 million in arrears to the private sector in 2024, compared with an envelope of US$200 million envisaged in the 2024 fiscal plan.
  - Fiscal performance remained in line with the EFF program in early 2025; government liquidity tightened owing to delays in IFI disbursements due to elections and global shifts.
- External sector and reserves:
  - Goods trade surplus in 2024: US$6.8 billion (5.5 percent of GDP), driven by a 9.5 percent (y/y) increase in exports and a 6.4 percent (y/y) contraction in imports.
  - Current account (CA) surplus: around 5.7 percent of GDP in 2024, up from 1.8 percent of GDP in 2023.
  - Real effective exchange rate depreciated by 1.1 percent.
  - Gross international reserves (GIR): recovered to US$6.9 billion as of end-2024 (from US$4.5 billion at end-2023); GIR increased further to US$8.3 billion as of end-May 2025.
  - GIR adequacy: 26 (43) percent of the Fund’s reserve adequacy metric excluding (including) the Liquidity Fund as of end-2024, from 17 (30) percent at end-2023.
- Financial sector and credit:
  - Deposit growth: 16.7 percent (y/y) in April 2025.
  - Credit growth: 7.8 percent (y/y) in April 2025; led by commercial credit from private banks.
  - Credit growth by public banks turned positive for the first time since the pandemic.
  - Restructured and refinanced share of total credits declined considerably.
  - Cooperatives (26 percent of financial system assets) display lower asset quality; consumer and SME segments weak but stabilizing.
  - Financial soundness indicators improved for banks and cooperatives: higher capital ratios, lower nonperforming loans, improved provisioning.

### Outlook and Risks
- Growth projections:
  - Real GDP projected to recover by about 1.7 percent in 2025 amid continued low inflation.
  - Growth is expected to improve to 3 percent over the medium term as structural reforms and fiscal consolidation boost potential growth.
- External financing and market access:
  - The deteriorated global backdrop makes re-accessing international capital markets at debt-sustainable conditions unviable in 2025 as originally planned.
  - The authorities augmented and recalibrated the EFF to smooth external shocks while strengthening fiscal position, buffers, and reforms.
- Risk assessment (overall risks high and tilted to the downside; decisive policy steps mitigate some risks):
  - Downside risks listed include:
    - Shortfalls in external financing leading to lower capital expenditure, decline in government deposits, and potential payment arrears.
    - Further deterioration in the global economic backdrop, higher trade barriers, deeper geoeconomic fragmentation.
    - Further tightening in global financial conditions, lower investor risk appetite, inability to regain market access per revised timeline.
    - Further deterioration of the security situation.
    - Renewed electricity crisis if planned capacity not implemented.
    - Extreme weather events (floods, droughts).
    - Weakening in balance sheets of some financial institutions.
    - Increase in social discontent hampering/slowing reform efforts.
  - Upside risks include:
    - Stronger-than-expected global growth.
    - Increase in oil prices beyond program assumptions.
    - Improvement in the security situation.
    - Lower domestic political fragmentation and renewed structural reform efforts.
- Mitigants and program stance:
  - Decisive policy steps and the revamped fiscal and reform strategy support the recovery.
  - Program aims to strengthen fiscal balance, protect essential social and investment spending, and deepen structural reforms (including financial sector, hydrocarbons, mining, energy, and disaster resilience).

### Program Implementation and Structural Reforms
- Program performance:
  - All end-December 2024 and April 2025 quantitative performance criteria (QPC) and most indicative targets (ITs) for the second review were met, some with significant margins.
  - Substantial progress made on structural benchmarks (SBs), notably on fiscal, governance, and financial sector reforms.
  - Staff assess that the exceptional access criteria continue to be met.
- Policy priorities and reform areas highlighted by authorities:
  - Strengthen fiscal sustainability and liquidity buffers to increase resilience to shocks and regain market access when feasible.
  - Protect priority social and investment spending while implementing fiscal consolidation.
  - Strengthen energy resilience and implement additional power generation capacity to reduce electricity risk.
  - Improve security, particularly in the coastal region, as part of structural reform agenda.
  - Advance economic diversification and reforms to foster private investment in hydrocarbons, mining, energy, and resilience to natural disasters.
  - Strengthen governance and Anti-Money Laundering/Combatting the Financing of Terrorism (AML/CFT) frameworks.
- Program modalities:
  - An augmentation and recalibration of the EFF is proposed to address the more challenging external environment and to support ambitious structural reforms and fiscal consolidation.

*Source: EXECUTIVE SUMMARY, 1ecuea2025001*

### 14.      The authorities will adopt additional

### 1ecuea2025001 - 14.      The authorities will adopt additional

### Fiscal consolidation: size, composition, and targets
- Authorities will adopt additional fiscal measures equivalent to 1.1 percent of GDP, with the overall fiscal effort increasing to 6.6 percent of GDP over the program to reduce the fiscal gap and build buffers.
- Prior to external shocks, the fiscal plan already envisaged an improvement in the non-oil primary balance including fuel subsidies (NOPBS) of the NFPS by 5.5 percent of GDP over the program period; the extra 1.1 percent of GDP raises the consolidation effort to 6.6 percent of GDP over the program.
- NOPBS projections and NFPS balances:
  - NOPBS is projected to rise by 1.4 percent of GDP in 2025, which is 0.4 percent of GDP more than projected at the first EFF review, to -4 percent of GDP.
  - NFPS overall (primary) balance projected to improve to -0.9 (0.2) percent of GDP in 2025.
  - NFPS overall (primary) balance projected to improve to a surplus of 1.3 (2.4) percent of GDP by 2028, with the NOPBS reaching -0.9 percent of GDP.
- Debt and buffers:
  - Fiscal policy anchored on maintaining public debt on a downward path.
  - Larger fiscal adjustment would allow achieving the debt target of 40 percent of GDP mandated by the Organic Budget Law (COPLAFIP) by 2031, one year ahead of schedule.
  - Revised consolidation plan supports stronger rebuilding of NFPS deposits, projected to reach US$9.2 billion by 2028 compared to US$8 billion at the first EFF review.

- Fiscal Consolidation Plan (Change in the non-oil primary balance including fuel subsidies, in percent of GDP) — aggregated totals from plan:
  - Total change over 2024-28: 6.6
  - Yearly breakdown (selected):
    - 2024: 2.2
    - 2025: 1.4
    - 2026: 1.7
    - 2027: 0.9
    - 2028: 0.6
  - Revenue components (2024-28 totals and yearly entries preserved as in source):
    - Revenue: 1.2, 1.4, 1.2, 0.8, 0.4, 5.1
    - Tax revenue: 1.2, 0.8, 0.4, 0.3, 0.1, 2.7
    - Other: 0.0, 0.7, 0.9, 0.6, 0.2, 2.4
  - Expenditure components:
    - Expenditure total: 0.9, -0.1, 0.4, 0.1, 0.2, 1.5
    - Wages and salaries: 0.2, 0.2, 0.2, 0.3, 0.3, 1.2
    - Goods and services: 0.6, -0.2, 0.3, 0.1, 0.1, 0.8
    - Social and capital: 0.3, -0.1, -0.2, -0.3, -0.2, -0.5
    - Other: -0.1, 0.1, 0.1, 0.0, 0.0, 0.1

### Revenue-raising and expenditure measures
- Nonoil revenue:
  - Continued focus on boosting permanent nonoil revenue to reduce dependence on volatile oil revenue.
  - June 2025: introduction of new fees in the e-commerce and mining sectors.
  - Additional reforms: streamlining inefficient tax expenditures to increase corporate income tax yields; revamping the fiscal framework of the mining sector (proposed SB for end-December 2025), supported by IMF TA.
- Other revenues:
  - Ongoing work to improve oil sector efficiency to reduce fiscal cost of oil derivatives production and distribution.
  - June 2025: elimination of the diesel subsidy for the industrial tuna sector.
  - Further targeting of subsidies, protecting the most vulnerable, and enhancing refinery efficiency are deemed essential.
- Expenditure consolidation:
  - Gradual rationalization of current expenditure by containing the public sector wage bill and enhancing public procurement efficiency.
  - Timeline commitments:
    - Operationalize the National Control Subsystem (SNC): end-December 2024 SB (met).
    - Develop conceptual and operational framework for an upgraded Official System of Public Procurement (SOCE): end-July 2025 SB.

### Financing strategy, market access, and IMF augmentation request
- Revised market access and bond issuance schedule:
  - Original EFF envisaged external bond issuance of US$1.5 billion in 2025 and US$2 billion per year during 2026-28.
  - Revised assumptions:
    - No market access in 2025.
    - External bond issuance of US$1 billion in the second half of 2026, US$1.5 billion in 2027, and US$2 billion in 2028.
  - Increased IFI financing by US$600 million over the program period (World Bank, IDB, CAF).
  - Bilateral and commercial project loan disbursements are included and intended to cover or exceed amortizations due to these creditors through the remainder of the program period.
  - If financing is not available, a greater fiscal effort may be needed to meet program targets.
- Remaining financing gap and proposed IMF augmentation:
  - Staff estimates a remaining financing gap of US$1 billion in 2025-27 after additional fiscal effort, higher IFI financing, and revised market access assumptions.
  - Proposal: augment the EFF by an additional US$1 billion (about SDR 750 million), phased over 2025-27 in line with shock impacts and reform enactment.
- Estimated Gross Financing Needs and Sources (US$ million) — key lines preserved exactly:
  - Gross Financing Needs:
    - 2024: 10,574
    - 2025: 8,201
    - 2026: 7,123
    - 2027: 7,195
    - 2028: 5,541
  - NFPS Deficit:
    - 2024: 1,590
    - 2025: 1,147
    - 2026: 149
    - 2027: -974
    - 2028: -1,842
  - Amortization:
    - 2024: 8,983
    - 2025: 7,053
    - 2026: 6,975
    - 2027: 8,168
    - 2028: 7,382
  - Domestic vs External amortization:
    - Domestic amortization (2024–28): 5,757; 3,638; 3,033; 3,622; 3,098
    - External amortization (2024–28): 3,226; 3,415; 3,942; 4,546; 4,285
  - Gross Financing Sources (selected):
    - IMF disbursements: 1,487; 1,750; 750; 750; 250
    - Multilateral (excl. IMF): 2,781; 3,050; 2,100; 1,900; 1,400
    - Commercial bonds and bond issuance entries include: Bonds 938; 1,542; 1,197; 1,933; 1,405; Bonds (memo later) 150; 1,000; 1,500; 2,000 (years not re-labeled here to preserve source values)
  - Memo: NFPS deposits stock (US$ million):
    - 2024: 4,641
    - 2025: 5,198
    - 2026: 5,843
    - 2027: 7,366
    - 2028: 9,262

### Public financial management, arrears, and social security
- PFM and arrears:
  - Authorities cleared a significant amount of arrears to the private sector in 2024, meeting the end-December 2024 IT with a wide margin.
  - Work to implement a system to automatize central government payments with IMF TA (end-March 2025 SB, not met, proposed reset for end-July 2025) — implementation delayed due to staff turnover.
- MEF-IESS healthcare obligations:
  - Agreement between the Ministry of Finance (MEF) and the social security agency (IESS) on healthcare obligations settlement has taken longer than envisaged; end-March 2025 SB not met, proposed to be reset for end-August 2025.
  - Once finalized, the MEF-IESS agreement expected to strengthen IESS liquidity and sustainability while safeguarding public finances.

### Enhancing the social safety net
- Cash transfer coverage:
  - Enrollment in cash transfer programs in December 2024: 1,214,638 families — 1,654 families above the target.
  - Enrollment by end-April (IT): 1,248,805 families — surpassing the target by 20,145 families.
  - Government announced expansion of the 1,000 Days cash transfer program to include 20,000 new beneficiaries by end-2025 (with World Bank support).
  - Cash transfer programs are projected to reach 1.1 percent of GDP in 2025.

### Safeguarding financial stability: conditions, measures, and reforms
- Financial conditions and vulnerabilities:
  - Easing of liquidity conditions lowered funding costs; financial system remained stable with improved soundness indicators since late 2024.
  - Some credit cooperatives and small private banks remain vulnerable with weak asset quality, slim capital buffers, and low or negative profits.
- Supervisory and resolution actions:
  - Intensified supervision and capital restoration plans implemented for troubled institutions.
  - Insolvent medium-sized credit cooperative and a small bank liquidated; two troubled small banks recapitalized by new owners.
  - Supervision of credit cooperatives tightened: improved provisioning, credit-granting methodologies, loan risk classification, and governance.
  - Regulatory forbearance measures introduced in November 2024 and extended in April 2025; recommendation to phase out forbearance at appropriate pace.
  - Inter-institutional group for resolution policy within the Financial Stability Committee created (end-January 2025 SB, met).
  - IMF TA recommendations include amending purchase-and-assumption regulations and carrying out crisis simulations.
- Macroprudential and market infrastructure reforms:
  - Macroprudential capital buffer regulations enacted in November 2024, including minimum Tier 1 capital requirement and a capital conservation buffer in line with Basel recommendations.
  - Work to revise access rules to resources of two Liquidity Funds and to gradually increase contribution rates from financial institutions.
  - Improvements to stress testing toolkit and inter-agency data sharing under IMF TA.
  - Study on lending interest rate caps completed (end-March 2025 SB, completed in May 2025); Financial Policy and Regulation Board (JPRF) to work on implementing a simpler, more flexible interest rate methodology.
  - Common identifier for clients of banks and credit cooperatives established to improve assessment of credit risk and borrowers’ indebtedness.
  - Plans to speed up transmission of credit data to private credit bureaus from 45 days to a daily basis.

### Developing the domestic public debt market (Box 1)
- Importance:
  - Development of domestic public debt market is critical to mobilize domestic public financing, implement Basel III liquidity ratios, and reduce financial repression and interest rate controls.
- Key short- to medium-term recommendations:
  - Implement competitive auctions for primary placement of bonds and Treasury bills (CETES) to establish a reliable yield curve and promote pricing transparency.
  - Upgrade Central Securities Depository (DCV) and integrate with a Real-Time Gross Settlement (RTGS) system; authorities hired a company to modernize payments system and overhaul DCV (end-January 2025 SB, implemented in March 2025).
  - Standardize bond features, implement reopenings to develop benchmark bonds, and use buybacks/exchanges to mitigate refinancing risks.
  - Publish a Medium-Term Debt Management Strategy and issuance calendars; improve secondary market transparency through collaboration with brokerage firms.
  - Legal and regulatory reforms: clarify taxation in primary/secondary markets, implement auctions of government securities, and strengthen investor protections.
  - Authorities plan to issue a regulation for domestic market auctions for bonds and treasury notes (proposed SB for end-November 2025).

### Structural reforms, energy resilience, and competitiveness
- Energy sector measures:
  - Short-term: installation of new land-based or floating thermal generation plants.
  - Toachi Pilatón hydroelectric capacity increase completed in April 2025.
  - Construction of wind project Villonaco III set to begin; prioritization of other solar, wind, and geothermal projects.
  - Pricing reforms:
    - Adopt transparent and cost-reflective pricing mechanism, with regular reviews, for medium- and high-voltage electricity tariffs, in line with gradually reducing energy subsidies (proposed SB for end-August 2025).
    - Enact secondary regulations to allow private entities to sell surplus self-generated electricity to the national grid (proposed SB for end-August 2025).
- Competitiveness and growth priorities:
  - Reforms aimed at increasing labor market flexibility, reducing informality, facilitating female labor participation, enhancing legal and regulatory certainty, improving business regulations, fostering competition, and developing the financial sector.
  - For mining: implement regulations for reopening the mining cadaster (proposed SB for end-June 2026), which has been closed since (text ends).

*Source: IMF staff and Ministry of Economy and Finance materials as presented in the provided content.*

### 2018. They will also develop a new fiscal regime for the mining sector, with support from IMF TA

### 1ecuea2025001 - 2018. They will also develop a new fiscal regime for the mining sector, with support from IMF TA

### Governance and hydrocarbon sector
- Audits completed:
  - Audits of the 2019 and 2020 financial statements of Petroecuador and Petroamazonas completed (end-March 2025 SB, met).
  - Audit of the 2021 financial statements of Petroecuador (first year after the merger) expected to be completed this year (proposed SB for end-September 2025).
  - Authorities committed to auditing the financial statements for the 2022-204 period and to hire top-tier firms to continue auditing Petroecuador, Celec, and CNEL.
- Investment and operational plans:
  - Announced multi-year initiative to mobilize investments in the hydrocarbon sector, including significant private sector participation to boost oil production, enhance the oil refinery system, and promote the gas sector.
  - Handing back the Heavy Crude Oil Pipeline (OCP) to a private operator identified as a positive step.

### Structural reforms to lift potential growth
- Context and constraints:
  - In 2024, GDP per capita (PPP) was 44 percent below the average-emerging-market level.
  - Growth impediments include insufficient investment, sluggish employment growth, stagnant total factor productivity growth, underdeveloped financial markets, a rigid labor market, price controls, and governance weaknesses.
- Planned reforms and expected effects:
  - Financial sector:
    - Move toward more flexible interest rates supported by the EFF.
    - Issue regulations for domestic market auctions of bonds and treasury notes to develop a yield curve.
    - Financial sector reforms could add +0.5 ppt to growth by reducing the gap in the sub-index of “institutions”.
  - Private investment in resource and energy sectors:
    - Mining: only two big mines currently operating; six additional mines expected to come online over the next five years.
    - Reopen the mining cadaster (structural benchmark for end-June 2026).
    - Develop a new fiscal framework for the mining sector with IMF TA (structural benchmark for end-December 2025).
    - Reforms to attract private investment in electricity: allow private entities to sell surplus electricity from self-generation to the national grid and adopt a new pricing mechanism for medium- and high-voltage electricity tariffs to gradually reduce energy subsidies.
  - Governance and efficiency:
    - Complete financial audits of Petroecuador for 2021.
    - Prepare framework for an upgraded Official System of Public Procurement.
    - Governance reforms could raise output by 2 percent after six years, yielding an annual increase in growth of about +0.3 ppt (upper bound estimate).
  - Labor market:
    - Address rigid labor market structures, high minimum wages and dismissal costs, prohibition of hourly and fixed-term contracts, and large gender employment gaps.
    - Closing the gender employment gap over 10 years could boost annual growth by up to 1.6 percent.
- Potential growth assessment:
  - Fund staff estimate: full implementation of reforms supported by the EFF could add at least 0.5 percentage point to growth over the medium term, raising potential growth to 3 percent on a conservative basis.
  - Effects summarized:
    - Financial Sector Reforms: +0.5 ppt
    - Governance (financial audits of PetroEcuador; upgraded System of Public Procurement): +0.3 ppt

### Financial integrity, AML/CFT, and anti-corruption
- AML/CFT:
  - National Assembly approved an AML/CFT law in July 2024 (end-February 2025 SB, met); expected to be in effect by July 2025.
  - Authorities working with IMF TA on an AML/CFT Strategic Action Plan (end-September 2025 SB) based on the National Risk Assessment approved in 2024.
- Anti-corruption and procurement transparency:
  - December 2024: SERCOP and other institutions approved the National Integrity Strategy for Public Procurement (ENICOP).
  - June 2025: National Assembly approved a law to strengthen the procurement framework.
  - December 2024: Authorities approved the 2024-28 National Integrity and Anti-Corruption Plan.
  - Key next steps: ensure accuracy of beneficial ownership information in procurement, sustain enforcement against corruption, operationalize enhanced asset and interest declaration framework from AML/CFT law, pass legislation to prevent conflicts of interest in public administration.

### Macroeconomic resilience to natural disasters
- Vulnerabilities:
  - Ecuador highly vulnerable to droughts, wildfires, floods, landslides, and sea-level rise; frequency and severity increased in recent decades.
  - Historical droughts in 2023 and 2024 triggered electricity crises, severely disrupting economic activity.
- Policy positioning:
  - Authorities have made significant progress establishing policy and institutional frameworks for adaptation and mitigation but need to address remaining institutional, legislative, data, and policy gaps and attract financing.
  - Authorities interested in requesting an arrangement under the Resilience and Sustainability Facility (RSF) to advance their agenda.

### Program modalities, financing needs, and augmentation proposal
- Balance of payments and financing gap:
  - Staff estimate that, after an additional fiscal effort and a larger financing envelope of US$600 million from other IFIs, Ecuador would face a financing gap of US$1 billion in 2025-27.
- Proposed Fund support:
  - Staff proposes to augment overall access under the EFF by SDR 750.4 million (107.6 percent of quota).
  - An additional SDR 125.5 million (US$164.4 million) would be disbursed at the second EFF review; the bulk of the augmentation to be disbursed in future reviews after enactment of important fiscal reforms.
  - Remaining disbursements under the EFF, including the augmentation, envisaged for budget support.

### Program implementation, performance criteria, and quantitative targets
- Program performance through end-April 2025:
  - All QPCs through end-April 2025 have been met.
  - Between January and April 2025:
    - NFPS deposits at the central bank increased by US$423 million, exceeding the adjusted end-April QPC of -US$957 million.
    - Net international reserves (NIR) increased by US$828 million, overperforming the adjusted end-April IT of -US$991 million.
  - Continuous PCs on no accumulation of external arrears and no new central bank credit to the NFPS were met.
  - The end-April 2025 IT on the PGE arrears with the public sector was missed but expected to be compensated later in the year.
- Selected program quantitative performance criteria and indicative targets (Million of U.S. dollars, unless otherwise indicated):
  - Nonoil primary balance of the budgetary central government (PGE) (floor): Program/Adj./Actual examples include -2,295 / -2,295 / -1,801 (End-Aug. 2025 Program 2/Adj./Actual; status Met).
  - Overall balance of the PGE and CFDD (floor): examples include -4,213 / -4,215 / -3,058 (End-Aug. 2025; status Met).
  - Accumulation of NFPS deposits at the central bank (floor): examples include 360 / 154 / 850 (End-Aug. 2025; status Met) and 0 / -957 / 423 (End-Dec. 2025; status Met).
  - Change in the stock of NIR (floor): examples include 65 / -141 / 1 (End-Aug. 2025; status Met) and -34 / -991 / 828 (End-Dec. 2025; status Met).
  - Stock of PGE arrears to the domestic private sector (ceiling): examples include 662 / 505 / Met (End-Aug. 2025) and 600 / 660 / Not Met (End-Dec. 2025).
  - Number of families in the first three income deciles covered by cash transfer programs (floor): 1,212,984 / 1,214,638 / Met (End-Aug. 2025); 1,228,660 / 1,248,805 / Met (End-Dec. 2025).
- Structural benchmarks and implementation status:
  - Most SBs for the second review implemented (two with delay), including operationalization of the SNC, tender for auditor for 2023-2024 healthcare audits, completion of the 2019 and 2020 Petroecuador and Petroamazonas audits, enactment of new AML/CFT law, establishment of inter-institutional group for resolution reforms, study of interest rate system, and contract to implement new platform for BCE’s central securities depository.
  - SBs requiring more time: automatized process for PGE payments (end-March 2025 SB proposed reset to end-July 2025) and updated MEF–IESS agreement on transfer of healthcare obligations (end-March 2025 SB proposed reset to end-August 2025).
  - Six new SBs added to enhance transparency and governance, foster domestic capital market development, attract private investment, foster energy security, and unlock growth potential.

### Capacity to repay and financing assurances
- Capacity to repay:
  - Total Fund credit outstanding projected to peak in 2025 at 1032.8 percent of quota, equivalent to 7.4 percent of GDP, 98.7 percent of GIR, and 24.5 percent of exports of goods and services.
  - Total obligations to the Fund relative to GIR peak in 2025 at 15.9 percent and decline steadily to 3.1 percent by 2034.
  - Fund obligations as percent of GDP and exports of goods and services peak at 1.3 and 4.6 percent in 2027.
  - Risks to capacity to repay critically depend on policy implementation and availability of external financing.
- Financing assurances:
  - Program described as fully financed with firm financing commitments for the next 12 months and good prospects for the remaining period.
  - IFIs (WB, IDB, CAF, FLAR) committed to maintain or increase support.
  - Firm financing commitments obtained from all official bilateral creditors providing budget support for next 12 months.
  - External market access assumptions: approximately US$1 billion in 2026, US$1.5 billion in 2027, and US$2 billion thereafter.
  - In case of financing shortfalls, alternative financing sources and/or a contingent policy response would be required per contingency plans discussed with Fund staff.

*Source: IMF staff report content (1ecuea2025001).*

### 37.      Safeguards. A safeguards assessment undertaken in 2024 concluded that safeguards had

### 37. Safeguards.

### Safeguards assessment and central bank governance
- A safeguards assessment undertaken in 2024 concluded that safeguards had been strengthened since 2019, particularly following the 2021 Organic Monetary and Financial Code (COMYF) reforms.
- The BCE took steps to implement some recommendations from the 2024 assessment; efforts should continue to:
  - fully implement governance related reforms;
  - strengthen the central bank’s financial autonomy; and
  - align the BCE annual financial statements with International Financial Reporting Standards.
- The 2021 COMYF reforms established a “backing rule” that aims to fully cover the BCE monetary liabilities and government deposits with international reserve assets to strengthen the Central Bank’s balance sheet and safeguard dollarization.
- To ensure effective implementation, the authorities aligned the implementation of the backing rule with the 2023 reprofiling of the government’s debt held by the BCE, deferring the requirement for full coverage of the first, second, and third balances to 2040.
- A fiscal safeguards review was recently completed with the main finding that Ecuador’s PFM system provides broadly adequate safeguards for the use of Fund resources for budget support, with progress achieved since the last review in 2021.
- Further work is needed to improve treasury and budget management to prevent domestic arrears accumulation.

### Lending into arrears
- Ecuador maintains a residual amount of arrears to international private bond holders arising from outstanding claims on those international bonds that the authorities repudiated in 2008-09.
- At that time, most government obligations were repurchased by the government; however, US$52 million remain outstanding in the hands of individual creditors, and the authorities have been unable to identify these creditors to settle the claims.
- The authorities established a public procedure to follow in the event these bondholders request liquidation of the securities, which continues to operate to solve outstanding claims.
- Staff judges that the authorities continue to make good faith efforts to reach a collaborative agreement with the remaining creditors.

### Article VIII / Capital Flow Management Measures (CFMs)
- Ecuador maintains a 5 percent tax on transfers abroad (“impuesto a la salida de divisas”, ISD) for financial and current international transactions.
  - The measure constitutes both an outflow CFM under the Fund’s Institutional view on the Liberalization and Management of Capital Flows, and an exchange restriction subject to Fund approval under Article VIII, Section 2(a).
- The authorities remain committed to gradually phasing out the tax as macroeconomic and balance of payments stability is restored and the reserve position is strengthened, supported by the implementation of the policies under the EFF-supported program.
- The ISD rate for the imports of certain items was reduced in January 2025.
  - The ISD rate for a list of imports in the pharmaceutical sector was reduced to 0 percent from 5 percent as of January 2025 for the year 2025.
  - The ISD for a list of imports for other productive sectors was temporarily reduced from 5 percent to 0 percent between January and April 2025, and was reduced to 2.5 percent as of May 2025 for the remainder of 2025.

### Enterprise risks related to the EFF arrangement
- The Fund faces significant business, operational, financial, and reputational risks related to the EFF arrangement, which have increased since the first EFF review due to the deterioration of the global landscape.
- Specific risks identified:
  - Business risks: analytical accuracy risks from an uncertain economic outlook and exceptionally high global policy uncertainty; quality of policy and technical advice affected by weaknesses in Ecuador’s institutional capacity, notably lags and variability in data sources.
  - Operational risks: risks to mission and field presence from the challenging security situation.
  - Financial risks: potential deterioration if global economic and financial conditions worsen and/or difficulties in program implementation delay additional international financial support (including financing commitments) and/or affect market re-access.
  - Reputational risks: scenarios above could carry reputational risks for the Fund.
- Risk mitigants include:
  - bold policy actions already taken by the authorities;
  - strong program implementation since program approval (including meeting most program targets with significant margins);
  - authorities’ reaffirmed commitment to continue implementing the revised program (including larger fiscal adjustment, progress towards meeting SBs, and additional structural reforms);
  - stronger mandate and larger support in the National Assembly attained by President Noboa in the recent elections;
  - strong multilateral financial support;
  - authorities' commitment to honoring external debt obligations;
  - the program’s protection of social spending;
  - contingency planning, with clearly-defined triggers to enable timely and effective responses.
- Operational risks to field presence could be mitigated by support from Fund headquarters through close monitoring and dynamic adjustments to field presence.
- On balance, staff judges these risks to be lower than the reputational, financial, and business risks of the Fund not continuing to support a member facing severe challenges amid exceptionally high global policy uncertainty that has taken substantive actions to address them, demonstrated strong ownership of program objectives, and met all QPCs, most with wide margins, under very challenging economic conditions.

### Assessment of Exceptional Access Criteria (Box 3)
- Criterion 1 (exceptional BoP need not met within normal limits): Staff assesses that this criterion is met.
  - Ecuador continues to experience an exceptional balance of payment (BoP) need stemming from large external debt repayments and loss of market access.
  - Staff estimates that, after accounting for additional fiscal and reform efforts and additional financing from other IFIs, Ecuador would face a financing gap of US$1 billion in 2025-27.
  - Ecuador’s credit outstanding with the Fund stands at SDR6.4 billion (US$8.7 billion, or 922 percent of quota) as of end-April 2025, so IMF support requires exceptional access.
- Criterion 2 (debt sustainability analysis): Staff assesses that this criterion is met.
  - Under the staff’s baseline scenario, the 2024 debt sustainability updated assessment continues to assess public debt as sustainable but not with high probability.
  - Staff assesses that adequate safeguards remain in place to meet EA Criterion 2 (EA2) should adverse shocks materialize; the assessment is finely balanced and hinges on steadfast implementation of the fiscal plan and reforms and timely disbursement of bilateral and commercial project financing, with limited margins for maneuver.
  - Two tests under the Fund’s new Debt Sustainability Framework for Market Access Countries were applied:
    - Debt sustainability test: analysis examined whether public debt would remain sustainable in the face of a large shock at the end of the program period (defined as a shock that would propel Ecuador’s debt to the 80th percentile of the debt fan-chart by 2034). Staff assesses that this condition is met.
    - FX availability test: given debt would remain sustainable under the shock, the analysis examined whether Ecuador would have sufficient FX liquidity to manage international obligations under plausible assumptions regarding fiscal adjustment and net financing. Staff assesses that this condition is met.
- Criterion 3 (prospects of regaining private market access): Staff assesses that this criterion is met.
  - Sovereign spreads remain elevated but have declined by over 1,000 basis points since the April 2025 presidential election.
  - Ecuador had regularly issued international bonds until 2019; staff judges that robust implementation of the recalibrated EFF-supported plan, continued commitment to remain current on external debt obligations, and adherence to a sustainable and firmly declining debt path consistent with achieving COPLAFIP’s debt ceilings ahead of schedule will help Ecuador bolster market confidence, further lower sovereign spreads, and re-access international markets as envisaged under the program’s revised baseline.
  - This assessment is subject to significant risks and depends on steadfast implementation of fiscal and reform plans as well as global economic and financial conditions.
- Criterion 4 (policy program provides reasonably strong prospect of success): Staff assesses that this criterion is met.
  - In April 2025, President Noboa won reelection and has forged a working majority in the National Assembly.
  - The authorities remain fully committed to program objectives; all QPCs for end-April 2025 have been met, and authorities have completed or are in the process of completing all SBs envisaged under the program.
  - The government has demonstrated capacity to implement needed reforms under very difficult circumstances and strong ownership of broader objectives; the assessment remains subject to risks related to the challenging domestic and global environment and Ecuador’s longstanding socio-political complexities.

### Staff appraisal — key findings and program implications
- Progress and implementation
  - The authorities made significant progress in implementing their economic program supported by the EFF under very difficult circumstances.
  - Decisive policy actions mobilized nonoil revenues, boosted fiscal and external buffers, and enabled clearing a significant amount of domestic arrears.
  - All QPCs for the second EFF review have been met, and substantial progress was made on structural reform SBs (fiscal, governance, financial sector).
  - The end-April 2025 IT on the PGE arrears with the public sector was missed due to tight liquidity from delays in IFI disbursements related to elections and global conditions but is expected to be compensated later in the year.
- Updated fiscal plan and financing
  - The authorities will adopt additional fiscal measures to strengthen the fiscal position and build buffers.
  - The updated fiscal plan envisages a fiscal consolidation of 6.6 percent of GDP over the program period, up from 5.5 percent at the first EFF review.
  - The proposed augmentation of the EFF arrangement of SDR 750.4 million (about $1 billion), together with additional support from other multilateral partners, would cover the remaining financing need.
  - The fiscal plan maintains public debt on a firm downward path and supports objectives of lowering sovereign spreads and regaining market access (deferred to 2026).
- Macroeconomic outlook
  - Economic growth is projected to recover gradually after a 2 percent contraction in 2024 amid severe security and electricity crises; real GDP growth is expected to recover in 2025 and over the forecast period.
  - Inflation is projected to remain low, below that of trading partners.
  - The current account balance would continue to record sizable surpluses, supporting continued improvement in reserve buffers.
- Risks and reform priorities
  - Overall risks to the outlook have increased since the first EFF review and remain high: low reserves and liquidity constraints, a large fiscal consolidation need, and potential delays in securing external financing and regaining market access are key vulnerabilities.
  - Steadfast implementation of the recalibrated EFF arrangement is key to increase buffers, achieve a fiscal surplus, durably reduce the government’s financing need, and implement reforms to promote growth.
  - Strengthened structural reform agenda is important to unlock growth potential by attracting private investment into mining, hydrocarbons, and energy; fostering domestic capital market development; strengthening energy resilience; and building resilience to natural disasters.
  - Authorities continue expanding the social safety net by enhancing the social registry and expanding cash transfers to vulnerable groups to mitigate adverse impacts from fiscal adjustment.
  - Efforts to bolster financial stability and domestic capital market development are welcome: financial sector broadly stable, improvements in credit and financial soundness indicators, strengthened regulation and oversight, enhanced resolution tools, and study of the interest rate system to inform future reforms.
  - Combating illicit activities and enhancing governance through AML/CFT legislation, an AML/CFT Strategic Action Plan, and procurement governance initiatives are key to improving the investment environment and boosting growth.

*Source: IMF staff report excerpt (sections 37–48 and Box 3).*

### 49.      Staff supports the completion of the Second Review and the augmentation of the EFF

### 1ecuea2025001 - 49.      Staff supports the completion of the Second Review and the augmentation of the EFF

### Staff recommendations on the program
- Staff supports the completion of the Second Review and the augmentation of the EFF arrangement with the rephasing of the availability date for the third review.
- Staff recommends the completion of the financing assurances review.

### Program financing and schedule (key program dates and amounts)
- Approval of arrangement: May 31, 2024 — 752.9 (Millions of SDRs), 107.9 (Percent of Quota).
- First review / end-August 2024 criteria: November 15, 2024 — 375.9 (Millions of SDRs), 53.9 (Percent of Quota).
- Second review / end-December 2024 criteria: March 15, 2025 — 312.9 (Millions of SDRs), 44.8 (Percent of Quota).
- Third review / end-April 2025 criteria: July 15, 2025 — 312.9 (Millions of SDRs), 44.8 (Percent of Quota). (Availability date rephased for third review under augmentation proposals.)
- Subsequent scheduled reviews/purchases through March 15, 2028 list repeated tranches of 312.9, 186.9, 184.9 (Millions of SDRs) at specified dates.
- Original Total: 3,000.0 (Millions of SDRs), 430.0 (Percent of Quota).
- Proposed Augmentation Total: 3,750.4 (Millions of SDRs), 537.5 (Percent of Quota).

### Recent economic developments (selected highlights)
- Real GDP: 2023 = 2.0 (percent); 2024 = -0.4 (percent); 2025 projection = -2.0 (percent); 2026 projection = 1.6 (percent).
- Nominal GDP (US$ million): 2023 = 121,147; 2024 = 120,433; 2025 = 124,676; 2026 = 125,038.
- GDP per capita (US$): 2023 = 6,793; 2024 = 6,703; 2025 = 6,939; 2026 = 6,907.
- Oil production (millions of barrels): 2023 = 173.5; 2024 = 173.8; 2025 = 174.0; 2026 = 172.5.
- Oil price West Texas Intermediate (US$ per barrel): 2023 = 77.6; 2024 = 78.5; 2025 = 76.6; 2026 = 70.2.
- Consumer price index (period average): 2023 = 2.2 (percent); 2024 = 1.9 (percent); 2025 = 1.5 (percent); 2026 = 2.2 (percent).
- Staff notes: economy contracted in the first three quarters of 2024; high-frequency data point to weak activity in 2024Q4 amid the electricity crisis and a recovery in 2025Q1; oil production has declined, driven by lower production in the ITT field; inflation has ticked up recently mainly driven by a normalization in electricity prices.

### Fiscal developments (selected figures and trends)
- NFPS overall balance (percent of GDP): 2023 = -3.5; 2024 = -1.8; 2025 = -1.3; 2026 = -1.3; 2027 = -0.9; 2028 = -0.2.
- Primary balance (percent of GDP): 2023 = -2.6; 2024 = -0.8; 2025 = -0.2; 2026 = -0.3; 2027 = 0.2.
- Nonoil primary balance (NOPB, US$ million): 2023 = -5,833; 2024 = -3,841; 2025 = -3,643; 2026 = -3,820.
- NOPBS (NOPB including fuel subsidies, percent of GDP): 2023 = -7.5; 2024 = -5.6; 2025 = -5.4; 2026 = -4.6.
- Revenue (US$ million): 2023 = 43,580; 2024 = 46,791; 2025 = 45,876; 2026 = 47,104.
  - Oil revenue (US$ million): 2023 = 14,510; 2024 = 14,800; 2025 = 14,847; 2026 = 14,251.
  - Nonoil revenue (US$ million): 2023 = 29,070; 2024 = 31,991; 2025 = 31,029; 2026 = 32,853.
- Expenditure (US$ million): 2023 = 47,797; 2024 = 48,978; 2025 = 47,467; 2026 = 48,674.
- NFPS gross debt (US$ million): 2023 = 65,821; 2024 = 68,370; 2025 = 67,019; 2026 = 71,009.
- Gross financing needs (US$ million): 2023 = 9,810; 2024 = 8,097; 2025 = 10,574; 2026 = 8,250.
- Staff highlights: fiscal position strengthened in 2024 with a significantly declining fiscal deficit and rebuilding of fiscal buffers; financing mix relied on support from multilateral partners; successful revenue mobilization via authorities’ fiscal package in 2024 while primary expenditures remained contained; gross financing needs remained large despite fiscal improvement.

### External sector and reserves
- Current account balance (percent of GDP): 2023 = 1.8; 2024 = 4.4; 2025 = 5.7; 2026 = 3.1.
- Trade balance (US$ million): 2023 = 2,207; 2024 = 5,566; 2025 = 6,813; 2026 = 4,087.
- Exports, f.o.b. (US$ million): 2023 = 31,484; 2024 = 33,423; 2025 = 34,699; 2026 = 32,645.
- Gross international reserves (US$ million): 2023 = 4,454; 2024 = 7,648; 2025 = 6,900; 2026 = 10,544.
- Gross international reserves (months of next year’s imports of G&S): 2023 = 1.6; 2024 = 2.7; 2025 = 2.3; 2026 = 3.6.
- IMF purchases under the EFF reported in Balance of Payments: 2025 = 1,500 (US$ million) purchase noted as “purchases under the EFF” in Table 5a (listed among IMF net credit items).

### Financial system and monetary indicators
- Broad money (M2) percent change, yoy: 2023 = 6.7; 2024 = 4.8; 2025 = 4.8; 2026 = 3.8.
- Credit to the private sector (percent change, yoy): 2023 = 8.4; 2024 = 4.5; 2025 = 6.2; 2026 = 4.0.
- Net international reserves (US$ million): 2023 = -7,639; 2024 = -7,574; 2025 = -7,638; 2026 = -6,470.
- Financial soundness: banking system regulatory capital to risk-weighted assets = 16.7 (2019) falling to ~15.1 (2023); nonperforming loans to total gross loans = 3.2 (2019) to 4.6 (2023); provisioning to nonperforming loans = 203.0 (2019) to 185.9 (2023); return on assets = 2.0 (2019) to 2.2 (2023).
- Staff observations: robust deposit growth facilitated an incipient recovery in credit growth and a decline in borrowing costs; credit-to-GDP gap seems to have closed; liquidity ratios remaining on a downward trend with early signs of recovery; provisioning and loan quality improved in recent months; solvency ratios stabilized above the regulatory norm.

### Labor market and socio-economic developments
- Formal private employment has returned to pre-pandemic levels but total employment has not; inadequate employment has risen, especially among the youth.
- Unemployment rate is in single digits but significantly higher among the youth; informality has risen, particularly among the youth.
- Poverty has recently risen, especially in urban areas.
- Note: latest youth (aged 15 to 24) data points for some charts correspond to March 2025 as specified in the source.

### Key macro-fiscal projections (selected)
- Real GDP projections: 2024 = -0.4 (percent); 2025 = -2.0 (percent); 2026 = 1.6 (percent); 2027 = 1.7 (percent); 2028 = 1.8 (percent); 2029 = 2.1 (percent); 2030 = 2.5 (percent).
- NFPS overall balance (percent of GDP) projected to improve from -1.3 (2026) to 0.7 (2029) and 1.3 (2030).
- NFPS gross debt to GDP projected to decline from 56.8 (2024) to 42.5 (2030).

### Financing assurances review
- Staff recommends completion of the financing assurances review in conjunction with support for the Second Review and the proposed augmentation and rephasing of the EFF arrangement.

*Source: IMF staff report material provided in the content unit.*

### 1. Nonoil primary balance of the budgetary central government (PGE) (floor) 1/

### 1. Nonoil primary balance of the budgetary central government (PGE) (floor) 1/

### Performance criteria and indicative targets — key numerical outcomes
- 1. Nonoil primary balance of the budgetary central government (PGE) (floor) 1/
  - -2,295
  - -2,295
  - -1,801
  - Met
  - -341
  - -341
  - 312
  - Met
  - -1,220
  - -1,964
  - -52

- 2. Overall balance of the PGE and CFDD (floor) 1/
  - -4,213
  - -4,215
  - -3,058
  - Met
  - -1,041
  - -1,181
  - -796
  - Met
  - -2,628
  - -3,795
  - -1091

- 3. Accumulation of NFPS deposits at the central bank (floor) 1/
  - 360
  - 154
  - 850
  - Met
  - 0
  - -957
  - 423
  - Met
  - 0
  - 557
  - 200

- 4. Non-accumulation of external payments arrears by the NFPS (continuous performance criterion)
  - 0
  - 0
  - Met
  - 0
  - 0
  - Met
  - 0
  - 0
  - 0

- 5. (No new) Central bank direct and indirect financing to the NFPS (continuous performance criterion)
  - 0
  - 0
  - Met
  - 0
  - 0
  - Met
  - 0
  - 0
  - 0

Indicative targets
- 6. Overall balance of the NFPS (floor) 1/
  - -2,442
  - -2,444
  - -1,590
  - Met
  - -89
  - -1,103
  - -1,147
  - 217

- 7. Nonoil primary balance including fuel subsidies (NOPBS) of the NFPS (floor) 1/
  - -6,528
  - -6,526
  - -6,674
  - Not Met
  - -1,151
  - -3,070
  - -5,151
  - -1,317

- 8. Change in the stock of NIR (floor) 1/
  - 65
  - -141
  - 1
  - Met
  - -34
  - -991
  - 828
  - Met
  - -579
  - 147
  - 315

- 9. Stock of PGE arrears to the domestic private sector (ceiling)
  - 662
  - 505
  - Met
  - 600
  - 660
  - Not Met
  - 400
  - 105
  - 0

- 10. Number of families in the first three income deciles nationwide covered by cash transfer programs (floor)
  - 1,212,984
  - 1,214,638
  - Met
  - 1,228,660
  - 1,248,805
  - Met
  - 1,244,336
  - 1,260,012
  - 1,279,012

- Sources: Ministry of Economy and Finance and IMF staff estimates.
- Note: Aggregates and adjustors as defined in the Technical Memorandum of Understanding (TMU).
- 1/ Cumulative from January 1.
- 2/ Staff report for the 2024 Article IV Consultation and First EFF Review (Country Report No. 24/357).
- 3/ Adjusted for oil prices and disbursements from multilateral institutions.
- End-December 2024
- End-April 2025

### Interpretive summary of performance
- Multiple fiscal floors and ceilings were met (notably entries marked "Met") while some targets were "Not Met".
- The Nonoil primary balance including fuel subsidies (NOPBS) of the NFPS (floor) 1/ was explicitly marked "Not Met".
- Stock of PGE arrears to the domestic private sector recorded a "Not Met" outcome in one reporting instance.
- Coverage of cash transfer programs for the lowest three income deciles shows sequential increases across reported observations.

*Source: Ministry of Economy and Finance and IMF staff estimates.*

---

### Structural Benchmarks

### Overview
- Table 12 lists 25 structural benchmarks across reform areas including Public Financial Management, Domestic Arrears, Tax Reform, Fiscal Strategy, Social Safety Net, Governance, Transparency and Governance, Anti-Money Laundering Framework, Financial Sector, Domestic Capital Market Development, Mining Sector, Oil Sector Transparency and Governance, and Electricity Sector.
- Each benchmark entry includes: Reform Area; Structural Conditionality; Objectives; Due Date; Status.

### Structural benchmarks (numbered 1–25) — reform area, objective, due date, status
- 1. Public Financial Management — Publish an updated Medium-Term Fiscal Framework (MTFF) in line with program targets. Strengthen fiscal planning and management. End-October 2024. Met
- 2. Public Financial Management — Publish a Medium-Term Debt Management Strategy in line with program targets. Strengthen fiscal planning and management. End-October 2024. Met
- 3. Public Financial Management — Implement an automatized process for budgetary central government (PGE) payments, including arrears’ payments. Strengthen financial management, increase transparency, and reduce accumulation of payment arrears. End-March 2025. Not met. Proposed to be reset to end-July 2025
- 4. Domestic Arrears — Share with Fund staff an updated plan to clear and prevent the resurgence of domestic arrears of the budgetary central government (PGE), including obligations to the private sector and intra-public sector claims. Strengthen the monitoring and reduce accumulation of payment arrears. End-November 2024. Met
- 5. Tax Reform — Prepare and share with the Fund a plan to mobilize nonoil fiscal revenues, including by streamlining inefficient tax expenditures and replacing transitory revenue measures with permanent high-quality ones. Inform future efforts to broaden the tax base and streamline tax expenditures. Mid-November 2024. Met
- 6. Fiscal Strategy — Enact regulation on revenue and/or expenditure measures to ensure that the 2025 fiscal plan is in line with program and MTFF commitments. Ensure fiscal consolidation. December 6, 2024. Met
- 7. Social Safety Net — Share with the Fund a plan to complete the social registry to cover families in the lowest three deciles of the income distribution throughout the country. Enhance the social safety net. End-October 2024. Met
- 8. Governance — Establish an updated agreement between the MEF and IESS on the transfer of healthcare obligations (including both internal and external providers), building on the December 2022 agreement. The updated agreement should include a decision about the 2022 healthcare audits. Improve expenditure control. End-March 2025. Not met. Proposed to be reset to end-August 2025
- 9. Governance — Establish a timeline to operationalize the National Control Subsystem (SNC) to increase transparency in procurement. Strengthen anticorruption framework and improve expenditure control. End-December 2024. Met
- 10. Governance — Prepare and share with the Fund the conceptual and operational framework for an upgraded Official System of Public Procurement (Sistema Oficial de Contratación Pública del Ecuador, SOCE). Increase transparency and efficiency in procurement and improve expenditure control. End-July 2025. (Status blank/implicit as Proposed)
- 11. Transparency and Governance — Initiate the tender process to select an auditor to undertake the 2023 and 2024 healthcare audits (based on the updated MEF/IESS agreement). Improve the quality and reliability of fiscal data. End-December 2024. Met
- 12. Transparency and Governance — Complete the audits of the 2019 and 2020 financial statements of Petroecuador and Petroamazonas and share the results with Fund staff. Enhance transparency and governance in the oil sector. End-March 2025. Met
- 13. Anti-Money Laundering Framework — Enact new AML/CFT legislation to strengthen the AML/CFT framework in line with FATF standards. Mitigate the risk of illicit flows including those related to organized crimes. End-February 2025. Met
- 14. Anti-Money Laundering Framework — The National AML/CFT Coordination Committee to approve and publish a summarized version of an AML/CFT Strategic Action Plan, establishing actionable policy priorities to mitigate money laundering, including by organized crime, and terrorist financing risks identified in the National Risk Assessment approved in 2024. Mitigate the risk of illicit flows, including those related to organized crimes. End-September 2025. (Status blank/implicit as Proposed)
- 15. Financial Sector — Establish a Financial Stability Committee in line with best international practices, comprising the BCE, MEF, JPRF, JPRM, SB, SEPS, SCVS, and COSEDE. Enhance coordination among agencies involved in financial sector oversight. End-September 2024. Met
- 16. Financial Sector — Establish an inter-institutional group within the Financial Stability Committee, comprising BCE, MEF, JPRF, JPRM, SB, SEPS, and COSEDE to coordinate resolution reforms and strategies. Strengthen financial sector resolution framework. End-January 2025. Met
- 17. Financial Sector — Issue macroprudential regulations on bank capital buffers, including surcharges on systemically important institutions and a countercyclical capital buffer. Strengthen financial sector buffers. End-November 2024. Met
- 18. Financial Sector — Prepare and share with Fund staff a study of the system of interest rates, including recommendations to improve credit allocation, financial inclusion, and economic growth, while preserving financial stability. Foster financial sector deepening and improve economy’s growth potential. End-March 2025. Not met. Implemented with delay
- 19. Domestic Capital Market Development — Sign a contract to implement a new platform for the BCE’s central securities depository (DCV) to modernize the compensation, liquidation, and custody functions in line with international standards. Foster domestic capital market development. End-January 2025. Not met. Implemented with delay
- 20. Domestic Capital Market Development — Issue regulation for domestic market auctions for bonds and treasury notes, including procedures, auction format, and rules for participation, bidding, and allocation. Foster domestic capital market development. End-November 2025. Proposed
- 21. Mining Sector — Implement the regulation for the opening of the mining cadaster. Enhance transparency and attract private investment. End-June 2026. Proposed
- 22. Mining Sector — Develop a new fiscal regime for the mining sector to enhance its efficiency and revenue potential (informed by IMF technical assistance). Enhance transparency and attract private investment. End-December 2025. Proposed
- 23. Oil Sector Transparency and Governance — Complete the audit of the 2021 financial statements of Petroecuador and share the results with IMF staff. Enhance transparency and governance in the oil sector. End-September 2025. Proposed
- 24. Electricity Sector — Enact secondary regulations under existing electricity laws to allow private entities to sell surplus electricity from self-generation to the national grid. Attract private investment. Foster energy security and economic growth. End-August 2025. Proposed
- 25. Electricity Sector — Adopt a transparent and cost-reflective pricing mechanism, with regular reviews, for medium- and high-voltage electricity tariffs, in line with gradually reducing energy subsidies and enhancing fiscal sustainability. Attract private investment. Foster energy security, fiscal sustainability, and economic growth. End-August 2025. Proposed

*Source: Table 12, Structural Benchmarks.*

---

### Annex I. Risk Assessment Matrix — key risks, likelihoods, impacts, and policy responses

### Conjunctural Shocks and Scenarios
- Trade Policy and Investment Shocks.
  - Relative Likelihood: High
  - Possible Impact: Medium
  - Summary: Higher trade barriers or sanctions reduce external trade, disrupt FDI and supply chains, and trigger further U.S. dollar appreciation, tighter financial conditions, and higher inflation.
  - Additional considerations: Higher trade barriers or sanctions that impact commodity prices (in particular oil) and volumes of nonoil products (such as bananas and shrimps) could have significant ramifications on growth and fiscal and external balances. Higher oil and metal prices would have a net positive impact on Ecuador’s external and fiscal balances.
  - Policy Response: Adopt policies to improve trade resilience, including enhancing diversification of trade markets and export products and limiting policy uncertainty through clearly articulated medium-term policy frameworks. In the event tensions reduce oil prices, implement fiscal contingency measures.

- Sovereign Debt Distress.
  - Relative Likelihood: High
  - Possible Impact: High
  - Summary: Higher interest rates, stronger U.S. dollar, and shrinking development aid amplified by sovereign-bank feedback result in capital outflows, rising risk premia, loss of market access, abrupt expenditure cuts, and lower growth in highly indebted countries.
  - Policy Response: Pursue fiscal consolidation to rebuild credibility with markets. Strengthen (financial) crisis preparedness and management. Continue to address financing needs by closely working with international financial institutions and seek opportune times to re-access international markets.

- Tighter Financial Conditions and Systemic Instability.
  - Relative Likelihood: Medium
  - Possible Impact: Medium
  - Summary: Higher-for-longer interest rates and term premia amid looser financial regulation, rising investments in cryptocurrencies, and higher trade barriers trigger asset repricing, market dislocations, weak bank and NBFI distress, and further U.S. dollar appreciation.
  - Possible Impact details: Abrupt market movements could hit Ecuador through higher funding costs, and negative spillovers via lower growth in trading partners and lower commodity prices.
  - Policy Response: Continue stepping up financial supervision, including by imposing capital restoration plans on troubled institutions. Strengthen financial crisis preparedness and management.

- Regional Conflicts.
  - Relative Likelihood: Medium
  - Possible Impact: Medium
  - Summary: Intensification of conflicts (e.g., in the Middle East, Ukraine, Sahel, and East Africa) or terrorism disrupt trade in energy and food, tourism, supply chains, remittances, FDI and financial flows, payment systems, and increase refugee flows.
  - Additional: Difficulties in finding new markets for exports hit by the disruptions can reduce trade flows and slow economic growth. Higher oil and metal prices are expected to have a net positive impact on Ecuador’s external and fiscal balances.
  - Policy Response: Gradually reduce dependency on oil through economic diversification and promote private sector-led growth. Continue to diversify export markets through new high standard regional free trade agreements.

- Commodity Price Volatility.
  - Relative Likelihood: Medium
  - Possible Impact: High
  - Summary: Supply and demand volatility (due to conflicts, trade restrictions, OPEC+ decisions, AE energy policies, or green transition) increases commodity price volatility, external and fiscal pressures, social discontent, and economic instability.
  - Policy Response: Pursue fiscal consolidation to restore confidence and ensure debt and fiscal sustainability. Gradually reduce dependency on oil through economic diversification and promote private sector-led growth. Continue to closely monitor financial sector stability. Continue to address financing needs by closely working with IFIs and seek opportune times to re-access international markets.

- Global Growth Acceleration.
  - Relative Likelihood: Low
  - Possible Impact: Medium
  - Summary: Easing of conflicts, positive supply-side surprises (e.g., oil production shocks), productivity gains from AI, or structural reforms raise global demand and trade.
  - Policy Response: Diversify the economy to reduce dependency of commodity export and to be able to take advantage of a growth pickup more broadly. Continue to diversify export markets through new high standard regional free trade agreements.

### Structural Risks
- Deepening Geoeconomic Fragmentation.
  - Relative Likelihood: High
  - Possible Impact: Medium
  - Summary: Persistent conflicts, inward-oriented policies, protectionism, weaker international cooperation, labor mobility curbs, and fracturing technological and payments systems lead to higher input costs, hinder green transition, and lower trade and potential growth.
  - Policy Response: Adopt policies to improve trade resilience, including enhancing diversification of trade markets and export products and limiting policy uncertainty through clearly articulated medium-term policy frameworks. In the event tensions reduce oil prices, implement fiscal contingency measures.

- Cyberthreats.
  - Relative Likelihood: High
  - Possible Impact: High
  - Summary: Cyberattacks on physical or digital infrastructure (including digital currency and crypto assets), technical failures, or misuse of AI technologies trigger financial and economic instability.
  - Policy Response: Ensuring critical systems are properly protected and backup systems are available. Insurance could help mitigate some of the fiscal risk.

- Climate Change.
  - Relative Likelihood: Medium
  - Possible Impact: High
  - Summary: Extreme climate events driven by rising temperatures cause loss of life, damage to infrastructure, food insecurity, supply disruptions, lower growth, and financial instability. Ecuador is vulnerable to landslides, floods, extreme heat, droughts, volcanic and seismic activity.
  - Policy Response: Implement policies to build resilience in infrastructure to natural disasters. Invest to protect critical financial, transport, communication, or energy infrastructure to minimize disruptions. Build precautionary savings buffers.

- Social Discontent.
  - Relative Likelihood: Medium
  - Possible Impact: High
  - Summary: Real income loss, spillovers from conflicts, dissatisfaction with migration, and worsening inequality ignite social unrest, populism, polarization, and resistance to reforms or suboptimal policies.
  - Policy Response: Design reforms such that the fiscal adjustment does not hurt the poor and the vulnerable. Continue engaging the broader public, explaining the benefits of the reform program. Prioritize social spending to achieve more inclusive growth. Continue to liberalize trade and improve the business climate to promote faster job creation, including for youth, and foster inclusive growth.

### Domestic Risks
- Prolonged or Deeper Security Crisis.
  - Relative Likelihood: High
  - Possible Impact: High
  - Summary: A renewed flare-up in domestic violence causing renewed curfews and other disruptions.
  - Policy Response: Ensure adequate fiscal spending on security, through adequate prioritization. Implement contingency fiscal measures to ensure fiscal sustainability is not undermined. Implement targeted measures to support the most vulnerable. Advance governance, AML/CFT, and inclusive growth agenda.

- Renewed Political Impasse.
  - Relative Likelihood: High
  - Possible Impact: High
  - Summary: The government is unable to complete its reform agenda due to faltering political and public support.
  - Policy Response: Design reforms such that the fiscal adjustment does not hurt the poor and the vulnerable. Continue engaging the broader public, explaining the benefits of the reform program. Prioritize social spending to achieve more inclusive and job-rich growth.

- Unexpected and Large Disruptions in Oil Production.
  - Relative Likelihood: Medium
  - Possible Impact: High
  - Summary: Repeated and long disruptions to oil production owing to natural disasters and lacking maintenance of infrastructure.
  - Policy Response: Invest in maintenance of oil infrastructure. Advance the diversification and SOE governance agendas.

*Source: Annex I, Risk Assessment Matrix.*

### Annex II. Sovereign Risk and Debt Sustainability Framework

### Annex II. Sovereign Risk and Debt Sustainability Framework

### Overall assessment and headline findings
- Public debt is assessed as sustainable but not with high probability.
- Overall risk of sovereign stress: moderate.
- Key recent developments:
  - Public debt-to-GDP decreased to 53.8 percent of GDP in 2024 from 54.3 percent in 2023.
  - A debt-for-nature swap lowered external debt outstanding by US$527 million.
  - Spreads have declined to around 800 basis points as of early-July 2025.
- Program importance: The fiscal plan supported by the EFF program is essential to rebuild buffers and restore market confidence.

### Baseline assumptions and debt projections
- Fiscal plan and implementation:
  - Projections assume successful implementation of the fiscal reform plan supported by the EFF program.
  - NFPS primary balance: projected at 0.2 percent of GDP in 2025, converging to a primary surplus of 2.4 percent of GDP in the medium term.
- Debt path and financing needs:
  - Public debt-to-GDP: 53.8 percent in 2024; projected to decline to below 40 percent by 2031, reaching the COPLAFIP debt limit one year ahead of schedule.
  - Gross financing needs (GFNs): 8.5 percent of GDP in 2024; forecasted 6.4 percent of GDP in 2025; around 4 percent of GDP over the medium term.
- Baseline macro and interest assumptions (selected indicators from the projection table):
  - Public debt (selected years, percent of GDP): 2024: 53.8; 2025: 53.2; 2026: 52.1; 2027: 50.4; 2028: 48.4; 2029: 45.5; 2030: 42.5; 2031: 39.4.
  - Change in public debt (percent of GDP, selected): 2024: -0.6; 2025: -0.5; 2026: -1.1; 2027: -1.7.
  - Primary deficit (percent of GDP, selected): 2024: 0.2; 2025: -0.2; 2026: -1.0; thereafter converging to -2.4.
  - Real GDP growth (percent, memo): 2024: -2.0; 2025: 1.7; 2026: 2.1; 2027: 2.5; medium-term: about 3.0.
  - Inflation (GDP deflator; percent, memo): 2024: 5.0; 2025: 1.8; medium-term steady at 1.5.
  - Effective interest rate (percent, memo): rises from 4.4 in 2024 to 5.5 by 2035.
  - Residual maturity: 6. years.

### Public debt definition and coverage
- Public debt defined as consolidated liabilities of the NFPS, comprising the PGE, the CFDD, social security funds, public nonfinancial corporations, and the Development Bank of Ecuador (BEDE).
- Instruments included: loans; securities (bonds and Treasury bills); liabilities under oil related financing; central bank lending to the government; deposits at BEDE; other accounts payable including arrears.

### Risks to the debt outlook and realism assessment
- Realism and fiscal multiplier:
  - Baseline assumes a fiscal multiplier of 0.5.
  - Growth path is somewhat more conservative than SRDSF benchmark metrics.
  - Negative fiscal impulse assessed highest in 2024 and expected to dissipate gradually starting in 2025.
- Main downside risks:
  - Uncertainty of external financing sources.
  - Implementation capacity of the fiscal program (risk of policy slippage).
  - Revenue risks from: growth underperforming (including security situation uncertainty), lower oil prices under high global uncertainty, disruptions in oil production, and renewed energy shortages.
- Mitigating factors:
  - Large share of multilateral and bilateral official debt with comparatively low rollover risk and long maturities.
  - Relatively low GFNs in the projection and successful performance of fiscal measures implemented so far.
- Realism assessment outcome:
  - Fiscal adjustment is ambitious relative to cross-country historical experience; avoiding policy slippages is important to achieve debt reduction goals.
  - Debt fanchart width indicates significant uncertainty; debt could increase substantially under adverse yet plausible scenarios.

### Medium-term tools, stress tests, and risk metrics
- Debt fanchart and medium-term indices (selected values):
  - Debt fanchart width: 77.4 (percent of GDP).
  - Probability of debt non-stabilization: 16.1 (percent).
  - Terminal debt-to-GDP x institutions index: 30.8.
  - Debt fanchart index (DFI): 1.9 → Risk signal: Moderate.
- Gross Financing Needs (GFN) module:
  - Average baseline GFN: 4.8 (percent of GDP).
  - Initial banks' claims on general government: 4.3 (pct bank assets).
  - Change in banks' claims in stress: 9.9 (pct banks' assets).
  - GFN financeability index (GFI): 6.4 → Risk signal: Low.
- Medium-term index and probabilities:
  - Medium-term risk signal: Moderate.
  - Prob. of missed crisis, 2025-2030, if stress not predicted: 18.2 pct.
  - Prob. of false alarms, 2025-2030, if stress predicted: 37.5 pct.
- Stress test insights:
  - GFNs could increase substantially in case of an unexpected natural disaster; impact smaller following a commodity price decline.

### Long-term modules and considerations
- Large amortization module:
  - Ecuador faces sizeable amortizations in the medium-term.
  - Maintaining a fiscal stance consistent with a debt-stabilizing primary balance after program completion would keep debt below the COPLAFIP limit.
  - Historical episodes of large fiscal imbalances could lead to a rapidly increasing debt ratio.
- Natural resources module:
  - Ecuador does not face immediate pressures from depleting oil resources.
  - Continued need to diversify fiscal revenue away from oil revenue in the long term.

### Policy implications and recommendations (from analysis)
- Steadfast implementation of fiscal reforms under the EFF program to sustain the downward debt trajectory and strengthen public debt sustainability.
- Continue to reduce outstanding debt in the program to mitigate the uncertainty signaled by the debt fanchart.
- Manage financing risks by leveraging multilateral and bilateral official financing while monitoring spreads and market confidence.
- Prioritize measures to reduce vulnerabilities to shocks identified in stress tests (natural disasters, commodity and oil production risks, security-related growth shocks).

*Source: Annex II. Sovereign Risk and Debt Sustainability Framework, IMF staff.*

### Appendix I. Letter of Intent

### Appendix I. Letter of Intent

### Executive summary and program context
- New government started a four-year term on May 24, 2025, following the April runoff victory of President Daniel Noboa.
- Program supported by a 48-month Extended Fund Facility (EFF) arrangement (approved by the IMF Executive Board on May 31, 2024).
- Recent outcomes and conditions:
  - Inflation has remained low.
  - International reserves have recovered, supported by a record high current account surplus in 2024.
  - 1,214,638 lower-income families covered by the social safety net as of December 2024.
  - All quantitative performance criteria (QPC) and most indicative targets for end-December 2024 were met; only the indicative target on the nonoil primary balance including fuel subsidies was missed by a small margin due to unexpected diesel consumption increases from the 2024 electricity crisis.
  - QPC for end-April 2025 were met.
  - Sovereign debt spreads declined to about 800 basis points as of early July 2025.
- Key shocks and challenges: volatile oil prices, highly unpredictable global environment, adjustments in international financial markets, and residual effects of 2024 security and electricity crises.

### Requests to the IMF and financing
- Request augmentation of access under the current EFF arrangement by SDR 750.4 million (about US$1 billion).
- Request completion of the Second Review under the EFF arrangement and associated disbursement of SDR 438.4 million (about US$610 million) for budget support.
- Request rephasing of the availability date associated with the Third Review of the EFF arrangement from July 15, 2025 to August 15, 2025.
- Request completion of the financing assurances review.
- Enhanced IMF support is being complemented by increased financing from development partners and other international financial institutions.

### Policy commitments and safeguards
- Commitment to fiscal sustainability while protecting the most vulnerable.
- Commitment to rebuild fiscal and reserve buffers to safeguard the dollarization regime.
- Will not impose or intensify foreign exchange restrictions or multiple currency practices; will not conclude bilateral payment agreements inconsistent with Article VIII of the Fund’s Articles of Agreement; will not impose or intensify import restrictions for balance of payments reasons.
- Committed to gradually phasing out the tax on transfers abroad (ISD) as macroeconomic and balance of payments stability are restored and reserves are strengthened, supported by EFF program implementation.
- Consent to publication of the letter, its attachment, and the Staff Report.

### Memorandum of Economic and Financial Policies — overview
- The attached MEFP reports progress and lays out macroeconomic and structural policies under the EFF-supported program.
- Historical context and prior reforms:
  - 2020-22 EFF helped recovery from the pandemic, strengthened fiscal sustainability, supported dollarization, and advanced transparency and anti-corruption agendas.
  - Key reforms: updated Organic Budget Code (COPLAFIP), criminalization of acts of corruption (COIP), reform of the Organic Monetary and Financial Code (COMYF), expansion of social safety nets.
- Political and shock-related setbacks in 2023 and 2024: political uncertainty, declines in oil revenue, higher external interest payments on floating-rate debt, contraction in real GDP in 2024 due to a severe electricity crisis driven by historic drought.
- Energy context: hydroelectric power normally provides around 70 percent of total generation capacity.
- Short- and medium-term energy actions include incorporation of new generation sources (purchase or lease of land-based or floating thermal generation) and laws enacted in January and October 2024 to stimulate private investment (authority to delegate projects up to 100 MW in non-conventional and transitional renewable energy).

### Strengthening fiscal sustainability (detailed measures and targets)
- Fiscal framework and governance:
  - COPLAFIP introduced a medium-term fiscal framework (MTFF), clear anchors to reduce public debt, National Fiscal Coordination Committee, and fiscal risk management exercise.
  - An updated IMF Fiscal Safeguards Review in 2024 confirmed progress since 2021.
  - MTFF published (end-October 2024 structural benchmark, met).
  - A contingency plan was elaborated as a prior action for program approval in May 2024.
- Recent fiscal outcomes:
  - 2024 NFPS overall fiscal deficit reduced by over 2 percentage points of GDP to 1.3 percent of GDP.
  - Fiscal efforts included a 3-percentage point VAT rate hike and additional revenue measures totaling about 2 percent of GDP (implemented during November 2023–May 2024 period).
  - Prepared and shared a projected monthly cash flow and financing plan for the budgetary central government (PGE) as a prior action before program approval.
- Medium-term consolidation targets and trajectory:
  - Aim to keep the NFPS overall deficit broadly unchanged in 2025.
  - Target an overall NFPS surplus of 1.3 percent of GDP by end-2028.
  - Target NFPS primary surplus of 2.4 percent of GDP in 2028.
  - Target cumulative consolidation of about 6.6 percentage points of GDP in the non-oil primary balance including fuel subsidies (NOPBS) over 2024-28 relative to end-2023 (compared to a cumulative consolidation of 5.5 percentage points of GDP in the NOPBS at the time of the first review of the EFF in December 2024).
  - Respect the COPLAFIP debt limit of 40 percent of GDP by 2032.
- Policy instruments to achieve consolidation:
  - Non-oil revenues:
    - Plan to mobilize non-oil revenues by replacing temporary measures with permanent high-quality measures, streamlining inefficient tax expenditures and exemptions (mid-November 2024 structural benchmark, met).
    - Develop a new fiscal regime for the mining sector with IMF TA support (proposed structural benchmark for end-December 2025).
  - Oil revenues and fuel subsidies:
    - Reform of price-setting mechanism for domestic sales of low-octane gasoline enacted in June 2024 with World Bank technical support, expected to boost oil revenue by about 0.4 percent of GDP in steady state.
    - June 2025 decision to eliminate the diesel subsidy for the industrial tuna fishing sector.
    - Initiatives to increase net oil revenues include gradual production increases (partly via private investments) and enhancements to refinery capacity.
  - Public sector wage bill:
    - Continue containing the wage bill; limit increases in headcount and wages.
    - Norm issued in 2024 to cap all public sector wages below the salary of the President.
    - Review and streamline temporary contracts while ensuring necessary recruitment for police and domestic security forces.
  - Procurement reforms:
    - Continue reforming procurement to optimize expenditure and enhance transparency and quality of services.
    - SERCOP operationalized the 2022 Procurement Law (norms issued July 2023).
    - June 2024 MAPS evaluation presented by SERCOP with IDB support.
    - Urgent economic law approved by the National Assembly in June 2025 to establish new mechanisms in public procurement.
    - Creation of the National Control Subsystem (SNC) presided by SERCOP; timeline to operationalize SNC met (end-December 2024 structural benchmark, met).
    - Prepare and share conceptual and operational framework to upgrade the Public Sector Procurement System (SOCE) (end-July 2025 structural benchmark), with IDB support.
  - Capital expenditure and public investment:
    - Prioritize capital projects based on social and economic impact.
    - Promote PPPs and concessions with due account of contingent liabilities and fiscal risks.
    - Ecuadorian Development Bank to channel multilateral and bilateral resources for local government infrastructure.
    - Public Investment Management Assessment (PIMA) conducted in 2023, including a climate-related assessment (C-PIMA); intend gradual implementation of recommendations.

*Source: Appendix I. Letter of Intent and Attachment I. Memorandum of Economic and Financial Policies (Ecuador).*

### 14. Specific actions to achieve annual fiscal targets will be established in the

### 14. Specific actions to achieve annual fiscal targets will be established in the

### Fiscal planning, annual budgets, and arrears
- 2024 budget was extended into 2025, as stipulated by COPLAFIP.
- In late 2024, enacted measures to ensure the 2025 fiscal plan is in line with the EFF-supported program targets and the MTFF (early December 2024 structural benchmark, met).
- Will ensure the revised budget for 2025 and the next MTFF are aligned with the EFF-supported program targets.
- Committed to clearing domestic arrears that have accumulated due to tight fiscal and liquidity conditions.
- Included in the multi-year fiscal financing plan the clearance of PGE arrears with the private sector.
- In November 2024 prepared and shared with Fund staff a plan for clearing and preventing resurgence of PGE arrears, including obligations to the private sector and intra-public sector claims (end-November 2024 structural benchmark, met).
- Have estimated the stock of potential claims on PGE, including with the IESS, GADs, private sector, or others by type of expenditure, year, and beneficiaries.
- Started publishing data on monthly arrears in the public debt bulletins, as per COPLAFIP law.
- Published a methodology to estimate the stock of arrears and reporting templates in January 2022.

### Financing strategy and public debt management
- Near-term financing strategy relies on multilateral and bilateral sources, while seeking to regain access to international capital markets in 2026, and gradually developing domestic financing sources.
- Pursuing active public debt management to cover public sector financing needs at the lowest possible cost with a prudent level of risk.
- Published a new medium-term debt management strategy (MTDS) in line with these objectives and the EFF-supported program (end-October 2024 structural benchmark, met).
- In active dialogue with official bilateral partners to secure continued financial support.
- Will establish a dedicated working group to oversee and monitor project financing transactions which will meet every two weeks.
- Aim to return to international capital markets as market conditions allow and continue developing the domestic capital market.
- MEF has implemented actions to improve public debt transparency: a new Debt Bulletin published monthly with detailed information on previously not included past obligations related to internal debt, arrears, accounts payable, and previous unregistered budgetary obligations; current public external and internal debt profile and amortization profile by source and operation; detailed database supporting the Bulletin now accessible on the MEF website.

### Expanding social safety nets
- Objective: ensure the burden of fiscal consolidation is not borne by the poor and vulnerable.
- Upgraded social registry and expanded social protection coverage with assistance of the WB.
- Prepared a plan to further enhance the social registry and aim to cover all families in the lowest three deciles of the income distribution throughout the country (end-October 2024 structural benchmark, met).
- As of April 2025, over 1.2 million family units from the bottom three income deciles already benefit from social protection transfers.
- Aim to extend coverage for 47,000 additional family units per year into the social protection programs, thereby ensuring that almost all the families in the bottom two income deciles and the majority of the families in the third income decile are covered by social protection by the end of the IMF-supported program.
- Working on permanent updating of the social registry base including institutional strengthening at the central level and territorial deployment with subnational governments (GADs).
- With WB support, undertaken actions to make the social protection system more efficient and comprehensive through monetary transfers and complementary services by the State.
- Social protection will continue to increase through multiple social assistance transfer programs listed in the Technical Memorandum of Understanding (TMU).
- MIES led a campaign to increase the use of banking services by recipients of social protection transfers.

### Enhancing institutional framework, governance, and transparency (fiscal statistics and PFM)
- 2020 COPLAFIP reforms included regulations requiring timely collection, accurate compilation, and transparent publication of fiscal data, with adequate coverage (by subsectors of the NFPS).
- Established a dedicated statistics unit at the Ministry of Economy and Finance (MEF) with expertise in government finance statistics compilation.
- With IMF TA: updated training curriculum in GFS compilation and produced a training schedule; an IMF long-term expert (LTX) worked one year with the statistics unit to improve MEF capacity in compiling, verifying, and reconciling government finance and debt statistics.
- Objective to increase NFPS coverage through inclusion of public companies in the electricity sector and expand statistical sample of local government companies.
- Issued a technical regulation (norma técnica) in February 2025, in line with COPLAFIP, defining procedures for monitoring and evaluating compliance with fiscal rules.
- Fiscal statistics are disseminated monthly according to a pre-established publication calendar, updated once a year; time series on revenues, expenditures, and transactions in financial assets and liabilities by each subsector of the NFPS are published monthly with indication whether data is preliminary or definitive.
- An analytical report on the Budgetary Central Government GFS is published alongside the monthly time series (in collaboration with IMF’s Statistics Department).
- Revised historical balances of the Social Security Fund (IESS); adjusted compilation process and corrected transfers from central government to IESS for accrued pension liabilities going back to 2013.
- Incorporated additional healthcare transfer obligations to IESS into expenditure and debt statistics based on a conservative estimation while healthcare audits are pending.
- Included in the central government 2024 budget and MTFF the accrued pension transfer obligations and the estimation of healthcare transfer allocations to the IESS and will continue recording conservative estimates in future budgets.
- Committed to establishing an updated MEF/IESS agreement on transfer of healthcare obligations (including both internal and external providers), building on the December 2022 agreement (end-March 2025 structural benchmark, not met, proposed to be reset for end-August 2025).
- Finalized procurement to hire external auditor to review the 2023 and 2024 healthcare obligations to IESS (end-December 2024 structural benchmark, met); the audits are underway.
- Working on strengthening PFM and cash management practices with IMF PFM expert support: expanded cash management planning horizon to full annual budget cycle; remaining challenge to develop capability to update cash management planning on a 12-month rolling basis.
- Implemented a new monitoring system to evaluate existing stock of domestic payment arrears of the central government and selected NFPS entities.
- Will design a policy so MEF can gather monthly information on arrears from other NFPS entities, as mandated by COPLAFIP.
- Working to finalize, with IMF technical support, an automatized process for PGE payments, including arrears’ payments (end-March 2025 structural benchmark, not met, proposed to be reset for end-July 2025).
- Committed to improving efficiency of SOEs and monitoring fiscal risks: seven public companies that were not managed efficiently are in the process of closure, such as EMCO (closed in 2024).
- For remaining SOEs: committed to strengthening operational framework, reforming collective labor agreements, and implementing best practices to improve efficiency and limit contingent liabilities.
- Aiming for a structural cost-optimization strategy including a comprehensive efficiency assessment of the state.

### Strengthening BCE institutional framework and safeguarding the dollarization regime
- 2021 revisions to COMYF included: eliminating possibility of direct and indirect central bank financing of the government; restoring full reserve coverage of private and public financial institutions’ deposits at the BCE; giving technical and managerial autonomy to the BCE.
- Revised law strengthened BCE balance sheet by removing legacy assets from the 1999 banking crisis and improved transparency via an audit committee, external auditors, and publication of audited BCE financial statements.
- Implemented capacity development program for auditors; required certification of audit departments and individual auditors by the Institute of Internal Auditors; implemented peer-review recommendations for audit department.
- Modified BCE organizational structure to strengthen technical areas and ensured permanent constitution of the audit committee.
- Updated IMF safeguards assessment in 2024 confirmed significant strengthening of BCE safeguards since 2019.
- Aligned implementation of the “backing rule” in COMYF with the 2023 reprofiling of government’s debt held by the BCE, deferring requirement for full coverage of the first, second, and third balances to 2040 to ensure effective implementation consistent with strengthening of BCE balance sheet and safeguarding dollarization.

### BCE liquidity lines, reserves, and statistical updates
- FLAR granted BCE access to a contingent credit line of up to US$230 million in 2023.
- FRBNY granted BCE access to a FIMA Repo Facility of US$1 billion in 2022 for exclusive central banking operations.
- BIS contingent liquidity facility renewed at up to US$840 million as a precautionary measure; in June 2025 BIS granted a new contingent liquidity line up to US$1.5 billion which strengthens management of Ecuador’s international reserves and provides additional liquidity buffers for the BCE.
- BIS facility could be activated by liquidity funds of financial institutions when proper legal reforms have been implemented by COSEDE.
- Letters of credit increased from US$966 million in June 2021 to a historical maximum of US$1.7 billion in June 2025; letters of credit are critical for foreign trade operations, especially fuel imports.
- BCE completed base year change project for national accounts: December 2023 disseminated update changing fixed base methodology to a moving base with reference year 2018 with IMF and ECLAC TA.
- Released new 2018-23 Input-Output Matrices in early 2025.
- In June 2025, BCE released the Bioeconomy Satellite Account with international technical support.
- BCE reported accumulated net profits of US$1.6 billion between 2021 and 2024.
- BCE’s equity increased from US$1.6 billion to US$2.8 billion.
- Increased general reserve fund to US$500 million, reaching 500 percent of the authorized and paid-in capital, in compliance with COMYF.
- BCE transferred US$1.1 billion in profits to the MEF between 2021 and 2024.

### Enhancing financial system resilience and developing the domestic capital market
- Ecuador’s 2023 Financial System Stability Assessment (FSSA) assessed solvency and liquidity risks, financial sector oversight, macroprudential policies, safety nets, crisis preparedness, payment systems oversight, preconditions for capital market development, and access to finance.
- Key FSSA recommendations: (i) strengthen financial sector oversight and coordination among agencies; (ii) enhance prudential framework governing capital and liquidity; (iii) foster financial deepening and capital market development.
- Gradually implementing FSSA recommendations to meet international standards and best practices.
- Established a Financial Stability Committee (FSC) comprising BCE, MEF, JPRF, JPRM, SB, SEPS, SCVS, and COSEDE (end-September 2024 structural benchmark, met).
- Established an inter-institutional group within the FSC (BCE, MEF, JPRF, JPRM, SB, SEPS, COSEDE) to coordinate bank resolution reforms and strategies (structural benchmark for end-January 2025, met).
- With TA from IMF and WB, working to strengthen the resolution framework.
- Between December 2024 and May 2025 issued key new regulations to improve governance and provisioning frameworks for cooperatives.

*Source: 1ecuea2025001 - 14. Specific actions to achieve annual fiscal targets will be established in the*

### 33. We are enhancing the prudential framework on capital and liquidity. We have prepared

### 1ecuea2025001 - 33. We are enhancing the prudential framework on capital and liquidity. We have prepared

### Prudential framework on capital and liquidity
- Methodologies to identify the systemically important financial institutions have been prepared.
- In November 2024 we enacted macroprudential regulations on capital buffers, including surcharges on systemically important institutions and countercyclical capital buffer (end-November 2024 structural benchmark, met).
- Expected outcomes: enhance loss absorption of banks and credit cooperatives and support financial stability.
- Liquidity reforms:
  - Started implementing the FSSA recommendations on liquidity, including phased implementation of the Liquidity Coverage Ratio (LCR) for banks, expected to be achieved by 2028.
  - Working to improve data requirements on liquidity and to expand LCR implementation to the largest credit cooperatives.
- Emergency liquidity assistance:
  - COSEDE issued a new operative manual for the Liquidity Fund’s trust fund in 2024.
  - IMF provided TA during the first half of 2025 to improve stress testing toolkit and enhance emergency liquidity assistance framework.
- Supervisory actions:
  - Intensified supervision and implementation of action plans on a group of weak institutions.
  - An insolvent medium-sized credit cooperative and a small bank were liquidated in December 2024 and April 2025, respectively.
- Regulatory forbearance remains in use, with recognition it needs to be phased out at an appropriate pace.

### Financial sector development and inclusion
- Lending-rate caps:
  - Banks and credit cooperatives are subject to ceilings on lending rates differentiated by credit types and, for commercial loans, by firm size.
  - The 2023 FSSA noted rate caps in a higher interest rate environment have led to margin compression, distortions in credit supply, and restrictions to financial inclusion.
  - A recent revision to update interest rate caps on commercial and corporate loans led to some relief; effects are being assessed.
- Interest rate cap reform:
  - Carried out a study of the system of interest rates (end-March 2025 structural benchmark, not met, implemented with delay in May 2025).
  - Study forms basis for gradual reform to the interest rate cap system with objectives: alleviate unwarranted credit constraints, enhance financial inclusion, support economic growth, while preserving financial stability.
  - Financial Stability Committee reviewed the study’s recommendations; the Financial Board will work towards adopting a new interest rate methodology that is simpler, more flexible, and attuned to market conditions.
  - Plan to monitor and assess impact of the new methodology continuously.
- Public banking support:
  - CFN (Corporación Financiera Nacional) continued facilitating access to credit for micro, small, and medium-sized enterprises, with support from the WB, IDB, and other development partners.

### Domestic capital markets and payments infrastructure
- Domestic capital markets:
  - Primary placements of government securities with private domestic stakeholders occur through the Guayaquil and Quito Stock Exchanges.
  - Started to standardize government securities and develop a domestic yield curve.
  - Will issue a new regulation for domestic market auctions for bonds and treasury notes, including procedures, auction format, and rules for participation, bidding, and allocation (proposed structural benchmark for end-November 2025).
  - Intend to begin regular auctions of government securities as market conditions allow to develop a deeper domestic capital market and diversify financing sources.
- BCE infrastructure investments:
  - BCE signed a contract to implement a new platform for the BCE’s central securities depository (DCV) to modernize compensation, liquidation, and custody functions (end-January 2025 structural benchmark, implemented with delay).
  - Will work on improving the real time gross settlement (RTGS) system at the BCE to enhance payments interoperability and reduce transaction costs.
  - December 2024: Monetary Board approved regulation on payment systems and fintech activities.
  - May 2025: BCE approved a resolution establishing timeline to implement interoperability among participants of the payment system for digital transfers.
- Expected impacts: facilitate national payments, reduce cash-related risks, encourage digital commerce, and promote economic revitalization.

### Business environment, competitiveness, and private sector-led growth
- National competitiveness policy and reforms:
  - Decree issued in June 2024 announced a National Policy aimed at competitiveness-enhancing regulatory improvements.
  - Measures to facilitate environmentally sustainable investment in mining, boost investment in hydrocarbons and electricity supply.
  - Working with IMF, WB, and IDB on structural reforms to unlock growth potential.

### Trade agreements and FDI potential
- 2024 trade agreements:
  - National Assembly ratified trade agreements with Costa Rica and China in 2024.
  - Outcome specifics:
    - "84 percent of Ecuadorian products exported to Costa Rica will be exempted from tariffs."
    - "99.6 percent of Ecuadorian exports to China to benefit from immediate or gradual tariff reductions."
  - Agreements expected to increase potential for productive FDI inflows.
- Ongoing negotiations and processes: finalizing agreements with South Korea and Canada; negotiating with other countries such as the United Arab Emirates; working to deepen trade relations with the USA.

### Financial integrity, AML/CFT, and anti-crime measures
- AML/CFT framework:
  - Adopted new AML/CFT legislation incorporating reforms in line with FATF standards (end-February 2025 structural benchmark, met).
  - Legislation developed with IMF technical support.
  - Will issue necessary regulations to implement the legislation to ensure effective entering into force in line with FATF standards.
  - Plan to approve and publish a summarized AML/CFT Strategic Action Plan, with IMF technical support, establishing actionable priorities from the National Risk Assessment approved in 2024, including measures focused on tackling organized crime-related illicit financial flows (end-September 2025 structural benchmark).
- Institutional measures:
  - Working to enhance governance and independence of the UAFE and its capabilities to produce and disseminate strategic and operational financial intelligence.
  - Launched a Joint Investigation Unit to align efforts across public institutions to fight money laundering, tax fraud, and other illegal activities.

### Transparency, SOE audits, and public integrity
- Public integrity frameworks:
  - Issued "National Policy of Public Integrity 2030" covering SOEs, including transparency in public spending and conflict of interests.
  - December 2024: approved 2024-28 National Integrity and Anti-Corruption Plan.
  - 2022 Draft Law to Prevent Conflict of Interests in Public Administration was submitted to the National Assembly to expand asset declarations of PEPs and mandate online public access to declarations.
- UBO and procurement transparency:
  - SERCOP requires Ultimate Beneficial Ownership (UBO) information for companies awarded public procurement contracts via an electronic form to facilitate continuous publication.
  - SERCOP maintains updated UBO info for recent public contracts; SRI developing a Registry for Ultimate Beneficiaries with new regulations issued in September 2024.
  - December 2024: SERCOP and other institutions approved the National Integrity Strategy for Public Procurement (ENICOP).
- SOE audits:
  - Hired an independent top-tier audit firm in January 2024 with IDB support to audit Petroecuador and Petroamazonas.
  - Completed and shared with IMF staff the 2019 and 2020 audit results (end-March 2025 structural benchmark, met).
  - Working to complete the audit of the 2021 financial statements of Petroecuador and will share results with IMF staff (proposed structural benchmark for end-September 2025).
  - Plans to hire top-tier firms to continue auditing Petroecuador as well as CNEL and CELEC.

### PPPs, mining, hydrocarbons, and energy sector reforms
- PPP framework:
  - New PPP law approved December 2023; complementary regulations issued February 2024.
  - Pipeline prioritizes road infrastructure and renewable energies.
  - MEF fiscal risk unit to evaluate PPP viability and quantify/mitigate risks, presenting risks in fiscal risk statements annexed to annual budgets.
- Mining and hydrocarbons:
  - 2024: created interinstitutional committee to fight illegal mining and update the mining cadaster; expect to reopen cadaster by end-2025.
  - Will implement regulation for opening the mining cadaster (proposed structural benchmark for end-June 2026).
  - June 2024 decree provided new regulatory framework for natural gas projects.
  - 2025: launched multi-year plan to mobilize investments in the hydrocarbon sector with significant private sector participation.
- Electricity sector and renewables:
  - Power shortages since late 2023 due to extreme climate events and underinvestment.
  - October 2024: National Assembly approved an Organic Law to Promote Private Initiative in the Transition to Renewable Energies.
  - Will enact secondary regulations to allow private entities to sell surplus electricity from self-generation to the national grid (proposed structural benchmark for end-August 2025).
  - Will adopt a transparent and cost-reflective pricing mechanism for medium and high voltage electricity tariffs (proposed structural benchmark for end-August 2025).
  - Actions underway: recover generation plants, rent barges, buy generators; April 2025: permanently expanded capacity of the Toachi Pilatón hydroelectric facility.
  - Long-term plans: diversify beyond hydroelectric generation per Electricity Master Plan and 2025-2030 Investment Plan of the Electric and Mining Sectors.
  - Developed 12 NCRE projects (solar, wind, hydroelectric) expected to contribute 833 MW of power, backed by private investments, with mechanisms to cover commercial revenue risks and IDB support.
  - Approved environmental licenses for several renewable projects; Villonaco III wind project set to begin construction.
  - Plans for geothermal and nuclear projects and to urgently strengthen electricity transmission system; started plan to strengthen electricity interconnection with Peru with IDB support.

### Social measures, public sector modernization, and climate resilience
- Social and public sector initiatives:
  - February 2025: created a mechanism to care for, protect, and facilitate reintegration of Ecuadorian migrants.
  - March 2025: an organic law to support female entrepreneurs published in the Official Gazette.
  - Launched a digital transformation project to modernize public services and improve transparency in customs, civil services, and healthcare processes.
- Climate and disaster resilience:
  - WB’s CCDR published in September 2024 informs adaptation and mitigation priorities.
  - Established institutional committee on climate finance within MEF with IDB support.
  - Expanded protected areas, including Galapagos marine reserve; May 2023: secured long-term financing via a debt-for-nature swap.
  - December 2024: completed second debt-for-nature swap to fund the Amazon Biocorridor Program.
  - Expressed interest in a potential Resilience and Sustainability Facility arrangement to increase resilience to natural disasters.

### Program monitoring
- Implementation monitoring:
  - Program implementation will be monitored through quantitative performance criteria, indicative targets, and structural benchmarks detailed in Tables 1 and 2, with definitions and data requirements in the attached TMU.
  - The EFF arrangement will be subject to triannual reviews during 2025 and shift to semiannual reviews during 2026-28, with the third and fourth reviews occurring on or after August 15, 2025, and November 15, 2025, respectively.

*Italic: Source — Content unit 1ecuea2025001 (PDF chapter/section) provided above.*

### 1. Nonoil primary balance of the budgetary central government (PGE) (floor) 1/

### 1. Nonoil primary balance of the budgetary central government (PGE) (floor) 1/

### Quantitative performance criteria: outcomes and program targets
- Nonoil primary balance of the PGE (US$ million, cumulative from January 1):
  - Program / Adj. / Actual — End-December 2024: -2,295 / -2,295 / -1,801 (Status: Met)
  - Program / Adj. / Actual — End-April 2025: -341 / -341 / 312 (Status: Met)
  - Program / Adj. / Actual — End-Aug. 2025: -1,220 / -1,964 / -52

- Overall balance of the PGE and CFDD (floor) (US$ million):
  - End-December 2024: -4,213 / -4,215 / -3,058 (Met)
  - End-April 2025: -1,041 / -1,181 / -796 (Met)
  - End-Aug. 2025: -2,628 / -3,795 / -1091

- Accumulation of NFPS deposits at the central bank (floor) (US$ million):
  - End-December 2024: 360 / 154 / 850 (Met)
  - End-April 2025: 0 / -957 / 423 (Met)
  - End-Aug. 2025: 0 / 557 / 200

- Continuous performance criteria (no accumulation / no new financing):
  - Non-accumulation of external payments arrears by the NFPS: 0 / 0 (Met) — subsequent test dates: 0 / 0 (Met); 0 / 0 / 0
  - (No new) Central bank direct and indirect financing to the NFPS: 0 / 0 (Met) — subsequent test dates: 0 / 0 (Met); 0 / 0 / 0

### Indicative targets and related statistics
- Overall balance of the NFPS (floor) (US$ million):
  - End-December 2024: -2,442 / -2,444 / -1,590 (Met)
  - End-April 2025: -89 / -1,103 / -1,147 / 217

- Nonoil primary balance including fuel subsidies (NOPBS) of the NFPS (floor) (US$ million):
  - End-December 2024: -6,528 / -6,526 / -6,674 (Not Met)
  - End-April 2025: -1,151 / -3,070 / -5,151 / -1,317

- Change in the stock of NIR (floor) (US$ million):
  - End-December 2024: 65 / -141 / 1 (Met)
  - End-April 2025: -34 / -991 / 828 (Met)
  - End-Aug. 2025: -579 / 147 / 315

- Stock of PGE arrears to the domestic private sector (ceiling) (US$ million):
  - End-December 2024: 662 / 505 (Met)
  - End-April 2025: 600 / 660 (Not Met)
  - End-Aug. 2025: 400 / 105 / 0

- Number of families in the first three income deciles nationwide covered by cash transfer programs (floor):
  - End-December 2024: 1,212,984 / 1,214,638 (Met)
  - End-April 2025: 1,228,660 / 1,248,805 (Met)
  - End-Aug. 2025 and forward: 1,244,336 / 1,260,012 / 1,279,012

### Definitions and measurement rules (key TMU elements)
- Nonoil primary balance of the PGE:
  - Defined as total revenues of the PGE excluding oil revenues and interest revenue, minus total non-oil expenditure of the PGE excluding interest expense.
  - Non-oil primary revenues (cash basis): Tax revenues (ingresos tributarios); Other revenues (otros ingresos), including transfers, dividends, administrative fees, proceeds from asset monetization, and other.
  - Non-oil primary expenditures (accrual basis): Wages and salaries (sueldos y salarios); Purchases of goods and services (compra de bienes y servicios); Transfers (to international organizations, GADs, IESS, ISSFA, ISSPOL, SOEs, and the private sector, explicitly including “account 99”); Social assistance benefits; Employment-related social benefits; Transactions in nonfinancial assets.

- Estimated transfers to the IESS for healthcare expenses:
  - PGE transfers to the IESS will include US$337 million in accrued estimated expenses for 2024. This estimated amount will increase every year in line with projected average annual CPI inflation and will be updated once the MEF–IESS agreement on future healthcare expenditures is operational.

- Treatment of PPPs and other liabilities:
  - Government-funded PPPs treated as traditional public procurements; accrued PGE obligations on PPPs recorded transparently in budget data and measured as part of the PGE deficit as they accrue. Accrued but not settled PPP obligations to be recorded either as public debt or as a contingent liability depending on nature.
  - Costs from divestment operations, liquidations, or lawsuit awards recorded as expense.
  - All expenditures credited to “Account 99” due to lack of corresponding budget allocations will be recorded in the year the obligation was accrued or, if year is unavailable, in the year the obligation is credited to Account 99.

### Monitoring and data provision
- All fiscal data needed for program monitoring to be provided to the Fund within 45 days from the end of each test date as shown in Table 2.
- Preliminary monthly data to be provided with a lag of no more than 30 days after the end of each month.

### Program exchange rates (as of April 23, 2024)
- US Dollar to Euro 0.94
- US Dollar to Renminbi 7.11
- US Dollar to Yen 154.82
- US Dollar to SDR 1.31
- US Dollar to British Pound 0.80
- US Dollar to South Korean Won 1,380.60
- US Dollar to Swiss Franc 0.91
- US Dollar to Canadian Dollar 1.37
- US Dollar to Danish Krone 6.99
- US Dollar to Swedish Krone 10.87
- US Dollar to Norwegian Krone 10.99
- US Dollar to Australian Dollar 1.55
- US Dollar to Mexican Peso 17.00
- US Dollar to Colombian Peso 3,924.82
- US Dollar to Gold prices (US$/ounce) 2,313.00

### Data sources and notes
- Sources: Ministry of Economy and Finance and IMF staff estimates.
- Note: Aggregates and adjustors as defined in the Technical Memorandum of Understanding (TMU).
- Footnotes: 1/ Cumulative from January 1. 2/ Staff report for the 2024 Article IV Consultation and First EFF Review (Country Report No. 24/357). 3/ Adjusted for oil prices and disbursements from multilateral institutions.

*Source: Ministry of Economy and Finance and IMF staff estimates (TMU and Table 2 data provided in the IMF program documentation).*

### 20.      Costs associated with divestment operations, with the liquidation of public entities, or

### 1ecuea2025001 - 20.      Costs associated with divestment operations, with the liquidation of public entities, or

### Recording of costs and Account 99
- Costs associated with divestment operations, with the liquidation of public entities, or that are otherwise awarded as part of lawsuits shall be recorded as expense. Examples include but are not limited to:
  - the cancellation of existing contracts;
  - severance payments to workers;
  - awards related to unfair dismissal trials.
- All expenditures recorded as a credit in “Account 99” (due to the lack of corresponding budget allocations) will be recorded in the year the obligation was accrued or, if information on the year is not available, in the year the obligation is credited to the account 99.

### Monitoring timelines for fiscal data
- Fiscal data for program monitoring:
  - For the section referenced in paragraphs 20–23: provided to the Fund within 45 days from the end of each test date as shown in Table 2.
  - Preliminary monthly data: provided with a lag of no more than 30 days after the end of each month.
- For the non-oil primary balance (paragraphs 38–49):
  - Data for program monitoring provided within 60 days from the end of each test date as shown in Table 2.
  - Preliminary monthly data: provided with a lag of no more than 45 days after the end of each month.
- For the overall balance of the NFPS (paragraph 53):
  - Fiscal data provided with a lag of no more than 90 days after the end of each test date as shown in Table 2.
  - Preliminary monthly data: provided with a lag of no more than 60 days after the end of each month.
- For BCE credit monitoring (paragraph 37):
  - Monthly data on amortizations and disbursements of BCE credit to NFPS and to publicly owned banks for the purpose of financing the NFPS will be provided within five business days to the Fund.
- NFPS deposits at the BCE:
  - Data provided to the Fund at weekly frequency within 5 business days following the end of the week.

### Adjustors linked to oil prices and financing (key parameters)
- Adjustor on oil prices (overall balance of the budgetary central government and CFDD, paragraphs 23 and 54):
  - The floor will be adjusted upward/downward by US$23.85 million at corresponding test dates for each US$1 per barrel that the average Ecuador mix crude oil price is above/below the program assumption defined in Table 3.
  - The adjustor is capped at US$178.9 million at corresponding test dates.
  - For 2025 targets, the average price of Ecuador mix oil price will be calculated as the total value of crude oil exports divided by the total volume of oil exports over the period between January 1, 2025, and each test date.
- Adjustor on oil prices (floor on the accumulation of NFPS deposits, paragraph 30):
  - The floor will be adjusted upward/downward by US$11.93/US$23.85 million at corresponding test dates for each US$1 per barrel that the average Ecuador mix crude oil price is above/below the program assumption defined in Table 3.
  - This adjustor is capped at US$178.9 million at corresponding test dates.
  - For 2025 targets, the average price of Ecuador mix oil price will be calculated as the total value of crude oil exports divided by the total volume of oil exports over the period between January 1, 2025, and each test date.
- Adjustor on external borrowing (paragraph 28):
  - The floor on the accumulation of NFPS deposits will be adjusted upward/downward by the amount of NFPS borrowing from non-residents above/below that envisioned under the program, as reported in Table 5, and net of issuances related to liability-management operations that have no net impact on fiscal financing.
  - External borrowing comprises issuance of international bonds and other borrowing with non-official external creditors.
- Adjustor on disbursements from the IMF and other multilateral institutions (paragraph 29):
  - The floor on the accumulation of NFPS deposits will be adjusted upward/downward by the amount of the excess/shortfall in program loan disbursements from the IMF and other international financial institutions (IFIs: IDB, World Bank, CAF, and FLAR), relative to the baseline projection reported in Table 6.
  - Program loan disbursements are defined as external loan disbursements (excluding project financing disbursements and disbursements that are repaid within the same test period) from official creditors that are freely usable for the financing of the NFPS budget operations.

### Key explicit numeric values and program figures (as presented)
- Ecuador mix crude oil price (US$ per barrel): 60.08
- Oil-price adjustor per US$1 per barrel (overall balance and certain NFPS measures): US$23.85 million
- Alternate oil-price adjustor amount (NFPS deposits floor): US$11.93/US$23.85 million (per US$1 per barrel)
- Oil-price adjustor cap at corresponding test dates: US$178.9 million
- Reporting lags and frequencies:
  - 45 days from end of each test date (paragraph 22)
  - no more than 30 days for preliminary monthly data (paragraph 22)
  - weekly NFPS deposits data within 5 business days (paragraph 27)
  - 60 days from end of each test date for non-oil primary balance monitoring (paragraph 48)
  - no more than 45 days for preliminary monthly data (paragraph 48)
  - 90 days from end of each test date for overall balance monitoring (paragraph 53)
  - no more than 60 days for preliminary monthly data (paragraph 53)
  - monthly BCE credit data within five business days (paragraph 37)
- Table excerpts as presented (verbatim entries):
  - Total external borrowing consistent with program targets 1/ 0.0 0.0 Aug. 2025 Dec. 2025
  - Expected disbursement of IMF credit 1/ 1,1671,750
  - Expected disbursements of program loans by other IFIs 1/ 1,0252,900
  - 1/ Cumulative from January 1 of each year.
- Footnote on multilateral institutions (paragraph 29):
  - Multilateral institutions refer to institutions with more than one official shareholder. This classification follows the authorities’ definition which may not necessarily align with the creditor classification treatment for the purposes of IMF policies.

### Definition and coverage notes for the Non-Financial Public Sector (NFPS)
- NFPS composition (paragraph 24):
  - PGE and CFDD;
  - Decentralized Autonomous Governments (municipal, provincial, parish boards);
  - Social Security Funds (IESS, ISSFA, ISSPOL and BIESS);
  - Non-Financial State-Owned Enterprises (SOEs, detailed in Table 4);
  - Development Bank of Ecuador (BEDE);
  - accounts related to the payments to private operators of oil concessions (Ministerio de Energía y Recursos Naturales no Renovables).
  - The Central Bank of Ecuador falls outside of the NFPS perimeter.
- NFPS deposits at the Central Bank of Ecuador (BCE) include all depository liabilities (time and on-call deposits) at the BCE of the NFPS (paragraph 25).
- Table 4: Non-Financial Public Sector Corporations covered under NFPS (verbatim entries):
  - Empresa Pública de Hidrocarburos del Ecuador Petroecuador - PEC
  - Empresa Pública Flota Petrolera Ecuatoriana-EP FLOPEC
  - Empresa Nacional de Ferrocarriles del Ecuador – ENFE (*)
  - Empresa Pública Línea Aérea del Ecuador TAME (*)
  - Muestra de Empresas Públicas Menores (Empresas de Agua Potable)
  - (*) SOEs in liquidation process, which will be in fiscal data until the liquidation process is completed.

### External payment arrears: definition, coverage, and monitoring
- Definition of external debt (paragraph 31): residency criterion generally applies; for debt securities, criterion is place of issuance.
- Debt definition (paragraph 31) includes:
  - Loans (including deposits, bonds, debentures, commercial loans, buyers’ credits, repurchase agreements, official swap arrangements);
  - Suppliers’ credits (deferred payments after delivery of goods/services);
  - Leases (present value at inception of lease payments expected during the agreement, excluding payments for operation, repair or maintenance).
- Arrears, penalties and judicially awarded damages arising from failure to make payment under a contractual obligation that constitutes debt are debt (paragraph 32).
- External payment arrears for program monitoring purposes (paragraph 33) are defined as:
  - (i) external debt obligations (principal and interest) falling due after May 1, 2024 that have not been paid within 90 days of the due date, considering contractual grace periods;
  - (ii) payment arrears on goods delivered or services rendered by external entities.
- Coverage exclusions (paragraph 34):
  - arrears on short-term trade credit or letters of credit;
  - arrears on debt subject to renegotiation or restructuring;
  - arrears from nonpayment of commercial claims that are subject to litigation initiated prior to May 1, 2024.
- Monitoring (paragraph 35): This performance criterion will be monitored on a continuous basis.

### BCE direct and indirect financing to the NFPS
- Definitions (paragraph 36): BCE direct financing and indirect financing through public banks include:
  - overdraft transfers from the BCE to NFPS entities;
  - advance distribution of unrealized profits from the BCE;
  - BCE acquisition of government debt on the primary market or by purchase from public institutions;
  - BCE lending to public banks for acquisition of government debt on the primary market or by purchase from public institutions.
- Monitoring (paragraph 37): This performance criterion will be monitored on a continuous basis. Monthly data on amortizations and disbursements of BCE credit to NFPS and to publicly owned banks for financing the NFPS will be provided within five business days to the Fund.

### Indicative targets: variable definitions (selected)
- Non-oil Primary Balance of the NFPS (paragraphs 38–44):
  - Defined as primary non-oil revenues minus primary non-oil spending.
  - Primary non-oil revenues recorded on a cash basis include:
    - Tax revenues of the PGE and of GADs;
    - Social security contributions;
    - Other revenues (administrative fees, sales of market and nonmarket establishments, other Transfers not elsewhere classified).
  - Primary non-oil revenues explicitly exclude: interest, proceeds from the sale of financial assets, revenues from the privatization of government-owned entities, revenues from oil exports, and revenues from the domestic sales of oil derivatives.
  - Primary non-oil spending recorded on accrual basis comprises:
    - Wages and salaries;
    - Purchases of goods and services (excluding Petroecuador “servicios petroleros”, CFDD purchases and payments to private oil companies (SHE));
    - Grants;
    - Social benefits (including social security benefits, social assistance, employment-related social benefits);
    - Dividends paid by social security funds;
    - Current and capital transfers, including “Account 99”;
    - Transactions in nonfinancial assets.
  - Petroleum product subsidies: defined as the difference between distributor sale price and cost of product; cost calculation details specified (weighted averages, export price of Eastern crude as opportunity cost for domestic production, import cost FOB plus freight and insurance).
  - The non-oil primary balance of NFPS, including fuel subsidies, is defined as the non-oil primary balance of the NFPS minus spending on subsidies on petroleum products (paragraph 44).
- Treatment of government-funded PPPs (paragraph 45):
  - Treated as traditional public procurements. PGE obligations accrued on PPPs recorded transparently in budget data and measured as part of the PGE deficit as they accrue. Accrued but not settled obligations will be transparently recorded either as public debt or as contingent liabilities depending on nature.
- Overall balance of the NFPS (paragraphs 50–53):
  - Defined as net lending/borrowing of the NFPS = non-oil primary balance + oil balance + interest revenues − interest expenditures.
  - NFPS revenues and interest expenses recorded on a cash basis; NFPS primary expenditures measured on an accrual basis.
  - Oil balance defined as revenues from oil exports and domestic sales of oil derivatives minus expenditures on imports of oil derivatives (CFDD), payments to private oil companies (SHE), and goods and services expense and investments of Petroecuador, including “servicios petroleros”.

### Net International Reserves (NIR) definition and components
- NIR definition (paragraph 55): US dollar value of usable gross international reserve assets of the BCE minus (i) gross reserve related liabilities of the BCE to nonresidents, and (ii) reserve holdings of domestic banks and deposits of other financial institutions held at the BCE. Non-U.S. dollar denominated foreign assets/liabilities converted at program exchange rates.
- Usable gross international reserve assets include (paragraph 56):
  - (i) currency and deposits;
  - (ii) monetary gold;
  - (iii) holdings of SDRs;
  - (iv) reserve position in the IMF;
  - (v) securities (including debt and equity securities);
  - (vi) financial derivatives;
  - (vii) other claims (loans and other financial instruments).
- Explicit exclusions from gross international reserves (paragraph 56):
  - precious metals or metal deposits other than monetary gold;
  - assets in nonconvertible currencies and illiquid assets;
  - claims on residents;
  - reserve assets that are pledged, collateralized or otherwise encumbered (unless already excluded), including assets tied up in repurchase agreement transactions.
- Gross reserve-related liabilities comprise (paragraph 57):
  - all short-term liabilities of the BCE vis-à-vis non-residents denominated in convertible foreign currencies with original maturity of one year or less;
  - short-term loans, securities, and other liabilities (excluding account payables) of the central government with original maturity of less than 30 days;
  - the stock of IMF credit outstanding;
  - the nominal value of all derivative positions (including swaps, options, forwards, futures) of the BCE implying sale of foreign currency or reserve assets.
- Reserve holdings of domestic banks at the BCE: all liabilities of the BCE to other depository institutions (otras sociedades de depósitos, per BCE’s Metodología: Información Estadística Mensual, 4th Edition of May 2017).
- Deposits of other financial institutions at the BCE: all liabilities of the BCE to other financial institutions (otras sociedades financieras), with the exception of deposits of the BEDE and BIESS, including those held in trust funds (fideicomisos BIESS y fideicomisos IESS).

*Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1ecuea2025001.pdf*

### 58.      Adjustor on external borrowing. The floor on net international reserves will be adjusted

### 1ecuea2025001 - 58. Adjustor on external borrowing. The floor on net international reserves will be adjusted

### Adjustors to the NIR floor
- External borrowing adjustor:
  - The floor on net international reserves (NIR) will be adjusted upward/downward by the amount of borrowing from non-residents above/below what is envisioned under the program (as reported in Table 5) and net of issuances related to liability-management operations that have no net impact on the outstanding stock of NFPS debt.
  - External borrowing comprises issuance of international bonds and other borrowing with non-official external creditors.

- Disbursement from other multilateral institutions adjustor:
  - The floor on NIR will be adjusted downward/upward by the shortfall/excess in loan disbursement by IFIs and grants, relative to the baseline projection reported in Table 6.
  - Program loan disbursements are defined as external loan disbursements (excluding project financing disbursements) from official creditors that are freely usable for the financing of the NFPS budget operations.

- Oil-price adjustor:
  - The floor on NIR will be adjusted upward/downward by US$11.93/US$23.85 million at corresponding test dates for each US$1 per barrel that the average Ecuador mix crude oil price is above/below the program assumption defined in Table 3.
  - This adjustor is capped at US$178.9 million at corresponding test dates.
  - For 2025 targets, the average Ecuador mix oil price will be calculated as the total value of crude oil exports divided by the total volume of oil exports over the period between January 1, 2025, and each test date.

### Monitoring of NIR and related FX data
- Measurement:
  - The change in NIR will be measured as the cumulative change in the stock of NIR between the beginning of the year and the last day of the corresponding test date month as shown in Table 2.
- Frequency and timeliness:
  - Foreign exchange asset and liability data will be provided to the Fund at weekly frequency within 5 business days following the end of the week.
  - Weekly data on international reserves and foreign currency liquidity, in line with SDDS requirements, no later than 5 business days after the end of the week.
  - Daily monetary and financial data in the agreed template, no later than 1 business days after the end of the day; template to include at least:
    - Movements of international reserves by inflows and outflows;
    - Main balance sheet accounts of financial institutions, broken down by private banks, cooperatives and mutuals;
    - Daily oil production.
  - Weekly consolidated balance sheets of the banking system, BCE balance sheet and financial indicators, and weekly monetary data in the agreed template no later than 5 business days after the end of the week.

### Ceiling on the Stock of PGE Payment Arrears to the Domestic Private Sector
- Definitions:
  - The PGE is defined as above.
  - Arrears are defined as other accounts payable included in the definition of PGE debt, which are overdue for more than 90 days from the date of accrual.
  - Stocks of “cartas de crédito” are explicitly excluded from the definition of arrears for this indicative target (IT).
- Monitoring:
  - Below the line fiscal data referring to PGE accounts payable needed for program monitoring will be provided to the Fund with a lag of no more than 60 days after the end of each test date (Table 2) and preliminary data with a lag of no more than 45 days after the end of each month.
  - The data will include a breakdown by economic sector of accounts payable (e.g., health, education, infrastructure, etc.), with an “of which” detail for amounts overdue by more than 90 days from the date of accrual.

### Floor on Social Assistance Scheme Coverage
- Definitions:
  - Social assistance coverage of poor families for the program is computed as the sum of all active beneficiary family units in the three bottom deciles of the income distribution that benefit from at least one social assistance program.
  - Poor beneficiary families are defined according to information in the RS2018.
  - Coverage expansion will occur through the listed social assistance programs in force on the date of issuance of the program, including: Bono de Desarrollo Humano (BDH), BDH con Componente Variable (BDH-V), Bono Joaquin Gallegos Lara, Pension Mis Mejores Años, Pensión Toda Una Vida, Bono para niños, niñas y adolescentes en situación de Orfandad por muerte violenta de la madre o progenitora, Cobertura de Contingencias, Bono para personas afectadas por eventos de origen natural o antrópico, Bono 1000 Días, and other monetary transfers that might be set into place to strengthen the social protection net.
  - The level (size) of benefits, understood as number of family units, of any of the cash transfer programs in the bottom three deciles of the income distribution should not be reduced (with respect to their level on May 1, 2024).
- Monitoring:
  - Monthly data on:
    - (i) number of family units in the lowest three income deciles covered by the social assistance protection programs, and
    - (ii) monthly data on numbers of registries with information updated and validated following RS2018 by income decile,
  - will be provided to the Fund with a lag of no more than 30 days after the end of each month.

### Other information and data requirements (definitions and monitoring)
- Debt definition and NFPS debt composition:
  - In accordance with IMF GFSM 2014 and Public Sector Debt Guide, total gross debt covers all liabilities that are debt instruments.
  - Debt instruments include:
    - Special drawing rights (SDRs);
    - Currency and deposits;
    - Debt securities;
    - Loans;
    - Insurance, pension, and standardized guarantee schemes; and
    - Other accounts payable.
  - Liabilities excluded from debt: equity and investment fund shares, financial derivatives, and employee stock options.
  - For the program, Ecuador’s NFPS debt includes:
    - Deposit liabilities;
    - Debt securities including short term liquidity instruments (held by nonresidents, and by residents not included in the NFPS entities);
    - Loans; and
    - Other accounts payables.
  - Any liabilities issued by entities of the NFPS, held as an asset by other entity of the NFPS should be netted out. Central bank lending to the government is included in the stock of NFPS debt.
- Monitoring and reporting:
  - NFPS stock of debt in US$ will be provided monthly with a lag of no more than 90 days after the end of each month; submissions will include cross-holdings among NFPS entities.
  - Data on amortizations and disbursements of credit from the BCE to NFPS and to publicly-owned banks for the purpose of financing the NFPS will be provided within five business days from the end of the month.
  - PGE cash flow data from the beginning to the end of the current fiscal year, with a lag of no more than 60 days after the closing of each month; includes expected monthly amortizations and repayments on NFPS debt.
  - Data on social spending for specified programs will be provided monthly.
  - Data to determine the latest net SDR position at the end of each month (all reported data should be denominated in SDRs).
  - Provision of detailed information on collateralized debt and debt with similar arrangements within 2 weeks of signing new contracts; includes all contracts, escrow accounts overseas serving as collateral, detailed information for each creditor on stock of debt, terms, pledged amounts, and expected repayment schedules.
  - Export price of Ecuador mix crude oil, with a lag of no more than 20 days after the closing of each month.
  - Quarterly: detailed balance of payments data no later than 90 days after the end of the quarter.
  - Quarterly: detailed fiscal and debt data by NFPS subsectors no later than 90 days after the end of the quarter, including above and below the line data, summary of the statistical discrepancy, calendar of amortization and payment of interest by instrument at the end of the quarter and stock of gross debt.
- Data templates and content (monthly):
  - Data on stocks and flows (above- and below the line), disaggregated by each NFPS subsector (budgetary central government and CFDD, rest of the central government, subnational governments, SOEs and social security) using agreed templates.
  - NFPS financing data compiled based on detailed information on financial assets and liabilities (deposits, loans, securities, equities, other accounts payable including oil related) and their amortizations, disbursements, and arrears accumulation.
  - Detailed templates: one with detailed revenues and expenditures of each subsector and consolidations; another with subsector summaries and comparisons for monitoring statistical discrepancy and stocks/flows.

### Program augmentation and access (summary from the document)
- The authorities requested augmentation of access under the Extended Fund Facility (EFF) equivalent to around US$ 1.0 billion (SDR 750.4 million or 107.6 percent of quota).
- Ecuador faces a financing gap of US$ 1.0 billion in 2025-27 proposed to be filled by an EFF augmentation of around US$ 1.0 billion.
- Proposed augmentation would increase cumulative access under the EFF to SDR 3.75 billion (537.5 percent of quota).
- Background on prior access:
  - On May 31, 2024, the Executive Board approved a 48-month EFF-supported program with access equivalent to SDR 3 billion (430 percent of quota, equivalent to US$ 4 billion).
  - First purchase on program approval in May 2024 was SDR 752.9 million (108 percent of quota).
  - Second purchase on completion of the first review in December 2024 was SDR 375.9 million (54 percent of quota).
- Under the proposed augmentation, total access under the EFF would increase by SDR 750.4 million (107.6 percent of quota) to SDR 3,750.4 million (537.5 percent of quota).

*Source: 1ecuea2025001 - 58.      Adjustor on external borrowing. The floor on net international reserves will be adjusted*

### 7.      The emerging financing gap would be addressed through a mix of adjustment and

### 7.      The emerging financing gap would be addressed through a mix of adjustment and 

### Financing gap and augmentation
- The revised fiscal plan includes additional fiscal measures equivalent to 1.1 percent of GDP in 2025-27, on top of the 5.5 percent of GDP improvement in the non-oil primary balance including fuel subsidies (NOPBS) during the program, which was projected at the time of EFF approval.
- The remaining financing gap of US$ 1.0 billion over 2025-27, stemming from the shortfall in market financing, would be filled by the proposed augmentation.
- The proposed augmentation of access is SDR 750.4 million (107.6 percent of quota).

### Debt situation and outlook
- Public debt declined from 54.3 percent of GDP at end-2023 to 53.8 percent at end-2024.
- Under baseline projections:
  - Total external debt service burden will peak at 10.9 percent of GDP in 2027.
  - Total external debt service would peak at 38.3 percent of exports of goods and services in 2027 and decline to 25.9 percent by 2034 (Table 3).
  - Debt service due to the Fund in 2025-34 would average 1.0 percent of GDP per year, peaking in 2027-2028 at 1.3 percent of GDP (Table 3).
- The primary balance of the non-financial public sector (NFPS) would turn to surplus in 2025, stabilizing at about 2.4 percent of GDP starting in 2028.
- Public debt-to-GDP ratio projected to decline to below 40 percent by 2031 (the debt limit embedded in the organic budget code).
- Downside risks: shortfalls in external financing; implementation capacity shortfalls of the fiscal program; further economic shocks (lower oil prices, renewed electricity shortages, worsening security situation); further tightening of global financial conditions.
- Risk-mitigating factors: large share of multilateral and bilateral official debt with comparatively low rollover risk and long maturities; relatively low gross financing needs in the projections; implementation of fiscal measures so far under the program.

### Financial implications of the proposed augmentation for the Fund
- IMF credit outstanding to Ecuador at end-May 2025: SDR 6,375.2 million (913.7 percent of quota).
- Disbursements under the current EFF thus far: SDR 1,128.8 million (SDR 752.9 million upon approval in May 2024 and SDR 375.9 million on completion of the first review in December 2024).
- Previous exposure: purchases of SDR 1.0 billion under the 2019 EFF, SDR 469.7 million under the 2020 RFI, and SDR 4.6 billion under the 2020 EFF.
- Augmentation effects:
  - Proposed augmentation SDR 750.4 million (107.6 percent of quota) is nearly equivalent to the 75th percentile of augmentations for SBA and EFF programs.
  - Ecuador’s access under the EFF would increase to 537.5 percent of quota (from 430 percent of quota at EFF approval in May 2024), below the median access (681 percent of quota) for other GRA exceptional access arrangements since 2008.
  - Upon approval of the second review, Fund exposure to Ecuador would increase to 953.1 percent of quota and peak at 1,067.4 percent of quota in March 2026 (compared with an expected peak of around 1,000 percent of quota in November 2025 before augmentation), assuming all purchases and repurchases are made according to schedule.
- Repayment profile:
  - Annual scheduled net repurchases will peak at SDR 1.2 billion in 2030.
  - Annual scheduled net repurchases will be lower between 2026-2027 compared with the original program but higher from 2029 onwards relative to the original arrangement.
- Credit concentration and precautionary balances:
  - After the scheduled purchase upon approval, Ecuador will remain the Fund’s fifth largest GRA borrower, with credit outstanding that would account for 7.4 percent of total Fund credit.
  - Credit concentration (exposure to top five borrowers) would increase slightly from 79.1 percent to 79.2 percent following the first purchase upon approval.
  - Fund GRA exposure to Ecuador after the purchase upon approval would amount to 26.3 percent of precautionary balances, rising to 28.8 percent in March 2026 when credit to Ecuador peaks (assuming the level of precautionary balances projected at end-April 2025).
- Liquidity and income impacts:
  - Fund’s Forward Commitment Capacity (FCC) as of May 31, 2025: SDR 162.7 billion; would decrease by 0.5 percent following approval of the proposed augmentation.
  - For FY26, total projected GRA charges and surcharges for Ecuador are SDR 377 million, accounting for around 39 percent of the Fund’s symmetric burden-sharing capacity of SDR 960 million as of end-May 2025.

### Capacity to repay
- Total obligations to the Fund relative to GIR will peak at 15.9 percent in 2025 and decline to 3.1 percent by 2034.
- Fund obligations in percent of GDP and exports of goods and services will peak at 1.3 and 4.6 percent in 2027.
- On an annual basis, total Fund credit outstanding will peak in 2025, reaching 1,032.8 percent of quota, equivalent to:
  - 7.4 percent of GDP,
  - 98.7 percent of GIR,
  - 14.5 percent of total external debt (Table 3).
- Ecuador’s peak Fund exposure in percent of quota will be above the median and close to the 75th percentile of GRA EA cases.
- International-reserve related indicators are comparatively elevated: peak Fund exposure in terms of GIR, at almost 100 percent in 2025, is the third highest of comparator cases (below Argentina’s 2025 EFF and Ecuador’s 2020 EFF).
- Most other metrics of peak Fund exposure and peak payment obligations are generally moderate compared to other GRA exceptional access cases; debt service to the Fund in percent of exports of goods and services and in percent of total external debt is below the median of other GRA exceptional access cases.

### Assessment and policy implications
- The proposed EFF augmentation would help Ecuador address the temporary shortfall in external financing, support the fiscal adjustment plan, and safeguard deposit accumulation.
- Even after additional fiscal effort and additional financing from other IFIs, Ecuador would face a financing gap of US$ 1.0 billion in 2025-27 without the augmentation.
- Key downside risks to capacity to repay:
  - (i) shortfalls in external financing, leading to a decline in government deposits and potential payment arrears;
  - (ii) further deterioration in the global economic backdrop, due to higher trade barriers and deeper geoeconomic fragmentation;
  - (iii) lower oil prices;
  - (iv) further tightening in global financial conditions, lower risk appetite, resulting in inability to regain market access according to the revised timeline envisaged under the program;
  - (v) a further deterioration in the security situation;
  - (vi) a renewed electricity crisis;
  - (vii) extreme weather events, including floods or droughts, disrupting economic activity;
  - (viii) an increase in social discontent, hampering or slowing reform efforts.
- Upside risks: stronger-than-expected global growth and higher oil prices.
- The proposed arrangement would have a modest impact on the Fund’s liquidity (FCC falls by 0.5 percent) while Fund credit exposure to Ecuador would increase (peak GRA credit outstanding at 1,067.4 percent of quota in March 2026 under the augmentation).
- Rigorous program implementation is critical to mitigate financial risks to the Fund; credible reform implementation is key to regaining access to private international bond markets and mobilizing resources from other official creditors.
- In the event of financing plan shortfalls, alternative financing sources and/or a contingency policy response would be required in line with the contingency plan discussed with Fund staff.
- If policy slippages—or reversals—were to materialize, risks of arrears to the Fund would not be insignificant given large scheduled repurchases over the coming decade.

*Source: IMF staff report excerpt (as provided).*

### 1.5 times the interquartile range, and points beyond that marked as outliers.

### Statement by André Roncaglia, Executive Director for Ecuador, Bernardo Acosta, Alternate Executive Director, and Felipe Antunes, Alternate Executive Director (July 18, 2025)

### Program Performance
- Program implementation remained strong despite two significant exogenous shocks in 2024: a severe security crisis and nationwide power outages caused by an unprecedented drought.
- All quantitative performance criteria (QPCs) for the second review (end-December 2024) and those originally set for the third review (end-April 2025) were met.
- Most indicative targets (ITs) for end-December 2024 and end-April 2025 were also met.
- Substantial progress made on a wide-ranging structural reform agenda under the Extended Fund Facility (EFF) arrangement, demonstrating firm commitment despite security and electricity crises and the lead-up to the 2025 general elections.

### Recent Economic Developments and Outlook
- Economic activity contracted by 2 percent in 2024 as a result of the security and electricity crises.
- Inflation stood at 0.5 percent at year-end 2024.
- Current account balance reached a surplus of 5.7 percent of GDP in 2024, driven by strong nonoil export growth, declining imports, and robust remittance flows—well above the 2.1 percent of GDP surplus projected at program approval and the 1.7 percent of GDP average from 2019 to 2023.
- Gross international reserves rose from $4.5 billion at end-2023 to $6.9 billion at end-2024, exceeding the $5.2 billion projected for end-2024 at program approval.
- For 2025:
  - IMF staff project economic growth of 1.7 percent.
  - The Central Bank of Ecuador forecasts 2.8 percent growth.
  - Economic activity grew by 3.4 percent (y/y) in the first quarter of 2025.
- Sovereign debt spreads declined by over 1,000 basis points following the April elections, reaching about 800 basis points in early July 2025; however, spreads have not declined sufficiently to regain market access in 2025 at conditions compatible with debt sustainability as projected at program approval.

### Fiscal Policy
- Decisive fiscal measures in 2024 included:
  - VAT rate hike from 12 percent to 15 percent.
  - Elimination of gasoline subsidies.
- Achieved fiscal consolidation of 2.2 percent of GDP in 2024.
- Accumulated $850 million in fiscal buffers—well above the $360 million target.
- Public debt declined to 53.8 percent of GDP and is on a downward path.
- Revised fiscal strategy:
  - Planned consolidation of the non-oil primary balance including fuel subsidies increased from 5.5 percent of GDP to 6.6 percent of GDP over the program period.
  - Updated fiscal plan will increase public sector deposit buffers by $1.2 billion by 2028, exceeding the proposed $1 billion EFF augmentation.
  - Continued focus on strengthening permanent nonoil revenues, controlling current spending, and protecting priority expenditures.
- Recent additional fiscal measures adopted: elimination of diesel subsidies for the industrial tuna sector and new fees for the e-commerce and mining sectors.
- Social safety net expansion:
  - Coverage of cash transfer programs in the lowest three income deciles has been increased, exceeding the end-April program target by over 20,000 families.
  - A comprehensive plan was elaborated to revamp the social registry to enhance targeting and coverage.

### Financing Plan
- Program is fully financed with firm financing commitments for the next 12 months and good prospects for adequate financing for the remaining program period.
- Authorities requested an augmentation of the EFF arrangement and further budget support from other IFIs.
- Priority assigned to securing positive net financing from all bilateral creditors during the program; Minister of Finance met with key counterparts in China in mid-May; President and Minister of Finance met with the President of China and other Chinese officials in Beijing in late-June.
- Chinese official and commercial financing expected to support priority investment projects included in the budget and medium-term investment plans; a joint working group established to monitor progress.
- Authorities reaffirm commitment to remaining current on debt obligations and engaging with all creditors in good faith.
- Prospects for tapping international capital markets in 2026 are positive contingent on implementation of the 2025 fiscal plan and bolstering liquidity buffers to further reduce sovereign spreads.

### Financial Sector Policy
- Financial sector broadly stable with improvements in key indicators:
  - Robust deposit growth supported by external inflows and government arrears clearance.
  - Modest recovery in credit growth and a meaningful decline in borrowing costs.
  - Improvements in loan quality, provisioning, and capital ratios for banks and cooperatives.
- Oversight and supervision enhancements:
  - Financial Stability Committee established in August 2024.
  - Inter-institutional group to strengthen the financial sector resolution framework created within the Financial Stability Committee in January 2025.
  - Two insolvent institutions (a small bank and a medium-sized cooperative) were liquidated; two troubled small banks were recapitalized by new owners; these events were contained and did not pose systemic risks.
  - Temporary regulatory forbearance introduced in response to the electricity crisis has been extended with a commitment to resume proper loan classification and provisioning in due course.
- Structural actions to mobilize domestic financing:
  - Central Bank of Ecuador completed a study on the system of lending interest rate caps with recommendations for a reform agenda to phase out financial repression measures.
  - Actions taken to improve institutional and market infrastructure to develop the domestic debt market.
  - Authorities remain committed to implementing the 2023 Financial System Stability Assessment recommendations.

### Structural Reforms
- Governance and AML/CFT frameworks strengthened:
  - Public procurement law approved in June 2025 and key steps taken to upgrade the public procurement system to increase transparency and improve expenditure control.
  - 2019 and 2020 financial audits of the state-owned oil company completed.
  - National Assembly unanimously approved a new AML/CFT law in line with FATF standards; authorities committed to effective implementation and to developing the AML/CFT Strategic Action Plan with IMF technical assistance.
- Expanded structural reform agenda to boost growth:
  - Six new structural benchmarks added focusing on generating an enabling environment to attract private investments in high potential sectors such as mining and energy.
  - Continued IMF technical assistance and support from other development partners identified as critical for success.

### Concluding Remarks
- Macroeconomic stability has improved significantly and the domestic outlook is favorable for continued strong program implementation.
- Recent and forthcoming actions confirm the authorities’ commitment to:
  - Durably strengthen fiscal sustainability.
  - Safeguard macroeconomic stability.
  - Buttress job-rich potential growth.
- A recalibration of the EFF arrangement is required given shifts in global economic conditions, but favorable domestic political environment, ambitious reform agenda, and authorities’ track record offer strong prospects for regaining market access in 2026.
- Authorities value the Fund’s ongoing financial, policy, and technical support.

*Statement by André Roncaglia, Bernardo Acosta, and Felipe Antunes (July 18, 2025).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1ecuea2025001.pdf_