## 1ecuea2025003-source-pdf - 438.4 million (about US$630 million), bringing total disbursements to date under this

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### Program overview and financing
- Ecuador’s 48-month EFF arrangement approved May 2024 and augmented July 2025: access equivalent to SDR 3.75 billion (about US$5 billion).
- Disbursements: 438.4 million (about US$630 million), bringing total disbursements to date under this arrangement to about SDR2.4 billion (about US$3.3 billion).
- Program objectives: strengthen fiscal and debt sustainability; protect vulnerable groups; rebuild liquidity buffers; safeguard macroeconomic and financial stability; advance structural reforms for sustainable, inclusive, and stronger growth.
- Program catalyzed additional financial support from multilateral partners.

### Program performance and implementation
- Quantitative performance:
  - All quantitative performance criteria (QPCs) for end-October 2025 for the fourth review were met.
  - All indicative targets (ITs) are on track; ITs on arrears clearance, NIR, and number of families covered by social safety net were met with a margin.
- Structural benchmarks:
  - Substantial progress; all structural benchmarks for this review achieved.
  - Select SBs met: MTFF (End-October 2024), MTDS (End-October 2024), MEF–IESS agreement (End-November 2025), regulations for domestic market auctions (End-November 2025), public tender to audit Petroecuador (End-February 2026).
  - Some SBs implemented with delay (e.g., automatized PGE payments; DCV contract).
- Authorities’ commitments: continue advancing reforms to safeguard financial stability, enhance governance, boost private investment, and promote job-rich growth.

### Macro performance and outlook — selected indicators and projections
- Real GDP growth (%): 2024: -2.0; 2025: 3.4; 2026: 2.2.
- Inflation, average (%): 2024: 1.5; 2025: 0.9; 2026: 2.8.
- Inflation, end of period (%): 2024: 0.5; 2025: 3.5; 2026: 1.7.
- Revenue (% GDP): 2024: 36.8; 2025: 36.4; 2026: 36.2.
- Expenditure (% GDP): 2024: 38.1; 2025: 37.6; 2026: 36.2.
- Overall fiscal balance (% GDP): 2024: -1.3; 2025: -1.2; 2026: 0.0.
- Primary balance (% GDP): 2024: -0.2; 2025: -0.1; 2026: 1.1.
- Non-oil primary balance (incl. fuel subsidies) (% GDP): 2024: -5.4; 2025: -4.1; 2026: -2.4.
- Public sector debt (% GDP): 2024: 53.8; 2025: 53.2; 2026: 51.4.
- Broad money (% change) 1/: 2024: 4.8; 2025: 4.7; 2026: 3.4.
- Credit to the private sector (% change): 2024: 6.2; 2025: 8.2; 2026: 4.9.
- Current account (% GDP): 2024: 5.7; 2025: 5.1; 2026: 4.1.
- Foreign direct investment, net (% GDP): 2024: 0.4; 2025: 0.6; 2026: 0.9.
- Gross international reserves (US$ billion): 2024: 6.9; 2025: 10.3; 2026: 13.2.
- External debt (% GDP): 2024: 48.0; 2025: 50.7; 2026: 50.0.
- Sources: Central Bank of Ecuador, Ministry of Economy and Finance, National Statistical Institute (INEC), and IMF staff calculations.
- 1/ M2.

### Recent macroeconomic developments (highlights)
- Real GDP: grew by 3.8 percent in the first half of 2025 (y/y); nonoil sectors (agriculture and trade) largest contributors.
- Inflation: headline (core) inflation at 1.2 (0.7) percent year-on-year as of October 2025.
- Financial system liquidity: NFPS deposits at the Central Bank of Ecuador (BCE) about US$5.8 billion as of October 31, 2025 (target: US$4.9 billion).
- Exports and current account: exports grew 7.6 percent (y/y) in January–September 2025 (19 percent for nonoil exports); CA surplus in 2025H1 reached US$5.2 billion (4 percent of projected GDP), up from US$3.9 billion (3.1 percent) in 2024H1.
- International reserves: gross international reserves reached US$9.3 billion as of end-October 2025, rising by US$2.4 billion from the beginning of the year; reserves account for about 34 (52) percent of the IMF’s reserve adequacy metric excluding (including) the Liquidity Fund.

### Fiscal performance, targets, and arrears
- Programmed consolidation: 6.6 percent of GDP in the NFPS NOPBS during the program period.
- Public debt target: declining public debt-to-GDP ratio to 40 percent of GDP by 2031 (COPLAFIP target), one year ahead of schedule.
- Central government (PGE & CFDD) Jan–Oct 2025 outturns (in percent of GDP):
  - NOPB target: -1.0; outturn: -0.8; difference: 0.2.
  - Primary balance target: -0.1; outturn: 0.1; difference: 0.2.
  - Overall balance target: -2.8; outturn: -2.5; difference: 0.2.
- Domestic arrears: PGE arrears to the domestic private sector fell to US$330 million as of end-October 2025 from US$480 million at end-August 2025, meeting end-October 2025 target with a margin.
- NFPS preliminary outturns through end-September 2025:
  - NOPBS: -2.2 percent of GDP (target: -2.9).
  - Primary balance (including oil): 0.5 percent of GDP (target: 0.2).
  - Overall balance: -0.5 percent of GDP (target: -0.8).
- NFPS deposits at BCE: reported as 48845762878 (table entry formatting preserved in source).

### External sector, reserves, and financing
- Imports rose by 11.3 percent (y/y) in January–September 2025.
- Net international reserves (NIR): negative at minus US$6.4 billion as of end-October 2025, improved by US$1.3 billion since the beginning of the year, meeting the end-October 2025 IT with a wide margin.
- Reserve adequacy: gross international reserves US$9.3 billion as of end-October 2025, up from US$6.9 billion in 2024.
- Financing plan:
  - Program fully financed with firm financing commitments for next 12 months and good prospects thereafter.
  - EXIM China projects expected to disburse about US$420 million in 2026.
  - Gross financing commitments from other official bilateral creditors expected to broadly cover amortizations due in next 12 months (about US$100 million).
  - Market access assumptions: US$1 billion in 2026, US$1.5 billion in 2027, and US$2 billion in 2028.

### Financial system performance and soundness indicators
- Deposits grew by 15.5 percent (y/y) in October 2025.
- Credit to the private sector rose 10.4 percent (y/y).
- Credit by cooperatives returned to growth after contraction in 2024 and most of 2025 (growth incipient).
- FSIs as of Jul-25 (banking system, Jul-25):
  - Regulatory capital to risk-weighted assets: 16.3 (end-Jul-25).
  - Nonperforming loans to total gross loans: 4.1 (end-Jul-25).
  - Provisions to nonperforming loans: 192.7 (end-Jul-25).
  - Return on assets: 2.0 (end-Jul-25).
  - Liquid assets to total assets: 15.3 (end-Jul-25).
- Liquidity and nonperforming loan ratios are recovering; cooperatives’ provisioning and capital ratios adequate on average though heterogeneous.

### Financial sector policies and reforms
- Institutional:
  - COMYF reform established unified JPRFM in October 2025 to improve coordination and macroprudential approach.
- Resolution framework:
  - Inter-institutional group formed January 2025 to coordinate resolution policy; authorities committed to strengthening resolution powers (purchase and assumption, bridge bank, bail-in) and amend ETAP regulations.
- Interest rate system and capital markets:
  - BCE study: lending interest rate caps created inefficiencies; share of corporate loans to SMEs requiring rates above the cap was 38.3 percent; in other segments share above 90 percent.
  - Authorities plan gradual reform to interest rate methodology with complementary policies: step up supervision; improve risk management; enforce liquidity coverage regulations; develop domestic bond and money markets.
  - Regulations for domestic market auctions issued (end-November 2025 SB, met); plan to launch auctions in 2026 (end-September 2026 SB).
  - Revamped DCV at BCE expected ready in 2026.

### Social protection and labor
- Social safety net:
  - Enrollment in cash transfer programs: 1,313,186 families as of October 2025 (exceeding end-October IT target).
  - Authorities extended coverage by adding 55,000 families (prioritizing older adults and individuals with special needs), frontloading part of increase planned for 2026.
  - Poverty rate fell by 1.5 points to 24 percent as of June 2025 compared to June 2024.
  - Plan to achieve universal coverage in bottom two deciles and majority in third decile by end of IMF-supported program.
- Employment:
  - Formal private employment surpassed pre-pandemic levels; unemployment in single digits; informality declining, notably among youth; labor force participation up, notably among women.

### Structural reforms, competitiveness, and governance
- Mining and diversification:
  - Mining cadaster reopened mid-June 2025 for non-metallic small-scale mining; regulation for reopening mining cadaster for wider activity due end-June 2026 SB.
  - New fiscal regime for mining being developed (end-December 2025 SB) with IMF TA to simplify royalty base and establish sovereign adjustment mechanism.
- Trade agreements:
  - Agreements with China and Costa Rica in 2024; concluded negotiations with Canada and South Korea; November 2025: trade agreement framework with United States; discussions with Japan and UAE.
- Energy and disaster resilience:
  - Encouraging private non-conventional renewable energy investment; simplification for projects up to 100 MW; transparent cost-reflective pricing for medium- and high-voltage tariffs; regulations to allow sale of surplus self-generation to grid.
- AML/CFT and anti-corruption:
  - 2024 AML/CFT law in force; implementing regulations pending.
  - Authorities preparing AML/CFT Strategic Action Plan (end-January 2026 SB).
  - Priorities: diagnosis of organized crime channels; strengthen UAFE independence and capacity; enhance verification of beneficial ownership; enforce asset declaration systems.

### Risks, resilience, and staff assessment
- Key risks:
  - Significant exposure to oil price volatility and international financial market volatility.
  - Downside risks: lower oil prices, shortfalls in external financing, security challenges, political fragmentation slowing reforms.
  - Enterprise risks: large adjustment needs; capacity to repay/debt sustainability contingent on policy implementation and external financing.
- Mitigants and resilience:
  - Decisive policy steps, strong program performance, frontloaded domestic financing, improved liquidity buffers, strong IFI support and narrowed sovereign spreads.
- Staff assessment:
  - Exceptional access criteria continue to be met.
  - Staff judges program implementation and authorities’ commitment supportive of regaining market access; assessment subject to significant risks.

### Exceptional access and debt sustainability
- Exceptional access criteria (Box 1):
  - Criterion 1 (exceptional BoP pressures): met. Credit outstanding with Fund: SDR6.9 billion (US$9.8 billion, or 993 percent of quota) as of end-October 2025.
  - Criterion 2 (debt sustainability and safeguards): met. Staff baseline DSA assesses public debt as sustainable but not with high probability; two tests under DSA for Market Access Countries met (Debt Sustainability Test; FX Availability Test).
  - Criterion 3 (prospects of regaining market access): met. Sovereign spreads declined by over 1,300 basis points since April 2025 elections; historical market issuance until 2019 and recent policy actions support prospects.
  - Criterion 4 (prospect of success, institutional and political capacity): met. President Noboa won reelection April 2025 and forged working majority; all QPCs for end-October 2025 met.
- DSA and Annex II highlights:
  - Public debt-to-GDP: 2024: 53.8; 2025: 53.2; 2026: 51.4; projected below 40 percent by 2031 (2031: 39.1).
  - Gross financing needs: 2024: 8.5; 2025: 6.5; medium-term around 4 percent of GDP.
  - Medium-term overall risk signal: Moderate. Debt fan-chart width: 76.9 1.1 (as presented). Probability of debt non-stabilization (percent): 17.1 0.1 (as presented).
  - Memo real GDP growth (percent): -2.0; 3.4; 2.2; 2.4; 2.6; 2.8; 3.0; 3.0; 3.0; 3.0; 3.0; 3.0.
  - Public debt baseline trajectory (selected): 2027: 49.6; 2028: 47.7; 2029: 45.2; 2030: 42.2; 2031: 39.1; 2035: 27.5.

### Monitoring, performance criteria, and program modalities
- Program monitoring:
  - Triannual reviews in 2025; semiannual reviews in 2026–28 (fifth and sixth reviews on/after Mar 15, 2026 and Sep 15, 2026).
  - Program monitored through QPCs, ITs, and SBs as in Tables 1 and 2; TMU defines variables and reporting.
  - Fiscal data to be provided within 45 days of end of each test date; preliminary monthly data within 30 days after month-end.
- Selected QPCs and ITs (Table 1 / Table 2 excerpts, as presented):
  - 1. Nonoil primary balance of the PGE (floor): -1,255 -1,255 -1,018 Met -875 -875 -302 -302 -1,310.
  - 2. Overall balance of the PGE and CFDD (floor): -3,565 -3,579 -3,327 Met -1,229 -1,229 -1,341 -1,341 -2,624.
  - 3. Accumulation of NFPS deposits at the central bank (floor): 243 236 1,121 Met 100 -398 2000 364.
  - 8. Change in the stock of NIR (floor): -125 -132 1,267 Met -260 -758 315 115 672.
  - 9. Stock of PGE arrears to the domestic private sector (ceiling): 480 330 Met 330 330 210 210 105.
  - 10. Number of families in bottom three deciles covered by cash transfer programs (floor): 1,260,012 1,313,186 Met 1,283,012 1,313,800 1,289,012 1,319,000 1,325,000.
  - Memorandum item NFPS deposits at BCE: 4,884 5,762 4,984 5,364 5,413 5,513 5,877.
- Definitions and TMU highlights:
  - NIR computed as usable gross international reserve assets minus gross reserve-related liabilities minus reserve holdings of domestic banks and deposits of other financial institutions.
  - Adjustors on NIR, NFPS deposits, oil prices, IMF and IFI disbursements, and external borrowing apply as detailed in the TMU.
  - NFPS composition, data reporting frequencies (daily, weekly, monthly, quarterly), and specific monitoring rules for arrears and social assistance coverage specified in TMU.

### Policy recommendations and priorities emphasized by staff
- Fiscal:
  - Continue implementing high-quality revenue and expenditure reforms to place public debt on a firmly declining path; deliver programmed 6.6 percent of GDP NOPBS consolidation over program period.
  - Improve public financial management: operationalize MTFF, improve treasury and budget management, enhance public investment management, and publish audited actuarial report for social security (end-December 2026 SB).
- Financial stability:
  - Strengthen regulation, oversight, and resolution tools; operationalize risk-based supervision for cooperatives; phase out regulatory forbearance; finalize resolution framework with comprehensive resolution powers.
  - Reform interest rate cap system gradually, support development of domestic bond and money markets, and launch domestic auctions.
- Social protection:
  - Expand and better-target social safety net coverage while protecting vulnerable groups during fiscal consolidation; maintain or expand cash transfer coverage (program exceeded targets).
- Structural reforms and governance:
  - Advance structural reforms to attract private investment in mining, hydrocarbons, and energy; enhance governance and procurement transparency; implement AML/CFT Strategic Action Plan; strengthen asset declaration enforcement.
- Contingency and risk management:
  - Maintain strong contingency planning, preserve deposit buffers, secure multilateral financing, and sequence market access to manage rollover and financing risks.

*Source: Ecuador — Fourth Review under the Extended Arrangement under the Extended Fund Facility, Request for Modification of Performance Criteria, and Financing Assurances Review (Executive Summary and selected sections), December 5, 2025.*

### 438.4 million (about US$630 million), bringing total disbursements to date under this

### 1ecuea2025003-source-pdf - 438.4 million (about US$630 million), bringing total disbursements to date under this

### Program overview and financing
- Ecuador’s 48-month EFF arrangement was approved by the Executive Board in May 2024, and augmented in July 2025, providing access equivalent to SDR 3.75 billion (about US$5 billion).
- Disbursements: 438.4 million (about US$630 million), bringing total disbursements to date under this arrangement to about SDR2.4 billion (about US$3.3 billion).
- Program objectives: strengthen fiscal and debt sustainability, protect vulnerable groups, rebuild liquidity buffers, safeguard macroeconomic and financial stability, and advance structural reforms for sustainable, inclusive, and stronger growth.
- The authorities’ program has catalyzed additional financial support from multilateral partners.

### Program performance and implementation
- Program performance: all quantitative performance criteria (QPCs) for end-October 2025 for the fourth review were met; all indicative targets (ITs) are on track.
- Structural reforms: substantial progress on the implementation of structural benchmarks; all structural benchmarks for this review achieved.
- Authorities’ commitments: continue advancing reforms to safeguard financial stability, enhance governance, boost private investment, and promote job-rich growth.

### Macro performance and outlook (selected indicators and projections)
- Real GDP growth (%): 2024: -2.0; 2025: 3.4; 2026: 2.2.
- Inflation, average (%): 2024: 1.5; 2025: 0.9; 2026: 2.8.
- Inflation, end of period (%): 2024: 0.5; 2025: 3.5; 2026: 1.7.
- Revenue (% GDP): 2024: 36.8; 2025: 36.4; 2026: 36.2.
- Expenditure (% GDP): 2024: 38.1; 2025: 37.6; 2026: 36.2.
- Overall fiscal balance (% GDP): 2024: -1.3; 2025: -1.2; 2026: 0.0.
- Primary balance (% GDP): 2024: -0.2; 2025: -0.1; 2026: 1.1.
- Non-oil primary balance (incl. fuel subsidies) (% GDP): 2024: -5.4; 2025: -4.1; 2026: -2.4.
- Public sector debt (% GDP): 2024: 53.8; 2025: 53.2; 2026: 51.4.
- Broad money (% change) 1/: 2024: 4.8; 2025: 4.7; 2026: 3.4.
- Credit to the private sector (% change): 2024: 6.2; 2025: 8.2; 2026: 4.9.
- Current account (% GDP): 2024: 5.7; 2025: 5.1; 2026: 4.1.
- Foreign direct investment, net (% GDP): 2024: 0.4; 2025: 0.6; 2026: 0.9.
- Gross international reserves (US$ billion): 2024: 6.9; 2025: 10.3; 2026: 13.2.
- External debt (% GDP): 2024: 48.0; 2025: 50.7; 2026: 50.0.
- Sources: Central Bank of Ecuador, Ministry of Economy and Finance, National Statistical Institute (INEC), and IMF staff calculations.
- 1/ M2.

### Recent macroeconomic developments
- Real GDP: grew by 3.8 percent in the first half of 2025 relative to the same period in 2024; nonoil sectors such as agriculture and trade had the largest growth contributions.
- Inflation: headline (core) inflation at 1.2 (0.7) percent year-on-year as of October 2025.
- Financial system liquidity: liquidity supports credit growth; NFPS deposits at the Central Bank of Ecuador (BCE) stood at about US$5.8 billion as of October 31, 2025 (target: US$4.9 billion).
- Exports and current account: exports grew 7.6 percent (y/y) in January–September 2025 (19 percent for nonoil exports); CA surplus in 2025H1 reached US$5.2 billion (4 percent of projected GDP), up from US$3.9 billion (3.1 percent) in 2024H1.
- International reserves: gross international reserves reached US$9.3 billion as of end-October 2025, rising by US$2.4 billion from the beginning of the year; reserves account for about 34 (52) percent of the IMF’s reserve adequacy metric excluding (including) the Liquidity Fund.

### Fiscal performance and public finances
- Fiscal path: programmed consolidation of 6.6 percent of GDP in the nonfinancial public sector (NFPS) nonoil primary balance including fuel subsidies (NOPBS) during the program period.
- Target for public debt: firmly declining public debt-to-GDP ratio to 40 percent of GDP (target set by the Organic Budget Law (COPLAFIP)) by 2031, one year ahead of schedule.
- Central government (PGE & CFDD) January–October 2025 outturns (in percent of GDP): NOPB target: -1.0; outturn: -0.8; difference: 0.2. Primary balance target: -0.1; outturn: 0.1; difference: 0.2. Overall balance target: -2.8; outturn: -2.5; difference: 0.2.
- Domestic arrears: stock of PGE arrears to the domestic private sector fell to US$330 million as of end-October 2025 from US$480 million at end-August 2025, meeting the end-October 2025 target with a margin.
- NFPS preliminary outturns through end-September 2025: NOPBS: -2.2 percent of GDP (target: -2.9); Primary balance (including oil): 0.5 percent of GDP (target: 0.2); Overall balance: -0.5 percent of GDP (target: -0.8).
- NFPS deposits at BCE: reported as 48845762878 (table entry formatting preserved in source).

### External sector and reserves
- Trade and remittances: higher trade surpluses and strong remittances supported the CA surplus increase.
- Imports rose by 11.3 percent (y/y) in January–September 2025.
- Net international reserves (NIR): negative at minus US$6.4 billion as of end-October 2025, improved by US$1.3 billion since the beginning of the year, meeting the end-October 2025 IT with a wide margin.
- Reserve adequacy: gross international reserves at US$9.3 billion as of end-October 2025, up from US$6.9 billion in 2024.

### Risks, resilience, and outlook
- Risks: significant exposure to volatility in oil prices and international financial markets; elevated overall risks to the outlook.
- Resilience factors: decisive policy steps, strong program performance, and commitment to reforms mitigate risks.
- Outlook: Real GDP projected to rise by 3.4 percent in 2025 and 2.2 percent in 2026 (up from 3.2 and 2 percent at the time of the third review). Inflation projected to remain low and help strengthen competitiveness. Current account surpluses support rebuilding of international reserves.
- Staff assessment: exceptional access criteria continue to be met.

### Policy actions and structural reforms
- Fiscal: implemented high-quality revenue and expenditure reforms; committed to continue strengthening fiscal position and placing public debt on a firmly declining path to facilitate reentry into capital markets.
- Social protection: measures implemented to mitigate impact of reforms on vulnerable groups; expanding coverage of the social safety net for lower-income households, surpassing program targets.
- Financial sector: enhancing regulation, oversight, and resolution tools; gradually improving the interest rate system; launching auctions for domestic bonds and treasury notes; enhancing integrity of the financial system.
- Structural reforms and competitiveness: working to attract private investment in mining, hydrocarbons, and energy; enhancing governance; strengthening energy resilience by expanding electricity supply and improving preparedness for natural disasters.
- Expected benefits: continued progress in the reform agenda is expected to achieve significant growth dividends over the medium term.

### Governance, program modalities, and IMF engagement
- Meetings and team: discussions held in Washington DC and remotely during November 17–December 1, 2025; team led by Patrizia Tumbarello (Head) and including staff from WHD, FAD, MCM, SPR, and Resident Representative Office.
- Executive remark: following the Executive Board’s discussion, Mr. Nigel Clarke, Deputy Managing Director and Acting Chair, highlighted program achievements including meeting all QPCs for the fourth review, low inflation, strong GDP rebound, sizable CA surpluses, narrowing sovereign spreads, stronger liquidity, and declining poverty; he emphasized need for sustained prudent policies, continued international support, and robust contingency planning.

*Source: Ecuador — Fourth Review under the Extended Arrangement under the Extended Fund Facility, Request for Modification of Performance Criteria, and Financing Assurances Review (Executive Summary and selected sections), December 5, 2025.*

### 7.      Favorable liquidity in the financial system continues supporting credit growth, amid

### 7.      Favorable liquidity in the financial system continues supporting credit growth, amid lower borrowing costs,  and financial soundness indicators (FSIs) remaining stable

### Financial system performance and financial soundness indicators
- Deposits grew by 15.5 percent (y/y) in October 2025.
- Credit to the private sector rose 10.4 percent (y/y).
- Credit by cooperatives returned to growth after a contraction in 2024 and most of 2025, but growth is described as incipient.
- As of July, FSIs remained largely stable with banks improving:
  - asset quality,
  - provisioning,
  - profitability.
- Liquidity and nonperforming loan ratios are recovering.
- Cooperatives’ provisioning and capital ratios remained adequate on average, though there is wide variety across institutions.

### Outlook and risks
- Real GDP projections:
  - 3.4 percent in 2025,
  - 2.2 percent in 2026,
  - 3 percent over the medium term.
  - These are up from 3.2 and 2 percent, respectively, at the time of the third review.
- Inflation projections:
  - rise temporarily to 3.5 percent (y/y) by December 2025 due to one-off price level effects,
  - drop to 1.7 percent by end-2026,
  - 1.5 percent over the medium term.
- Current account (CA) outlook:
  - CA surplus expected to stay high in 2025-26 due to strong nonoil trade,
  - gradually converge to about 3 percent of GDP in the medium term.
- Noted external price context:
  - The price of the Ecuadorian crude mix now hovers below US$55 per barrel, 7 percent below its September level, amid significant volatility.
- Risk assessment:
  - Overall risks decreased relative to the third review but remain elevated and tilted to the downside.
  - Upside risks: higher-than-expected growth and more buoyant nonoil exports supporting faster reserve accumulation.
  - Downside risks: lower oil prices, shortfalls in external financing, security challenges, and political fragmentation slowing reforms.
  - Mitigants: improved government deposits and liquidity conditions, advanced structural reforms, narrowed sovereign spreads, authorities’ decisive policy steps and commitment to the program.

### Strengthening fiscal sustainability (policy discussion)
- NFPS (Non-Financial Public Sector) projections and drivers:
  - NFPS deficit projected to reach 1.2 percent of GDP in 2025, down from 1.3 percent of GDP in 2024.
  - Total nonoil revenues projected to reach 24.3 percent of GDP in 2025, up from 23.7 percent in 2024.
  - Improvement driven by reforms on dividends’ taxation, broadband concessions, and recovery in economic activity.
  - NOPBS deficit projected to shrink by 1.3 percent of GDP to 4.1 percent of GDP in 2025.
- Fiscal plan and consolidation targets:
  - 2026 fiscal plan envisages an improvement in the PGE overall balance of 1.2 percent of GDP relative to 2025.
  - NFPS overall balance projected to improve by 1.2 percent of GDP to a balanced position.
  - Fiscal consolidation projected to deliver 1.7 percent of GDP in the NFPS NOPBS narrowing it to -2.4 percent of GDP.
  - Over the medium term, authorities envisage total fiscal consolidation of 6.6 percent of GDP in the NFPS NOPBS and 5 percent of GDP in the primary balance over the program period.
  - Public debt target: achieve 40 percent of GDP public debt target set by COPLAFIP by 2031, one year ahead of schedule.
- Public financial management and governance reforms:
  - Authorities committed to improving budgeting, accounting, and auditing procedures.
  - Key targets: improve treasury and budget management (operationalize strategy developed in November 2024), enhance public investment management.
  - MEF and IESS signed agreement to settle longstanding past healthcare obligations and process future claims (end-November 2025 SB, met).
  - Plan to publish an audited actuarial report for the social security system with data up to 2024 (end-December 2026 SB).
  - With IDB TA, authorities working on operationalization of the National Control Subsystem (NCS) and developing an upgraded Official System of Public Procurement (end-December 2025 SB).
- Financing plan:
  - Program is fully financed, with firm financing commitments for the next 12 months and good prospects thereafter.
  - Authorities frontloaded domestic financing initially planned for 2026 to cover the projected 2025 NFPS deficit and attain a higher NFPS deposit balance at end-2025 than projected at the third review.
  - NFPS deposit balance projected to reach US$5.9 billion at end-2026, in line with the third review projection.
  - Projects under preparation with EXIM China expected to disburse about US$420 million in 2026.
  - Gross financing commitments for other official bilateral creditors expected to broadly cover debt amortizations due in the next 12 months (about US$100 million).
- Market access and bond issuance:
  - Sovereign spreads stood at 537 basis points as of December 2, 2025, having narrowed by about 1,300 basis points since the April 2025 elections and 200 basis points since the third review in late October 2025.
  - Fitch upgraded Ecuador’s long-term debt ratings to B- from CCC+ in November 2025.
  - Financing plan envisages returning to international capital markets in 2026 issuing US$1 billion, implying a modest increase of external bonded debt of US$200 million in 2026.
  - Bond issuance expected to increase further in 2027 and 2028 once market access is regained.
- NFPS fiscal consolidation plan (changes in the nonoil primary balance including fuel subsidies, in percent of GDP) — selected figures from the plan:
  - Revenue components 2024-28: tax revenue and other components listed in source table (figures preserved in source).
  - Memo: NOPBS and NFPS balance trajectories described in source charts and tables.

### Enhancing the social safety net
- Mitigating measures and coverage:
  - September 2025: package of temporary measures implemented to offset higher diesel prices for transport, freight, agriculture, and fishing.
  - Poverty rate fell by 1.5 points to 24 percent as of June 2025 compared to June 2024.
  - Enrollment in cash transfer programs reached 1,313,186 families as of October 2025, exceeding the end-October IT target.
  - Authorities extended coverage by adding 55,000 families, prioritizing older adults and individuals with special needs, frontloading part of the increase originally planned for 2026.
  - Social registry continues being updated with local government support to reduce coverage gaps and better target social protection programs.

### Safeguarding financial stability
- Institutional changes and supervision:
  - Reform of the Organic Monetary and Financial Code (COMYF) led to establishment of a unified Financial and Monetary Policy and Regulation Board (JPRFM) in October 2025.
  - JPRFM expected to improve policy coordination, speed decision making, facilitate an integrated macro-prudential approach, and enable more efficient use of resources.
  - JPRFM has begun working on regulations, administrative arrangements, and Audit Committee appointments.
- Sector vulnerabilities and regulatory responses:
  - Some credit cooperatives remain vulnerable due to weak asset quality, thin capital buffers, and low or negative profits.
  - Authorities issued regulations to strengthen credit cooperative governance and intensified supervision of weaker entities.
  - Regulatory forbearance measures have expired; supervisors must enforce rules on loan classification and provisioning.
  - SB (Superintendencia de Bancos), SEPS (Superintendencia de Economía Popular y Solidaria), and BCE continue developing stress testing models with IMF support; data sharing has notably improved.
  - IMF to provide TA to SEPS to operationalize risk-based supervision of cooperatives and enhance prudential supervisory effectiveness.
- Resolution framework:
  - Inter-institutional group formed January 2025 to coordinate resolution policy agenda expected to resume activities.
  - Authorities committed to strengthening resolution framework and crisis preparedness with Fund and WB support.
  - Recommended features for the new resolution framework include comprehensive resolution powers (flexible purchase and assumption tool, bridge bank and bail-in powers), early triggers, adequate safeguards, and financing sources.
  - Authorities will continue working on amendment of the “exclusion and transfer of assets and liabilities" (ETAP) regulations to facilitate orderly resolution of unviable entities under a least cost option.
- Interest rate system reform and capital markets:
  - BCE study found lending interest rate caps created inefficiencies and distortions, leading to credit rationing and adverse selection, particularly in high-risk segments.
  - Share of corporate loans to SMEs requiring interest rates above the cap was 38.3 percent; in other segments such as corporate loans to large companies or consumer loans, the share was above 90 percent.
  - Authorities plan to work on a new methodology for interest rates that is more reflective of market conditions; reform should be gradual and supported by complementary policies:
    - step up supervision,
    - foster improvements in risk management practices,
    - enforce liquidity coverage regulations,
    - develop domestic bond and money markets to facilitate price discovery.
  - Regulations for domestic market auctions for bonds and treasury notes issued (end-November 2025 SB, met); plan to launch auctions in 2026 (end-September 2026 SB).
  - Revamped central securities depository (DCV) at the BCE with modernized functions will be ready in 2026.

### Advancing structural reforms, governance, and competitiveness
- Mining sector and diversification:
  - Authorities committed to issue regulations for reopening the mining cadaster (end-June 2026 SB); cadaster was reopened mid-June 2025 for non-metallic small-scale mining with a new digital system.
  - A new fiscal regime for the mining sector is being developed (end-December 2025 SB) with IMF TA, including:
    - simplifying royalty base calculation for gold and silver,
    - establishing a framework to implement the sovereign adjustment mechanism,
    - improving institutional oversight.
  - Goal: leverage mining as a growth-driver and diversify fiscal revenues.
- Trade agreements and export diversification:
  - Following trade agreements with China and Costa Rica in 2024, negotiations concluded with Canada and South Korea.
  - November 2025: authorities reached a trade agreement framework with the United States.
  - Discussions initiated with Japan and the United Arab Emirates.
  - These agreements expected to support economic diversification and growth of nonoil exports, boosting resilience and economic potential, provided they do not introduce additional restrictions on non-participating economies.
- Employment focus:
  - Authorities continue focusing on promoting job opportunities, including for youth and women.

*International Monetary Fund — Ecuador: chapter content on liquidity, outlook, fiscal policy, social safety net, financial stability, and structural reforms.*

### 22.      Strengthening resilience to natural disasters and diversifying the energy supply are

### 22.      Strengthening resilience to natural disasters and diversifying the energy supply are

### Resilience to natural disasters and energy diversification
- Ecuador is highly vulnerable to extreme weather events and natural disasters, including droughts, wildfires, floods, and landslides.
- Recent shocks:
  - Consecutive historical droughts in 2023 and 2024 triggered electricity supply disruptions.
  - Heavy rainfall forced the closure of oil pipelines in 2025.
- Authorities’ measures and reforms:
  - Encouraging private investment in non-conventional renewable energy, with a focus on solar, wind, and geothermal projects.
  - Simplification of approval requirements for private non-conventional renewable energy projects of up to 100 MW.
  - Adoption of a transparent and cost-reflective pricing mechanism for medium- and high-voltage electricity tariffs.
  - Enactment of regulations to allow private entities to sell surplus electricity from self-generation to the national grid.

### Governance, audits, and transparency improvements
- Audit and transparency actions:
  - Completion of audits of financial statements for 2019-2021 over the past year.
  - Public tender launched to audit the financial statements of Petroecuador for 2022-2024 (end-February 2026 SB, met ahead of time).
  - Authorities will publish an externally audited actuarial report for the social security system with data up to 2024 (end-December 2026 SB); the most recent audit relied on 2020 data.
- Institutional reforms:
  - Work is ongoing to enhance internal management regulations, internal control systems, and corporate governance.
  - Announced multi-year initiative to mobilize investments in the hydrocarbon sector, including increasing private sector participation to boost oil production, enhance the oil refinery system, and promote the gas sector.

### Financial integrity, AML/CFT, and combating organized crime
- Legal and strategic steps:
  - Entry into force of the 2024 AML/CFT law; implementing regulations pending.
  - With IMF TA support, authorities are preparing to publish an AML/CFT Strategic Action Plan to delineate short term actions to mitigate pressing risks (end-January 2026 SB).
  - The Action Plan will address risks identified in the 2024 National Risk Assessment, including proceeds from drug trafficking, smuggling, illegal mining, tax evasion, abuse of financial and nonfinancial channels to launder money and corruption.
- Recommended priorities:
  - Conduct an in-depth diagnosis of organized crime activities and economic channels abused for financing and laundering proceeds.
  - Prioritize measures that can disrupt illicit financial flows.
  - Strengthen the Financial Analysis Unit’s (UAFE) independence and capacity to generate and share financial intelligence.
  - Emphasize coordination, information sharing and joint action among relevant authorities.

### Anti-corruption, procurement, and public integrity
- Ongoing reforms:
  - Strengthening procurement transparency, civil service integrity, and internal controls across public entities.
  - Ensuring accuracy of beneficial ownership information of participants in procurement processes.
- Asset declarations and enforcement:
  - Comptroller General’s Office required high-ranking public officials (politically exposed persons) to submit updated sworn asset declarations in August 2025; the process has been completed.
  - Asset declarations are publicly accessible, but interoperability of the verification system and enforcement of sanctions for noncompliance should be enhanced.
- Policy priorities:
  - Sustain enforcement of anti-corruption measures.
  - Continue enhancing the asset and interest declaration system introduced by the AML/CFT law.
  - Pass legislation to prevent conflicts of interest in public administration.

### Program modalities, performance criteria, and implementation status
- QPCs and ITs:
  - All QPCs for the fourth review have been met and all ITs are expected to be met.
  - Authorities met the end-October 2025 QPCs on the PGE fiscal balances, NFPS deposits (with a significant margin, reflecting strong fiscal performance and frontloaded domestic financing), and continuous performance criteria.
  - ITs on arrears clearance, NIR, and the number of families covered by the social safety net were met with a margin. Preliminary data suggest that the ITs on the NFPS fiscal balances were met too.
  - Proposed fiscal QPCs and ITs through end-December 2026 are unchanged relative to the third review; some recalibration proposed for change of NFPS deposits and change of NIR to account for higher levels achieved as of end-October 2025.
  - ITs on the number of families covered by cash transfer programs updated to account for faster increase in coverage achieved as of October 2026 and a higher coverage target set for end-2026.
- Structural reform implementation:
  - 2026 draft budget submitted to the National Assembly in line with the EFF fiscal program.
  - Regulations issued for domestic market auctions for bonds and treasury notes (end-November 2025 SBs, met).
  - Ministry of Finance and the Social Security Agency (IESS) signed an agreement to settle healthcare obligations (end-November 2025 SB, met).
  - Public tender to audit Petroecuador financial statements for 2022-2024 (end-February 2026 SB, met ahead of time).
  - Work advancing on: conceptual and operational framework for upgraded Official System of Public Procurement (SOCE) and development of a new fiscal regime for the mining sector (end-December 2025 SBs); preparation of an AML/CFT Strategic Action Plan (end-January 2026 SB).

### Capacity to repay, financing assurances, and market access assumptions
- Capacity to repay and exposures:
  - Total Fund credit outstanding expected to peak in 2025, reaching 1032.8 percent of quota and 24.4 percent of exports.
  - Total obligations to the Fund expected to reach 15.1 percent of gross reserves in 2025 and decline thereafter.
  - Fund obligations as a percentage of GDP and exports will peak at 1.3 and 4.3 percent in 2027.
  - Staff notes factors mitigating risks: decisive policy actions, continued implementation of policies, and strong track record under the EFF-supported arrangement.
- Financing assurances and market access:
  - Program is fully financed, with firm financing commitments for the next 12 months and good prospects for adequate financing for the remaining program period.
  - IFIs (WB, IDB, CAF, and FLAR) have committed to maintain or increase support.
  - EXIM China and other official bilateral creditors providing project financing; EXIM China has allowed more time for project preparation and selection.
  - Market access assumptions: US$1 billion in 2026, US$1.5 billion in 2027, and US$2 billion in 2028.

### Safeguards, arrears, and reserve-related measures
- Safeguards and central bank (BCE) reforms:
  - BCE implemented recommendations from the 2024 assessment: capacity-building plan for accounting function; revised operational framework for the Audit Committee.
  - COMYF amended to enhance BCE’s functional autonomy, address overlaps in authority to set interest rates on monetary policy, and expand special regulatory frameworks; budgetary autonomy strengthened.
  - Aligning transparency practices with international standards remains a work in progress; full adoption of IFRS would require legal reform.
- Lending into arrears:
  - Residual arrears to international private bond holders remain from outstanding claims on repudiated international bonds in 2008-09.
  - US$52 million remains outstanding in the hands of individual creditors; authorities have been unable to identify these creditors to settle the claims.
  - Authorities established a public procedure to resolve claims if bondholders request liquidation of the securities.
- Capital flow management measure (ISD):
  - 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 an outflow CFM and an exchange restriction under Article VIII, Section 2(a).
  - Executive Board approved temporary use for 12 months of this measure in December 2024.
  - ISD rate reductions in 2025:
    - ISD rate for imports in the pharmaceutical sector reduced to 0 percent from 5 percent as of January 2025 for the year 2025.
    - ISD for a list of imports for other productive sectors temporarily reduced from 5 percent to 0 percent between January and April 2025, and reduced to 2.5 percent as of May 2025 for the remainder of 2025.
  - Staff supports authorities’ request for Board approval of retention of the exchange restriction arising from the ISD, given it is maintained for balance of payments reasons and is temporary and non-discriminatory.

### Enterprise risks and mitigation
- Key risks identified:
  - Financial risks due to large adjustment needs; capacity to repay and debt sustainability contingent on implementing planned policies and availability of external financing.
  - Business risks from uncertain economic outlook, global policy uncertainty, and weaknesses in institutional capacity (lags and variability in data sources).
  - Operational risks to mission and field presence from the challenging security situation.
  - Reputational risks associated with the EFF arrangement.
- Mitigating actions:
  - Bold policy actions already taken and strong program implementation since program approval (including meeting all QPCs, many with significant margins).
  - Stronger mandate and larger support in the National Assembly attained by President Noboa in the April 2025 elections.
  - Strong multilateral financial support and authorities’ commitment to honoring external debt obligations.
  - Increased coverage of social safety nets to protect the most vulnerable.
  - Contingency planning with clearly-defined triggers for timely responses.
  - Operational mitigations for field presence: support from Fund headquarters, close monitoring, dynamic security assessments, agile decision-making, and conducting program discussions offsite or remotely as needed.
- Staff judgment:
  - On balance, staff judges enterprise risks associated with the program review to be lower than the reputational, financial, and business risks of the Fund not continuing to support a member facing severe challenges that continues to take substantive actions to address them.

### Exceptional Access (Box 1) — assessment of criteria
- Criterion 1 (exceptional BoP pressures): met.
  - Ecuador experiences exceptional balance of payments needs from large external debt repayments and loss of market access.
  - Ecuador’s credit outstanding with the Fund stands at SDR6.9 billion (US$9.8 billion, or 993 percent of quota) as of end-October 2025, so IMF support requires exceptional access.
- Criterion 2 (debt sustainability and safeguards): met.
  - Staff’s baseline DSA continues to assess public debt as sustainable but not with high probability.
  - Two tests under the Debt Sustainability Framework for Market Access Countries were performed and staff assesses both conditions are met:
    - Debt Sustainability Test: public debt would remain sustainable in face of a large shock defined as moving debt to the 80th percentile of the debt fan chart by 2034.
    - FX Availability Test: Ecuador would have sufficient FX liquidity to manage international obligations after such a shock under plausible assumptions.
- Criterion 3 (prospects of regaining market access): met.
  - Sovereign spreads declined by over 1,300 basis points since the April 2025 elections.
  - Ecuador had regularly issued international bonds until 2019; nimble debt management included a guaranteed bond in 2020 and two successful debt-for-nature swaps in 2023 and 2024.

*Source: IMF staff report text as provided.*

### Box 1. Assessment of Exceptional Access Criteria (concluded)

### Box 1. Assessment of Exceptional Access Criteria (concluded)

### Overall assessment and program prospects
- Staff judges that robust implementation of the EFF-supported plan (with ambitious fiscal consolidation, structural reforms, and buffers), the continued strong 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 baseline.
- This assessment is subject to significant risks and depends on the steadfast implementation of the authorities’ fiscal and reform plans as well as global economic and financial conditions.
- Criterion 4 (program provides a reasonably strong prospect of success, including institutional and political capacity) is assessed as met.
  - In April 2025, President Noboa won reelection and forged a working majority in the National Assembly.
  - The authorities remain fully committed to the objectives of the program and are implementing policies to ensure its success.
  - All QPCs for end-October 2025 have been met, and the authorities have completed several and are advancing other SBs envisaged under the program.
  - The government has demonstrated capacity to implement needed reforms under very difficult circumstances and strong ownership of the broader objectives of the program.
  - The assessment remains subject to risks related to the challenging domestic and global economic environment and Ecuador’s longstanding socio-political complexities.

### Staff appraisal — program implementation and performance
- The Ecuadorian authorities continue to demonstrate full commitment and made impressive progress in implementing their economic program supported by the EFF arrangement.
- They strengthened fiscal and external buffers, with continued efforts to protect vulnerable populations.
- Program performance remains strong:
  - The authorities met all QPCs for the fourth EFF review and all ITs for which final data is available.
  - The authorities continued advancing their far-reaching structural reform agenda.

### Growth, external sector, and inflation projections
- Real GDP rebounded strongly in the first half of 2025, supported by a recovery in domestic demand and buoyant nonoil exports.
- Growth projections:
  - Real GDP is now projected to rise by 3.4 percent in 2025 and 2.2 percent in 2026, up from 3.2 and 2 percent, respectively, at the time of the third review.
  - The upward revisions reflect stronger growth in the first three quarters of 2025 and a more robust outlook for nonoil exports supported by greater access to key markets, despite continued weakness in the oil sector.
- The CA balance is expected to continue posting steady surpluses over the medium term, contributing to the build-up of international reserve buffers.
- Inflation is expected to remain low and below levels in trading partner economies, strengthening competitiveness.

### Risks and outlook
- Overall risks have decreased relative to the third review but remain elevated, though mitigated by effective program implementation and ongoing structural reforms.
  - Since the third review, government deposits and liquidity conditions have improved, structural reforms have advanced, and sovereign spreads have narrowed.
  - Upside risks include higher-than-expected growth and more buoyant nonoil exports, supporting faster reserve accumulation than projected in the baseline scenario.
  - Downside risks include lower oil prices, shortfalls in external financing, security challenges, and political fragmentation slowing reforms.

### Fiscal consolidation, debt, and financing
- Substantial measures are being implemented to boost fiscal revenues and improve the targeting and efficiency of public expenditure, while protecting vulnerable groups.
  - The authorities have implemented substantial high-quality measures to permanently increase fiscal revenues, support expenditure rationalization, and enhance procurement efficiency.
  - They continue enhancing the social safety net by implementing measures to mitigate the impact of reforms on vulnerable groups and expanding the coverage of cash transfer programs to low-income families surpassing program targets.
- Fiscal position and debt trajectory:
  - The NFPS overall balance is projected to improve to -1.2 percent of GDP in 2025, from -1.3 percent in 2024, and reach balance in 2026.
  - The medium-term fiscal plan continues to envisage a fiscal consolidation of 6.6 percent of GDP in the NOPBS over the program period, in line with the second review, placing public debt on a firm downward path and on track to achieve the COPLAFIP target of 40 percent of GDP by 2031, one year ahead of schedule.
  - Reforms to enhance PFM and governance support these efforts.
  - Sovereign debt spreads have declined by over 1,300 basis points since the April 2025 presidential elections.
  - Continued progress on economic reforms and the buildup of liquidity buffers are expected to further narrow spreads and restore Ecuador’s market access.
  - Timely support from IFIs and bilateral creditors maintaining or increasing their exposure continues to be important to ensure that the program remains fully financed.

### Financial sector and capital markets
- Efforts to bolster financial stability and develop domestic capital markets should continue.
  - The financial sector remains stable, and supervision is being strengthened, but some credit cooperatives are facing challenges related to asset quality, capital reserves, and profitability.
  - Strengthening regulation, oversight, and resolution tools, and taking steps to reform the interest rate system will further support stability and improve credit allocation and growth.
  - Developing domestic capital markets is paramount to lifting potential growth.

### Structural reforms, competitiveness, and governance
- Advancing structural reforms is important to boost competitiveness and job-rich growth.
  - The authorities are working to attract private investment into high potential sectors such as mining, hydrocarbons, and energy.
  - Efforts are underway to strengthen energy resilience by increasing electricity supply and building resilience to natural disasters.
  - Decisively advancing the economic reform agenda could realize significant growth dividends over the medium term.
- Combating illicit activities and enhancing governance will also support growth.
  - Effective AML/CFT measures and the upcoming Strategic Action Plan aim to curb organized crime financing.
  - Authorities are implementing initiatives to strengthen procurement governance, focusing on increasing transparency and efficiency, and continue working to increase transparency and accountability to mitigate vulnerabilities to corruption.
  - Continued efforts are needed to conduct an in-depth diagnosis of organized crime activities and economic channels being abused for financing and laundering proceeds, as well as prioritizing measures that can disrupt the associated illicit financial flows.

*IMF staff appraisal and assessment as presented in Box 1: Assessment of Exceptional Access Criteria (concluded).*

### 42.      Staff support the completion of the fourth review and the modification of

### Staff support the completion of the fourth review and the modification of performance criteria.

### Program governance and IMF staff recommendations
- Staff support the completion of the fourth review and the modification of performance criteria.
- Staff recommend the completion of the financing assurances review.
- Staff support the authorities’ request for Board approval for the retention of the exchange restriction arising from the ISD.
- The exchange restriction is maintained for balance of payment reasons and is temporary and non-discriminatory.

### Recent economic developments (overview)
- The economy bounced back in the first half of 2025, driven by stronger domestic demand and record nonoil exports, with broad-based growth across sectors.
- High-frequency data points to continued strong nonoil activity in 2025Q3.
- Oil production recovered after the July disruptions in the main pipelines and refinery.
- Inflation remains subdued even after the normalization of electricity prices.

### Fiscal developments and public finances
- The fiscal position strengthened in 2024, with the fiscal deficit declining significantly, supporting the rebuilding of fiscal buffers; the financing mix relied on support from multilateral partners.
- Successful revenue mobilization was achieved with the authorities’ fiscal package, while primary expenditures remained contained.
- Despite the fiscal improvement, gross financing needs remained large; sovereign spreads have continued to narrow in recent months after the pre-April 2025 election spike.
- Selected fiscal figures (US$ million, NFPS unless noted):
  - Revenue (2024): 43,580
  - Oil revenue (2024): 14,510
  - Nonoil revenue (2024): 29,070
  - Expenditure (2024): 47,797
  - Net lending/borrowing (NLB) (2024): -4,217
  - NFPS gross debt (2024): 65,821 (US$ million)
- Fiscal ratios (percent of GDP, 2024):
  - Revenue: 36.0 percent
  - NFPS overall balance (2024): -3.5 percent of GDP
  - Primary balance (2024): -2.6 percent of GDP
  - Nonoil primary balance (NOPB, 2024): -4.8 percent of GDP
  - NFPS gross debt (2024): 54.3 percent of GDP

### External sector developments
- Imports increased with the recovery and were more than compensated by strong export growth, especially for nonoil products, supporting a record current account surplus in 2024 and contributing to an increase in gross international reserves.
- Selected external figures (US$ million):
  - Exports, f.o.b. (2024): 31,484
    - Oil exports (2024): 8,952
    - Nonoil exports (2024): 22,532
  - Imports, f.o.b. (2024): 29,277
    - Oil imports (2024): 7,045
    - Nonoil imports (2024): 22,232
  - Current account balance (2024): 2,346 (US$ million)
  - Gross international reserves (end-2024): 4,455 (US$ million) and projected 6,908 (US$ million) for 2025 (staff estimate)
- Balance of payments and financing:
  - Financial account (2024): 4,644 (US$ million)
  - Public sector disbursements (2024): -2,626 (US$ million)
  - Private sector, net (2024): 5,097 (US$ million)
- Projections and indicators:
  - Current account (percent of GDP): 1.9 (2024) and projected 5.7 (2025)
  - Gross international reserves (projection path shown up to 2030, e.g., 10,378 for 2026 in Table 5a)

### Real economy and projections
- National income and prices (selected, US$ million and growth rates):
  - Nominal GDP (2023): 121,147 (US$ million)
  - GDP per capita (2023): 6,793 (US$)
  - Real GDP growth (year series in Table 1/2): 2.0- (2023), -2.0- (2024), -2.0- (2025), 3.2 (2026), 3.4 (2027), 2.0 (2028), 2.2 (2029), 2.4 (2030) — preserve table formatting of reported series
- Oil sector (selected):
  - Oil production (millions of barrels per year or thousands of barrels per day as presented): 173.5 (2023), 174.0 (2024), 174.0 (2025), 161.0 (2026), 161.1 (2027), 172.1 (2028), etc., per Table 2 series.
  - Oil price West Texas Intermediate (US$ per barrel): 77.6 (2023), 76.6 (2024), 76.6 (2025), 66.5 (2026), 65.6 (2027), 62.6 (2028), 59.3 (2029), 59.5 (2030) — preserve the sequence as reported.

### Financial system and banking sector
- Robust deposit growth facilitated an incipient rise in credit growth and a decline in borrowing costs; the credit-to-GDP gap seems to have closed.
- Bank reserves remain adequate despite a decline since end-2024.
- Provisioning and loan quality of Segment 1 Cooperatives is substantially lower than private banks; capital ratios have stabilized above the regulatory norm.
- Financial soundness indicators (end-period percent):
  - Regulatory capital to risk-weighted assets (banking system, Jul-25): 16.3
  - Nonperforming loans to total gross loans (banking system, Jul-25): 4.1
  - Provisions to nonperforming loans (banking system, Jul-25): 192.7
  - Return on assets (banking system, Jul-25): 2.0
  - Liquid assets to total assets (banking system, Jul-25): 15.3

### Deposit and credit market dynamics
- Deposit growth has been strong for private banks and credit cooperatives; credit growth is leveling up, led by productive credit.
- Across institutions:
  - Credit by private banks is accelerating while credit by public banks has declined.
  - Cooperatives’ credit growth has turned marginally positive.
  - The refinanced and restructured share of credit remains stable with notable improvement in public banks.
- Monetary aggregates and credit:
  - Broad money (M2) percent change, yoy (selected): 6.7 (2023), 4.8 (2024), 4.8 (2025), with projected mid-single digits thereafter as reported in Table 7.
  - Credit to the private sector (percent change, yoy): 8.4 (2023), 6.2 (2024), 6.2 (2025), with subsequent projections in Table 7.

### Labor market and socio-economic developments
- Formal private employment has surpassed pre-pandemic levels, with rising adequate employment, especially among the youth.
- The unemployment rate is in single digits, with declining youth unemployment; informality is declining, particularly among the youth.
- Labor force participation saw an uptick in recent months, notably among women.
- Poverty has decreased recently, especially in urban areas.
- Social indicators (as presented): formal employment and adequate employment series through Sep-25 shown in Figure 6.

### External position and outlook
- Terms of trade are projected to decline moderately starting in 2025, consistent with lower oil prices and moderating non-oil commodity prices, supported by lower cost of imported oil derivatives.
- The current account has been in surplus since 2020 and reached record levels in 2024; the real effective exchange rate has been relatively stable, depreciating in 2025 in line with favorable inflation differentials relative to trading partners.
- Selected external projection highlights:
  - Current account (percent of GDP): projection path includes positive surpluses (Table 7/Table 5b), e.g., 1.9 (2024) and 5.7 (2025) as reported.

### Key program and financing schedule highlights
- IMF arrangement and reviews (Schedule, Table 10):
  - Approval of arrangement: May 31, 2024 — 752.9 (Millions of SDRs), 107.9 (Percent of Quota)
  - First review: November 15, 2024 — 375.9 (Millions of SDRs), 53.9 (Percent of Quota)
  - Second review: March 15, 2025 — 438.4 (Millions of SDRs), 62.8 (Percent of Quota)
  - Third review: August 15, 2025 — 438.4 (Millions of SDRs), 62.8 (Percent of Quota)
  - Fourth review: December 15, 2025 — 438.4 (Millions of SDRs), 62.8 (Percent of Quota)
  - Total: 3,750.4 (Millions of SDRs), 537.5 (Percent of Quota)

*Staff Report for the Third EFF Review (Country Report No. 2025/289) and IMF staff calculations and projections (figures and tables as presented in the source).*

### 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
- Performance criteria (cumulative from January 1 unless otherwise indicated; targets 1–8 cumulative from November 1, 2025 to January 31, 2026; targets 9 and 10 end-January 2026)
- 1. Nonoil primary balance of the budgetary central government (PGE) (floor): -1,255 -1,255 -1,018 Met -875 -875 -302 -302 -1,310
- 2. Overall balance of the PGE and CFDD (floor): -3,565 -3,579 -3,327 Met -1,229 -1,229 -1,341 -1,341 -2,624
- 3. Accumulation of NFPS deposits at the central bank (floor): 243 236 1,121 Met 100 -398 2000 364
- 4. Non-accumulation of external payments arrears by the NFPS (continuous performance criterion): 0 0 Met 0 0 0 0 0
- 5. (No new) Central bank direct and indirect financing to the NFPS (continuous performance criterion): 0 0 Met 0 0 0 0 0

### Indicative targets (continued)
- 6. Overall balance of the NFPS (floor): -1,023 -1,037 -667 -667 217 217 -46
- 7. Nonoil primary balance including fuel subsidies (NOPBS) of the NFPS (floor): -3,798 -3,784 -1,513 -1,513 -1,317 -1,317 -3,434
- 8. Change in the stock of NIR (floor): -125 -132 1,267 Met -260 -758 315 115 672
- 9. Stock of PGE arrears to the domestic private sector (ceiling): 480 330 Met 330 330 210 210 105
- 10. Number of families in the first three income deciles nationwide covered by cash transfer programs (floor): 1,260,012 1,313,186 Met 1,283,012 1,313,800 1,289,012 1,319,000 1,325,000

### Memorandum item
- NFPS deposits at the central bank: 4,884 5,762 4,984 5,364 5,413 5,513 5,877

- 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 unless otherwise indicated.
- 2/ Cumulative from November 1, 2025 to January 31, 2026 for targets 1 through 8; end-January 2026 targets for targets 9 and 10.
- 3/ Staff report for the Third EFF Review (Country Report No. 25/289).
- 4/ Adjusted for oil prices and disbursements from multilateral institutions.

### Timing reference (as printed)
- End-Dec. 2026; End-Oct. 2025; End-Jan. 2026 2/; End-Jun. 2026

---

### Structural benchmarks
- Table 12. Ecuador: Structural Benchmarks
- Reform Area — Structural Conditionality — Objectives — Due Date — Status

- Public Financial Management  
  - 1. Publish an updated Medium-Term Fiscal Framework (MTFF) in line with program targets. — Strengthen fiscal planning and management. — End-October 2024 — Met
  - 2. Publish a Medium-Term Debt Management Strategy in line with program targets. — Strengthen fiscal planning and management. — End-October 2024 — Met
  - 3. 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-July 2025 — Not Met. Implemented with delay.

- Domestic Arrears  
  - 4. 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

- Tax Reform  
  - 5. 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

- Fiscal Strategy  
  - 6. 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

- Social Safety Net  
  - 7. 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

- Governance  
  - 8. 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-November 2025 — Met
  - 9. 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. 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-December 2025 — (status not listed)

- Transparency and Governance  
  - 11. 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. 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

- Anti-Money Laundering Framework  
  - 13. 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. The National AML/CFT Coordination Committee to approve and publish 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-January 2026 — (status not listed)

- Financial Sector  
  - 15. 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. 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. 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. 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.

- Domestic Capital Market Development  
  - 19. 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. 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 — Met
  - 26. Launch auctions for domestic market bonds and treasury notes. — Foster domestic capital market development. — End-September 2026 — (status not listed)

- Mining Sector  
  - 21. Implement the regulation for the opening of the mining cadaster. — Enhance transparency and attract private investment. — End-June 2026 — (status not listed)
  - 22. 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 — (status not listed)

- Oil Sector Transparency and Governance  
  - 23. 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 — Met
  - 28. Launch a public tender to audit the financial statements of Petroecuador for 2022-2024. — Enhance transparency and governance in the oil sector. — End-February 2026 — Met

- Electricity Sector  
  - 24. 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 — Met
  - 25. 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 — Met

- Fiscal Strategy  
  - 27. Submit a draft 2026 budget to the National Assembly in line with the EFF fiscal program. — Strengthen fiscal planning and management. — End-November 2025 — Met

- Transparency and Governance (concluded)  
  - 29. Publish an audited actuarial report for the social security system with data up to 2024. — Enhance transparency and governance of the social security system. — End-December 2026 — (status not listed)

---

### Risk Assessment Matrix — key risks, likelihood, impact, and policy responses
- Global Conjunctural Risks
  - Escalating Trade Measures and Prolonged Uncertainty. — Relative Likelihood: High. — Possible Impact: Medium. — Policy Response: Adopt policies that improve the resilience of trading relationships, including by removing trade barriers; fostering free trade agreements; and limiting policy uncertainty through clearly articulated medium-term policy frameworks. In the event tensions reduce oil prices, implement fiscal contingency measures.
  - Fiscal Vulnerabilities and Higher Long-Term Interest Rates. — Relative Likelihood: High. — Possible Impact: High. — Policy Response: 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. Pursue fiscal consolidation to rebuild credibility with markets.
  - Financial Market Volatility and Correction. — Relative Likelihood: High. — Possible Impact: Medium. — Policy Response: Continue stepping up financial supervision, including by imposing capital restoration plans on troubled institutions. Strengthen financial crisis preparedness and management.
  - Geopolitical Tensions. — Relative Likelihood: High. — Possible Impact: Medium. — 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: High. — Possible Impact: High. — 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 wait for an opportune time to re-access international markets.
  - New Trade Agreements. — Relative Likelihood: Low. — Possible Impact: Medium. — Policy Response: Diversify the economy to reduce dependency on commodity exports and take advantage of a growth pick-up more broadly. Continue to diversify export markets through new high standard regional free trade agreements.

- Structural Risks
  - Cyberthreats. — Relative Likelihood: High. — Possible Impact: High. — Policy Response: Ensuring critical systems are properly protected and backup systems are available. Insurance could help mitigate some of the fiscal risk.
  - Labor Supply Gaps. — Relative Likelihood: Medium. — Possible Impact: Low. — Policy Response: Enhance the coverage of the social safety net to protect the most vulnerable segments of the population.

- Domestic Risks
  - Prolonged or Deeper Security Crisis. — Relative Likelihood: Medium. — Possible Impact: High. — 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: Medium. — Possible Impact: High. — Policy Response: Design reforms such that the fiscal adjustment does not hurt vulnerable groups. 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. — Policy Response: Invest in maintenance and resilience of oil infrastructure. Advance the diversification and SOE governance agendas.
  - Rising Social Discontent. — Relative Likelihood: Medium. — Possible Impact: High. — Policy Response: Design reforms such that the fiscal adjustment does not hurt the vulnerable groups. 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.
  - Climate Change. — Relative Likelihood: Medium. — Possible Impact: High. — Policy Response: Invest to protect critical financial, transport, communication, or energy infrastructure to minimize disruptions. Build precautionary savings buffers.
  - Natural Disasters. — Relative Likelihood: Medium. — Possible Impact: High. — Policy Response: Implement policies to build resilience in infrastructure to natural disasters.

*Source: Ministry of Economy and Finance and IMF staff (as presented in the source PDF).*

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

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

### Overview and key judgment
- Ecuador’s public debt continues to be assessed as sustainable but not with high probability.
- The fiscal plan supported by the EFF program is essential to continue rebuilding buffers and restore market confidence.
- The fiscal adjustment effort remains ambitious per the realism assessment, and the debt fan-chart module flags significant uncertainty around the debt path.

### Background and recent debt dynamics
- Public debt-to-GDP ratio decreased in 2024 to 53.8 percent of GDP from 54.3 percent in 2023.
- Drivers of the 2024 debt decrease:
  - A new debt-for-nature swap lowered external debt outstanding by US$527 million.
  - Repayment of domestic accounts payable—including in arrears.
  - New debt primarily from large borrowing from multilateral institutions catalyzed by the EFF program.
- Large accumulation of deposit buffers accompanied the strengthening of the fiscal position.
- Spreads have declined to about 537 basis points as of December 2 , 2025.

### Baseline assumptions and medium-term projections
- Projection premise: successful implementation of the fiscal reform plan supported by the EFF program.
- NFPS primary balance: projected at nil in 2025, converging to a primary surplus of 2.4 percent of GDP in the medium term.
- Public debt trajectory:
  - Expected decline from 53.8 percent in 2024 to below 40 percent by 2031, reaching the COPLAFIP debt target one year ahead of schedule.
- Gross financing needs (GFNs):
  - Forecast to decline from 8.5 percent of GDP in 2024 to 6.5 percent in 2025 and then to around 4 percent of GDP over the medium term.
- Fiscal multiplier assumption: 0.5.
- The negative fiscal impulse was highest in 2024, more front-loaded than originally envisaged, and expected to dissipate gradually starting in 2025.

### Public debt definition and coverage
- Public debt in the SRDSF: consolidated liabilities of the NFPS, comprising the PGE, the CFDD, social security funds, public nonfinancial corporations, and BEDE.
- Instruments included: loans, securities (bonds and Treasury bills), liabilities under oil related financing, central bank lending to the government, deposits at BEDE, and other accounts payable including arrears.
- Coverage notes (as presented): Budgetary central government: Yes; Extra budgetary funds (EBFs): No; Social security funds (SSFs): Yes; State governments: Yes; Local governments: Yes; Public nonfinancial corporations: Yes; Central bank: No; Other public financial corporations: No.

### Risks to the debt outlook, realism assessment, and mitigating factors
- Realism assessment: sustaining the primary consolidation envisaged under the program will be ambitious compared to cross-country historical experience.
- Debt fan-chart width, driven by past Ecuador outcomes, shows debt could increase significantly under an adverse but plausible scenario.
- Main downside risks:
  - Uncertainty of external financing sources.
  - Implementation capacity of the fiscal program.
  - Revenue risks from growth underperformance, uncertainty in the security situation, lower oil prices, disruptions in oil production, or 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.
  - Successful performance of fiscal measures implemented so far under the program.

### Medium-term risk assessment (module outputs and indicators)
- Overall medium-term risk signal: Moderate.
- Commentary: Two medium-term tools assess sovereign risk as moderate, mostly driven by the width of the confidence interval in the debt fanchart tool. Stress tests indicate GFNs could increase substantially in case of an unexpected natural disaster; the impact would be smaller following a commodity price decline.
- Selected numeric outputs from the medium-term assessment (as presented):
  - Final Fanchart (Percent of GDP)
    - Fanchart width: 76.9 1.1
    - Probability of debt non-stabilizaiton (percent): 17.1 0.1
    - Terminal debt-to-GDP x: 30.5 0.7
    - Debt fanchart index (DFI): 1.9
    - Risk signal: 3/Moderate
  - Gross Financing Needs (Percent of GDP)
    - Average baseline GFN: 4.8 1.6 (percent of GDP)
    - Initial Banks' claims on the gen. govt (pct bank assets): 4.3 1.4
    - Chg. In banks' claims in stress (pct banks' assets): 10.0 3.3
    - GFN financeability index (GFI): 6.4
    - Risk signal: 4/Low
  - Final assessment metrics:
    - 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.

### Long-term modules and vulnerabilities
- Large amortization module: Ecuador faces sizeable amortizations in the medium term; maintaining a fiscal stance consistent with a debt stabilizing primary balance post-program would keep debt below the COPLAFIP limit.
- Natural resources module: Ecuador does not face immediate pressures from depleting oil resources; however, the natural resources module reiterates the need to diversify fiscal revenue away from oil over the long term.
- Pensions and health modules were triggered (per figure headings), signaling longer-run fiscal pressures to monitor.

### Baseline scenario selected indicators (from Figure 4, percent of GDP unless indicated)
- Public debt: 2024: 53.8; 2025: 53.2; 2026: 51.4; 2027: 49.6; 2028: 47.7; 2029: 45.2; 2030: 42.2; 2031: 39.1; 2032: 36.0; 2033: 32.9; 2034: 30.1; 2035: 27.5
- Change in public debt: 2024: -0.6; 2025: -0.5; 2026: -1.9; 2027: -1.8; 2028: -2.0; 2029: -2.5; 2030: -3.0; 2031: -3.1; 2032: -3.1; 2033: -3.1; 2034: -2.9; 2035: -2.5
- Contribution of identified flows: 2024: 0.5; 2025: -0.5; 2026: -1.9; 2027: -1.8; 2028: -2.0; 2029: -2.5; 2030: -3.0; 2031: -3.1; 2032: -3.1; 2033: -3.1; 2034: -2.9; 2035: -2.5
- Primary deficit: 2024: 0.2; 2025: 0.1; 2026: -1.1; 2027: -1.9; 2028: -2.4; 2029: -2.4; 2030: -2.4; 2031: -2.4; 2032: -2.4; 2033: -2.4; 2034: -2.4; 2035: -2.4
- Noninterest revenues: 35.6; 35.1; 35.0; 35.0; 35.3; 35.1; 35.0; 35.0; 35.0; 35.0; 35.0; 35.0
- Noninterest expenditures: 35.8; 35.2; 33.8; 33.1; 32.9; 32.7; 32.6; 32.6; 32.6; 32.6; 32.6; 32.6
- Automatic debt dynamics: 0.8; 0.0; 0.2; 0.3; 0.4; 0.3; 0.3; 0.3; 0.3; 0.4; 0.4; 0.4
- Real interest rate and relative inflation: -0.3; 1.7; 1.4; 1.5; 1.6; 1.6; 1.6; 1.5; 1.5; 1.4; 1.3; 1.2
- Real growth rate: 1.1; -1.8; -1.1; -1.2; -1.3; -1.3; -1.3; -1.2; -1.1; -1.0; -1.0; -0.9
- Other identified flows: -0.4; -0.6; -1.0; -0.2; 0.0; -0.4; -0.8; -1.0; -1.1; -1.1; -0.8; -0.5
- (minus) Interest Revenues: -1.2 (constant)
- Other transactions: 0.8; 0.7; 0.3; 1.1; 1.3; 0.8; 0.3; 0.1; 0.1; 0.1; 0.3; 0.7
- Contribution of residual: -1.1; 0.0 (and zeros thereafter)
- Gross financing needs: 8.5; 6.5; 5.5; 5.1; 3.8; 3.9; 3.9; 4.2; 4.2; 3.9; 3.4; 2.7
- Debt service (of which, local currency): 9.5; 7.6; 7.9; 8.2; 7.3; 7.5; 7.5; 7.8; 7.8; 7.4; 6.9; 6.3
- Foreign currency debt service: 0.0 (constant)
- Memo: Real GDP growth (percent): -2.0; 3.4; 2.2; 2.4; 2.6; 2.8; 3.0; 3.0; 3.0; 3.0; 3.0; 3.0
- Memo: Inflation (GDP deflator; percent): 5.0; 1.3; 2.0; 1.7; 1.5; 1.5; 1.5; 1.5; 1.5; 1.5; 1.5; 1.5
- Memo: Effective interest rate (percent): 4.4; 4.6; 4.7; 4.7; 4.9; 5.0; 5.2; 5.3; 5.5; 5.6; 5.7; 5.8

### Realism and cross-country context
- Commentary: The program fiscal plan features a fiscal adjustment that is large relative to historical and cross-country comparisons; avoiding policy slippages will be important to achieve the debt reduction goals.
- Comparator group used in realism assessment: Emerging Markets, Commodity Exporter, Program.
- Historical reference: 3-year debt reduction above 75th percentile is 5.9 ppts of GDP; 3-year adjustment above 75th percentile is 2 ppts of GDP (as presented in Figure 5 annotations).

### Policy implications and priorities (implied by analysis)
- Steadfast implementation of fiscal reforms is essential to strengthen public debt sustainability and restore market confidence.
- Continual efforts to reduce outstanding debt under the program to mitigate downside risks flagged by the debt fan-chart.
- Maintain diversification of fiscal revenues away from oil over the long term to reduce natural-resource-related vulnerabilities.
- Preserve and build deposit buffers and secure multilateral financing to lower rollover and financing risk.

*Source: IMF staff.*

### Appendix I. Letter of Intent

### Appendix I. Letter of Intent

### Program progress and recent developments
- Supported by a 48-month Extended Fund Facility (EFF) arrangement.
- Strengthened public finances; inflation has remained low; international reserves have further increased on the back of a record high current account surplus.
- Liquidity in the financial system continues to support credit growth.
- Key legislative and institutional changes: important changes to the Organic Monetary and Financial Code (COMYF); establishment of the joint Financial and Monetary Policy and Regulation Board in October 2025.
- Energy and security challenges continue to be addressed; economy recovering, driven by stronger private consumption and record high nonoil exports.
- Fourth Review outcomes:
  - Met all quantitative performance criteria (QPC) for end-October 2025 and indicative targets (ITs) for which data are available; expect all remaining end-October 2025 ITs to be met.
  - Met all structural benchmarks for the Fourth Review; work advancing on other structural benchmarks.
- Social protection: over 1.3 million lower-income families covered by the social safety net as of end-October 2025, exceeding the target.

### Financing request and conditionality
- Request completion of the Fourth Review under the EFF arrangement and associated disbursement of SDR 438.4 million for budget support.
- Request modification of the QPCs on the change of NFPS deposits and the ITs on the change of NIR to account for their higher levels as of end-October 2025 owing to the frontloading of domestic financing originally planned for 2026 into 2025.
- Request completion of the financing assurances review.
- Government will observe standard performance criteria against imposing or intensifying foreign exchange restrictions, multiple currency practices, or bilateral payment agreements inconsistent with Article VIII.
- Request IMF Executive Board approval to retain the existing exchange restriction arising from the tax on transfers abroad (ISD) for payments and transfers on current international transactions, maintained for balance of payments purposes, temporary, and non-discriminatory; committed to gradually phasing out this measure as stability is restored.

### Policy framework and commitments
- Attached Memorandum of Economic and Financial Policies (MEFP) lays out macroeconomic and structural policies; Government believes policies are adequate but stands ready to take additional measures if necessary and to consult with the Fund on substantive revisions.
- Commitment to provide Fund staff with all relevant information required to complete program reviews and monitor performance.

### Fiscal performance and medium-term consolidation
- 2024 fiscal position: NFPS overall fiscal deficit reduced by over 2 percentage points of GDP to 1.3 percent of GDP.
- 2025 projection: reduce NFPS overall deficit to 1.2 percent of GDP.
- End-program (2028) objective: NFPS overall surplus of 1.3 percent of GDP and NFPS primary surplus of 2.4 percent of GDP in 2028.
- Cumulative consolidation target: about 6.6 percentage points of GDP in the non-oil primary balance including fuel subsidies (NOPBS) over 2024-28 relative to end-2023.
- Debt rule: respect expenditure growth rules and the debt limit of 40 percent of GDP by 2032 as enshrined in COPLAFIP.
- Published MTFF aligned with objectives and EFF-supported program (end-October 2024 structural benchmark, met).
- Contingency plan prepared as prior action for program approval in May 2024.

Specific fiscal policy measures and areas of focus:
- Nonoil Revenues:
  - Implement plan to mobilize nonoil revenues (mid-November 2024 SB, met) by replacing temporary measures with permanent measures, revamping taxation of dividends and undistributed profits, and improving tax administration.
  - Review inefficient tax expenditures and exemptions, including in investment contracts.
  - Develop and implement a new fiscal regime for the mining sector with IMF TA (end-December 2025 SB).
- Oil Revenues:
  - Streamline fuel subsidies while implementing social protection mechanisms for the most vulnerable.
  - Align diesel prices with international prices in September 2025; earlier alignment for low-octane gasoline and elimination of sectoral fuel subsidies earlier in 2025.
  - Compensatory measures for transporters to adapt gradually to new prices.
  - Initiatives to increase net oil revenues: gradually increase production (partly through private investments), improve operational efficiency, and enhance oil refinery capacity.
- Public Sector Wage Bill:
  - Continue containing the public sector wage bill; streamlined ministries and public agencies in June 2025 to improve efficiency.
  - Norm issued in 2024 caps all public sector wages below the salary of the President remains in effect.
  - Review and streamline temporary contracts while ensuring capacity for additional police and domestic security forces.
- Procurement:
  - Continue procurement reforms to optimize expenditure, increase transparency, and improve public services.
  - SERCOP issued norms in July 2023 to operationalize the 2022 Procurement Law.
  - Operationalize National Control Subsystem (SNC) timeline (end-December 2024 SB, met); advance SOCE upgrade with IDB assistance (end-December 2025 SB).
- Capital Expenditure:
  - Prioritize capital projects by social and economic impact.
  - Promote PPPs and concessions, mindful of contingent liabilities and fiscal risks.
  - Ecuadorian Development Bank to channel multilateral and bilateral resources for local government infrastructure.
  - Implement recommendations of Public Investment Management Assessment (PIMA) and climate-related C-PIMA gradually.

### Energy policy and electricity sector reforms
- Improve energy resilience and electricity supply capacity short-, medium-, and long-term.
- 2024–2025 regulatory changes: Ministry of Energy and Mines authorized to directly delegate projects of up to 100 MW in non-conventional and transitional renewable energy, streamline approvals, offer clean energy preferential pricing, and allow private entities to sell surplus self-generated energy to the national grid.
- Reformed medium- and high-voltage electricity tariffs to be consistent with cost recovery and reducing energy subsidies.
- Measures in 2025 to redirect resources to security, social development, and the productive sector by aligning diesel prices with international prices.

### Security and macroeconomic context
- Severe security crisis in recent years linked to international organized crime and drug trafficking; government declared a 60-day state of emergency (later extended for another 30 days) and an internal armed conflict in early January 2024, including curfews and mobility restrictions.
- Government reoriented current expenditure to boost the security envelope and enhance the role of the military.
- Referendum in April 2024 approved measures to tackle the security situation.
- After President Noboa’s re-election in April 2025, legislation passed to strengthen public finances, public procurement, and financial sector development.
- Sovereign debt spreads narrowed to about 537 basis points as of December 2, 2025.
- Exceptional growth of nonoil exports produced a record current account surplus with strong momentum in 2025, improving domestic liquidity and international reserve buffers.

### Institutional and technical reforms
- Updated COPLAFIP introduced MTFF, clear anchors to reduce public debt, National Fiscal Coordination Committee, and fiscal risk management exercise.
- Fiscal governance enhanced by revamp of fiscal statistics and cash management with IMF TA.
- Updated IMF Fiscal Safeguards Review in 2024 confirmed progress since 2021 review.
- Prior actions and structural benchmarks met: projected monthly cash flow and financing plan for the budgetary central government (PGE) prepared and shared with Fund staff as prior action.

_This summary is based solely on the content of "Appendix I. Letter of Intent" and the attached Memorandum of Economic and Financial Policies contained in the provided source PDF._

### 12. We remain committed to clearing domestic arrears. The accumulation of public sector

### 12. We remain committed to clearing domestic arrears.

### Domestic arrears, fiscal financing, and debt management
- The accumulation of public sector arrears due to tight fiscal and liquidity conditions has been weighing heavily on economic activity.
- As fiscal liquidity improves, the authorities will continue regularizing overdue obligations to the private sector and intra-public sector claims.
- Actions taken:
  - Included clearance of PGE arrears with the private sector in the multi-year fiscal financing plan.
  - In November 2024 prepared and shared with Fund staff a plan for clearing and preventing the resurgence of PGE arrears, including obligations to the private sector and intra-public sector claims (end-November 2024 SB, met).
  - Overperformed the program’s end-October 2025 arrears clearance target with a margin.
- Financing strategy:
  - Near-term reliance on multilateral and bilateral sources, seeking to regain access to international capital markets in 2026, and gradually developing domestic financing sources.
  - Active public debt management strategy 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) aligned with EFF-supported program (end-October 2024 structural benchmark, met).
  - Active dialogue with official bilateral partners for continued financial support and plans to return to international capital markets as conditions allow.
  - Working to foster domestic capital market development; in November 2025 issued regulations for domestic bond and treasury note auctions (end-November 2025 SB, met) as a first step toward launching auctions in 2026 (end-September 2026 SB).

### Expanding social safety nets
- Objective: ensure fiscal consolidation burden is not borne by the poor and vulnerable.
- Measures and outcomes:
  - Following the diesel reform in September 2025, redirected savings to support vulnerable groups.
  - Upgraded social registry and expanded social protection coverage with World Bank assistance (end-October 2024 SB, met).
  - As of October 2025, over 1.3 million family units in the bottom three income deciles benefit from social protection transfers.
  - Coverage expanded by 55,000 families in October 2025 alone, prioritizing the elderly and individuals with special needs.
  - Plan to achieve universal coverage in the bottom two deciles and the majority in the third decile 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 social protection more efficient and comprehensive, including complementary services beyond monetary transfers.
  - Social protection transfers and programs are listed in the Technical Memorandum of Understanding (TMU).
  - MIES led a campaign to increase use of banking services by recipients of social protection transfers.

### Enhancing fiscal statistics, transparency, and public financial management
- Fiscal statistics improvements:
  - 2020 COPLAFIP reforms adopted regulations requiring timely collection, accurate compilation, and transparent publication of fiscal data with adequate coverage by NFPS subsectors.
  - Established a dedicated statistics unit at the Ministry of Economy and Finance (MEF) for government finance statistics compilation.
  - With IMF TA, updated GFS compilation training curriculum and produced a training schedule for ongoing staff training.
  - An IMF long-term expert (LTX) worked one year with the statistics unit to improve compilation, verification, and reconciliation of government finance and debt statistics.
  - Objective to increase NFPS coverage by including public companies in the electricity sector and expanding the statistical sample of local government companies.
  - In February 2025 issued a technical regulation (norma técnica), in line with COPLAFIP, defining procedures for monitoring and evaluating compliance with fiscal rules.
- Dissemination practices:
  - Fiscal statistics disseminated monthly according to a pre-established publication calendar, updated once a year.
  - Monthly publication of time series on revenues, expenditures, and transactions in financial assets and liabilities by each NFPS subsector, indicating whether data is preliminary or definitive.
  - An analytical report on the Budgetary Central Government GFS, created with IMF Statistics Department, is published alongside the monthly time series.
- Social Security Fund (IESS) adjustments and transparency:
  - Revised historical balances of IESS in collaboration with IMF Statistics Department.
  - Adjusted IESS 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 conservative estimation while healthcare audits are pending.
  - Included accrued pension transfer obligations and estimated healthcare transfer allocations to IESS in the central government 2024 budget and MTFF; will continue recording conservative estimates in future budgets.
  - Signed an updated agreement between MEF and IESS establishing a clear procedure to settle healthcare obligations (including internal and external providers), building on the December 2022 agreement (end-November 2025 SB, met).
  - Finalized procurement to hire external auditor to review the 2023 and 2024 healthcare obligations to IESS (end-December 2024 SB, met); audits are underway.
  - Plan to publish an audited actual report for the social security system with data up to 2024 (end-December 2026 SB).
- Public financial management and arrears monitoring:
  - With IMF PFM expert assistance, expanded cash management planning to encompass the full length of the annual budget cycle; remaining challenge to develop a 12-month rolling update capability.
  - Implemented a monitoring system to evaluate existing stock of domestic payment arrears of central government and selected NFPS entities.
  - In January 2022 published a methodology to estimate stock of arrears and reporting templates for public sector entities.
  - Estimated stock of potential claims on PGE (including with IESS, GADs, private sector) by type of expenditure, year, and beneficiaries.
  - Began publishing monthly arrears data in public debt bulletins, as per COPLAFIP law.
  - Will design a policy for MEF to gather monthly arrears information from other NFPS entities, as mandated by COPLAFIP.
  - Implemented an automatized process for PGE payments, including arrears’ payments (end-July 2025 SB, implemented with delay) with IMF technical support.

### State-owned enterprises (SOEs), fiscal risks, and public debt transparency
- SOE efficiency and fiscal risk monitoring:
  - Seven public companies not managed efficiently are in the process of closure; example: Public Enterprise Coordinating Company (EMCO) closed in 2024.
  - For remaining SOEs, commitments include strengthening operational frameworks, reforming collective labor agreements, and implementing best practices to improve efficiency and limit contingent liabilities.
  - Support for a structural cost-optimization strategy, including a comprehensive efficiency assessment of the state to curtail unproductive activities and obtain efficiency gains.
- Public debt transparency:
  - MEF implemented actions to improve public debt transparency, including a new Debt Bulletin developed with WB and Fund TA, published monthly on the MEF official website.
  - Bulletin includes 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 are published; the detailed database supporting the Bulletin is accessible on the website.
- Tax administration strengthening:
  - Implement IMF TA recommendations on tax administration.
  - 2023 assessment of tax administration and a TADAT undertaken with IMF support.
  - Plan to implement an institutional model under TADAT methodology to close gaps against best international practices, focusing on control processes.
  - Implementation, with IDB support, will focus on process integration, transparency, tax registration, data intelligence, and information management.
  - Requested IDB TA for National Customs Service of Ecuador (SENAE) to enhance modernization.

### Strengthening the BCE institutional framework and safeguarding dollarization
- Legal and institutional reforms:
  - 2021 revision of COMYF to support dollarization regime, including eliminating direct and indirect central bank financing of government, restoring full reserve coverage of deposits at BCE, and granting technical and managerial autonomy to BCE.
  - Revised law removed legacy assets from the 1999 banking crisis, established an audit committee, appointed external auditors, and required publication of audited BCE financial statements.
  - Implemented capacity development for internal auditors, required certification by the Institute of Internal Auditors, and implemented peer-review recommendations for internal 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 safeguards strengthening since 2019; authorities committed to implementing all recommendations.
  - Aligned implementation of the “backing rule” in COMYF with the 2023 reprofiling of government debt held by BCE, deferring full coverage requirement for the first, second, and third balances to 2040 to ensure effective implementation consistent with BCE balance sheet strengthening.
  - Amended COMYF to establish a joint Financial and Monetary Policy and Regulation Board and updated BCE mandate consistent with best international practices to prepare and approve modern regulations for financial system, stock market, and insurance industry.
- Contingent liquidity lines and reserves:
  - 2022 FRBNY granted BCE access to a FIMA Repo Facility of US$1 billion for exclusive central banking operations.
  - 2023 FLAR granted BCE access to a contingent credit line of up to US$230 million.
  - BCE renewed contingent liquidity facility with BIS of up to US$840 million; in June 2025 BIS granted a new contingent liquidity line up to US$1.5 billion.
  - BIS facility could be activated by liquidity funds of financial institutions when proper legal reforms by COSEDE are implemented.
- Letters of credit:
  - BCE reported letters of credit increased from US$966 million in June 2021 to a historical maximum of US$2 billion in October 2025.
  - Letters of credit are critical for foreign trade operations, especially fuel imports, facilitating payment management and reducing pressures on national treasury and international reserves.
- National accounts and statistics improvements:
  - BCE concluded and disseminated in December 2023 the update of Annual and Quarterly National Accounts, changing from 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.
  - Continued IMF TA to improve macroeconomic statistics, especially remittances, FDI, and Export and Import Price Indexes.
  - In late 2025 began publishing a new monthly economic activity indicator developed with IMF TA.
- Green initiatives and ESG:
  - June 2025 BCE released the Bioeconomy Satellite Account with ECLAC and AFD technical and financial support.
  - BCE to complete an ESG framework in 2025 with technical support from GGGI and Deloitte.
  - BCE published research papers in 2025 on impact of climate events on Ecuador’s financial system.
  - Signed MOU with ARM and Duke University for policy research to strengthen the Bank’s Gold Commercialization Program consistent with sustainable standards.
  - BCE accepted in September 2025 as a Member of the Network of Central Banks and Supervisors for Greening the Financial System (NGFS).
- BCE financial results and equity:
  - 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$500 million, reaching 500 percent of the authorized and paid-in capital, in compliance with COMYF.
  - By August 2025, BCE’s equity surpassed for the first time US$ 3.2 million.
  - BCE transferred US$1.1 billion in profits to the MEF between 2021 and 2024.

### Enhancing financial system resilience and domestic capital market development
- 2023 Financial System Stability Assessment (FSSA) findings and recommendations:
  - 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 recommendations included:
    - Strengthening financial sector oversight and coordination among agencies.
    - Enhancing prudential framework governing capital and liquidity.
    - Fostering financial deepening and capital market development.
- Implementation stance:
  - Gradual implementation of FSSA recommendations to align prudential regulatory framework and financial system oversight with international standards and best practices, supporting financial stability and efficient financial intermediation.

*Source: Excerpt from the IMF document provided in the content unit.*

### 30. We are improving coordination and information sharing between all the agencies

### 30. We are improving coordination and information sharing between all the agencies

### Coordination and institutional reforms for financial oversight
- Merged the Financial Policy and Regulation Board with the Monetary Policy and Regulation Board into a unified Financial and Monetary Policy and Regulation Board (JPRFM), which serves as the sole regulator of the financial sector and the governing body of the BCE.
- Established a Financial Stability Committee (FSC) comprising all the authorities responsible for financial sector oversight (end-September 2024 SB, met).
  - FSC facilitates coordination and information exchange, provides a holistic perspective to financial sector surveillance, and supports prompt policy responses to financial sector vulnerabilities.
- Created an inter-institutional group within the FSC to coordinate bank resolution reforms and strategies (end-January 2025 SB, met).
- Working to strengthen the resolution framework, with Fund and WB support, in line with international standards.
- Between December 2024 and May 2025, issued new key regulations to improve the governance and provisioning frameworks for cooperatives.

### Prudential framework on capital and liquidity
- Prepared methodologies and enacted macroprudential regulations on capital buffers, including surcharges on systemically important institutions and a countercyclical capital buffer (end-November 2024 SB, met).
  - These regulations are expected to enhance the loss absorption of banks and credit cooperatives and support financial stability.
- Begun implementing FSSA recommendations on liquidity, including the phased implementation of the Liquidity Coverage Ratio (LCR) for banks, expected to be achieved by 2028.
  - Working to improve data requirements on liquidity and expand LCR implementation to large credit cooperatives.
- On emergency liquidity assistance, COSEDE issued a new operative manual for the Liquidity Fund’s trust fund in 2024.
- Intensified supervision, including implementation of action plans on a group of weak institutions.
  - Two insolvent medium-sized credit cooperatives were liquidated in December 2024 and April 2025, respectively, along with a small bank in August 2025.
- IMF provided TA during the first half of 2025 to improve the stress testing toolkit and enhance the emergency liquidity assistance framework; recommendations are currently being implemented.
- SEPS is developing risk-based supervision capabilities with IMF TA.
- Regulatory forbearance measures enacted in response to last year’s electricity crisis expired in September 2025.

### Financial sector development and inclusion; interest rate caps reform
- Banks and credit cooperatives remain subject to ceilings on lending rates differentiated by credit types and, for commercial loans, by borrower firm size.
  - The 2023 FSSA noted caps in a higher interest rate environment led to margin compression, distortions in credit supply, and restrictions to financial inclusion.
- Recent revision to update interest rate caps on commercial and corporate loans provided relief and facilitated robust credit growth to productive sectors in 2025.
- Conducted a study of the system of interest rates (end-March 2025 SB, not met, implemented with delay in May 2025).
  - The study sets the basis for gradual reform of the interest rate cap system to alleviate unwarranted credit constraints, enhance financial inclusion, and support economic growth while preserving financial stability.
  - Plan to adopt a new interest rate methodology more attuned to market conditions.
- Public bank 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, central securities depository, and payments infrastructure
- Primary placements of government securities with private domestic stakeholders currently occur through the Guayaquil and Quito Stock Exchanges.
- Begun standardizing government securities and developing a domestic yield curve.
  - Issued a new regulation in November 2025 for domestic market auctions for bonds and treasury notes, including procedures, auction format, and rules for participation, bidding, and allocation (end-November 2025 SB, met).
  - Plan to start issuing bonds and treasury notes through domestic market auctions in 2026 (end-September 2026 SB).
  - Expected outcome: deeper domestic capital market to channel resources to the government and private sector, contributing to increased investment, productivity, and growth.
- BCE investments in central securities depository and payment systems:
  - 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 SB, implemented with delay).
    - New system expected to be ready in 2026 ahead of the launch of domestic auctions for bonds and treasury notes.
  - Working to enhance the payments system by improving the real time gross settlement (RTGS) system at the BCE to facilitate national-level interoperability, reduce transaction costs, mitigate cash-related risks, and promote digital commerce.
- Regulatory milestones on payments and fintech:
  - December 2024: Monetary Board approved a regulation on payment systems and fintech activities.
  - May 2025: BCE approved a resolution establishing the timeline to implement interoperability among participants of the payment system for digital transfers.

### Business environment, competitiveness, and private sector-led growth (high-level reform highlights)
- Decree in June 2024 announced a National Policy for competitiveness-enhancing regulatory improvements.
- Facilitation of environmentally sustainable investment in mining; measures to boost investment in hydrocarbons and electricity supply.
- Ongoing collaboration with IMF, WB, and IDB on structural reforms to unlock growth potential.

### Trade integration and FDI potential
- 2024: National Assembly ratified trade agreements with Costa Rica and China.
  - 84 percent of Ecuadorian products exported to Costa Rica will be exempted from tariffs; other products benefit from gradual tariff reductions over the next five to fifteen years.
  - 99.6 percent of Ecuadorian exports to China to benefit from immediate or gradual tariff reductions.
- Concluded trade negotiations with South Korea and Canada; November 2025 reached a trade agreement framework with the US.
- Begun negotiations with other countries such as the United Arab Emirates and Japan.

### AML/CFT, financial intelligence, and anti-corruption measures
- Adopted new AML/CFT legislation incorporating reforms in line with FATF standards (end-February 2025 SB, met); legislation was developed with IMF technical support.
  - Will issue necessary regulations to implement the new AML/CFT legislation.
  - Working to enhance governance and independence of the UAFE and its capabilities to produce and disseminate comprehensive financial intelligence.
  - Launched a Joint Investigation Unit to align efforts across key public institutions in the fight against money laundering, tax fraud, and other illegal activities financing organized crime.
  - Plan to approve and publish an AML/CFT Strategic Action Plan, with IMF technical support, establishing actionable policy priorities identified in the National Risk Assessment approved in 2024, including measures focused on tackling organized crime-related illicit financial flows (end-January 2026 SB).

### Public sector integrity, transparency, and procurement
- Issued "National Policy of Public Integrity 2030" covering SOEs, with strategic lines including transparency in public spending and conflict of interests.
- December 2024: Approved the 2024-28 National Integrity and Anti-Corruption Plan.
- AML/CFT law introduced an enhanced asset and interest declaration framework.
- Draft Law to Prevent Conflict of Interests in Public Administration submitted to the National Assembly in 2022 to expand asset declarations of PEPs and enhance online public access to declaration information.
- SERCOP actions on UBOs:
  - Requires UBO information from companies awarded public procurement contracts via an electronic form for continuous publication on SERCOP’s website.
  - Maintains an updated SOCE section with UBO information for the most 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).

### Audits, SOE transparency, and public tenders
- Hired an independent top-tier audit firm in January 2024 with IDB support to audit national oil company financials.
  - Completed and shared 2019-21 audit results with IMF staff (end-March and end-September 2025 SBs, met).
  - Launched a public tender to audit Petroecuador’s financial statements for 2022-24 (end-February 2026 SB, met) and to hire firms to audit CNEL and CELEC.
- Will gradually address issues identified in audits.

### PPP framework, fiscal risk management, and sector priorities
- New PPP law approved in December 2023, with regulations issued in February 2024.
  - PPP pipeline prioritizes road infrastructure and renewable energies.
  - A fiscal risk unit within the MEF will evaluate PPP viability, quantify risks to the public sector’s balance sheet, propose mitigation, and present risks in fiscal risk statements annexed to annual budgets.

### Mining, hydrocarbons, and energy sector reforms
- 2024: Created an inter-institutional committee to fight illegal mining and update the mining cadaster.
  - Implement regulation for reopening the mining cadaster (end-June 2026 SB).
- June 2024 decree issued a new regulatory framework for natural gas projects.
- 2025: Launched a multi-year plan to mobilize investments in the hydrocarbon sector with significant private sector participation.

### Electricity sector: shortages, reforms, and renewable projects
- Power shortages since late 2023 linked to extreme climate events and underinvestment; maintenance and private investment needed.
- October 2024: National Assembly approved an Organic Law to Promote Private Initiative in the Transition to Renewable Energies.
  - Enacted secondary regulations to allow private entities to sell surplus electricity from self-generation to the national grid (end-August 2025 SB, met).
  - October 2024: Reformed electricity prices paid by the large-scale mining sector.
  - June 2025: Adopted a transparent and cost-reflective pricing mechanism and revised medium- and high-voltage electricity tariffs (end-August 2025 SB, met).
- Electricity investment pipeline and support:
  - Developed 12 NCRE projects (solar, wind, hydroelectric) expected to contribute 833 MW of power, backed by private investments.
  - Approved environmental licenses for several renewable energy projects; Villonaco III wind project set to begin construction.
  - Plans underway for geothermal and nuclear projects and to strengthen electricity transmission.
  - With IDB support, started executing a plan to strengthen electricity interconnection with Peru.
- Established mechanism design: covering commercial revenue risks, state commitment, and an IDB guarantee to attract private investors and development financial institutions.

### Social and public modernization measures; climate resilience
- February 2025: Created a mechanism to care for, protect, and facilitate reintegration of Ecuadorian migrants.
- March 2025: Organic law to support female entrepreneurs published in the Official Gazette.
- Launched a digital transformation project to modernize public services and improve transparency.
- Strengthening resilience to extreme weather and natural disasters:
  - WB’s CCDR published in September 2024 provides analysis of challenges.
  - Established an institutional committee on climate finance within MEF with IDB support.
  - Expanded several protected areas, including the Galapagos marine reserve; in May 2023 secured long-term financing as part of the world’s largest debt-for-nature swap on record.
  - December 2024: Completed second debt-for-nature swap to fund the Amazon Biocorridor Program.
  - Interested in a potential Resilience and Sustainability Facility arrangement to support resilience efforts.

*International Monetary Fund — Ecuador program text excerpt*

### 46. Program implementation will be monitored through quantitative performance criteria,

### Program implementation will be monitored through quantitative performance criteria, indicative targets, and structural benchmarks

### Program review schedule and monitoring framework
- The EFF arrangement with the Fund will be subject to triannual reviews during 2025 and shift to semiannual reviews during 2026-28, with the fifth and sixth reviews occurring on or after March 15, 2026, and September 15, 2026, respectively.
- Program implementation will be monitored through quantitative performance criteria, indicative targets, and structural benchmarks as detailed in Tables 1 and 2, with definitions and data requirements provided in the attached TMU.
- All fiscal data needed for program monitoring purposes will be provided to the Fund within 45 days from the end of each test date as shown in Table 2. Preliminary monthly data will be provided with the lag of no more than 30 days after the end of each month.
- In addition to the performance criteria listed in Table 2, the arrangement includes continuously monitored performance criteria standard to all Fund arrangements:
  - no imposition or intensification of restrictions on the making of payments and transfers for current international transactions;
  - no imposition or intensification of import restrictions for balance of payments reasons;
  - no introduction or modification of multiple currency practices;
  - no conclusion of bilateral payments agreements that are inconsistent with Article VIII of the IMF Articles of Agreement.

### Table 1 — Quantitative Performance Criteria and Indicative Targets, 2025-26 (selected program figures)
- Quantitative performance criteria
  1. Nonoil primary balance of the budgetary central government (PGE) (floor) 1/: -1,255-1,255-1,018 Met-875-875-302-302-1,310
  2. Overall balance of the PGE and CFDD (floor) 1/: -3,565-3,579-3,327 Met-1,229-1,229-1,341-1,341-2,624
  3. Accumulation of NFPS deposits at the central bank (floor) 1/: 2432361,121 Met100-3982000364
  4. Non-accumulation of external payments arrears by the NFPS (continuous performance criterion): 00 Met00000
  5. (No new) Central bank direct and indirect financing to the NFPS (continuous performance criterion): 00 Met00000
- Indicative targets
  6. Overall balance of the NFPS (floor) 1/: -1,023-1,037-667-667217217-46
  7. Nonoil primary balance including fuel subsidies (NOPBS) of the NFPS (floor) 1/: -3,798-3,784-1,513-1,513-1,317-1,317-3,434
  8. Change in the stock of NIR (floor) 1/: -125-1321,267 Met-260-758315115672
  9. Stock of PGE arrears to the domestic private sector (ceiling): 480330 Met330330210210105
  10. Number of families in the first three income deciles nationwide covered by cash transfer programs (floor): 1,260,0121,313,186 Met1,283,012   1,313,8001,289,012    1,319,0001,325,000
- Memorandum item
  - NFPS deposits at the central bank: 4,8845,7624,9845,3645,4135,5135,877
- Notes and timing
  - 1/ Cumulative from January 1 unless otherwise indicated.
  - 2/ Cumulative from November 1, 2025 to January 31, 2026 for targets 1 through 8; end-January 2026 targets for targets 9 and 10.
  - 3/ Staff report for the Third EFF Review (Country Report No. 25/289).
  - 4/ Adjusted for oil prices and disbursements from multilateral institutions.
  - End-Dec. 2026; End-Oct. 2025; End-Jan. 2026 2/; End-Jun. 2026 (columns reflected in Table 1).

### Definitions and TMU highlights
- The TMU sets out definitions of the performance criteria (PCs) and indicative targets (ITs), methods for assessing program performance, and information requirements for monitoring targets.
- Any variable not explicitly defined in the TMU is defined in accordance with the Fund's standard statistical methodology (e.g., Government Finance Statistics, Balance of Payments Manual). For omitted definitions relevant to program targets, Ecuadorian authorities shall consult with Fund staff to reach an understanding based on Fund methodology.
- All references to “days” indicate “calendar days”, unless stated otherwise.
- Program exchange rates (those that prevailed on April 23, 2024) — Table 1, Program Exchange Rates:
  - 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
  - Source: Haver, as of April 23, 2024.

- Non-oil primary balance of the PGE (floor): 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 are recorded on a cash basis. Revenues explicitly included are:
    - Tax revenues (ingresos tributarios);
    - Other revenues (otros ingresos), including transfers, dividends, administrative fees, proceeds from asset monetization, and other.
  - Non-oil primary expenditures are recorded on an accrual basis. Expenditures explicitly included are:
    - Wages and salaries (sueldos y salarios);
    - Purchases of goods and services (compra de bienes y servicios);
    - Transfers to international organizations, decentralized autonomous governments (GADs), IESS, other social security institutions (ISSFA and ISSPOL), SOEs, and the private sector (including “account 99” (cuenta 99) expense items);
    - 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. This estimated amount will increase every year in line with projected average annual CPI inflation and will be updated as soon as the agreement on the treatment of future healthcare expenditures between MEF and IESS is operational.
  - Government-funded PPPs will be treated as traditional public procurements; accrued but not settled PPP obligations will be recorded transparently either as public debt or as a contingent liability (e.g., public guarantees) depending on the obligation’s nature.
  - Costs associated with divestment operations, liquidation of public entities, or awards from lawsuits shall be recorded as expense.
  - All expenditures recorded as a credit in “Account 99” will be recorded in the year the obligation was accrued or, if unavailable, in the year the obligation is credited to Account 99.

### Table 2 — Structural Benchmarks (selected entries, with objectives, due dates, and status)
- Public Financial Management
  1. Publish an updated Medium-Term Fiscal Framework (MTFF) in line with program targets. Strengthen fiscal planning and management. Due: End-October 2024. Status: Met
  2. Publish a Medium-Term Debt Management Strategy in line with program targets. Strengthen fiscal planning and management. Due: End-October 2024. Status: Met
  3. Implement an automatized process for budgetary central government (PGE) payments, including arrears’ payments. Strengthen financial management, increase transparency, and reduce accumulation of payment arrears. Due: End-July 2025. Status: Not Met. Implemented with delay.
- Domestic Arrears
  4. Share with Fund staff an updated plan to clear and prevent the resurgence of domestic arrears of the PGE, including obligations to the private sector and intra-public sector claims. Strengthen monitoring and reduce accumulation of payment arrears. Due: End-November 2024. Status: Met
- Tax Reform
  5. 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. Due: Mid-November 2024. Status: Met
- Fiscal Strategy
  6. 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. Due: December 6, 2024. Status: Met
- Social Safety Net
  7. 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. Due: End-October 2024. Status: Met
- Governance and Transparency (selected)
  8. 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. Due: End-November 2025. Status: Met
  9. Establish a timeline to operationalize the National Control Subsystem (SNC) to increase transparency in procurement. Strengthen anticorruption framework and improve expenditure control. Due: End-December 2024. Status: Met
  10. 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. Due: End-December 2025. (Status blank in source)
  11. 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. Due: End-December 2024. Status: Met
  12. 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. Due: End-March 2025. Status: Met
- Anti-Money Laundering Framework
  13. 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. Due: End-February 2025. Status: Met
  14. The National AML/CFT Coordination Committee to approve and publish 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. Due: End-January 2026. (Status blank in source)
- Financial Sector and Domestic Capital Market (selected)
  15. Establish a Financial Stability Committee in line with best international practices (BCE, MEF, JPRF, JPRM, SB, SEPS, SCVS, and COSEDE). Enhance coordination among agencies involved in financial sector oversight. Due: End-September 2024. Status: Met
  16. Establish an inter-institutional group within the Financial Stability Committee to coordinate resolution reforms and strategies. Strengthen financial sector resolution framework. Due: End-January 2025. Status: Met
  17. Issue macroprudential regulations on bank capital buffers, including surcharges on systemically important institutions and a countercyclical capital buffer. Strengthen financial sector buffers. Due: End-November 2024. Status: Met
  18. 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. Due: End-March 2025. Status: Not met. Implemented with delay.
  19. Sign a contract to implement a new platform for the BCE’s central securities depository (DCV) to modernize compensation, liquidation, and custody functions. Foster domestic capital market development. Due: End-January 2025. Status: Not met. Implemented with delay.
  20. 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. Due: End-November 2025. Status: Met
  26. Launch auctions for domestic market bonds and treasury notes. Foster domestic capital market development. Due: End-September 2026. (Status blank in source)
- Sectoral and other benchmarks (selected)
  21. Implement the regulation for the opening of the mining cadaster. Enhance transparency and attract private investment. Due: End-June 2026. (Status blank in source)
  22. 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. Due: End-December 2025. (Status blank in source)
  23. 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. Due: End-September 2025. Status: Met
  24. 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. Due: End-August 2025. Status: Met
  25. 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. Due: End-August 2025. Status: Met
  27. Submit a draft 2026 budget to the National Assembly in line with the EFF fiscal program. Strengthen fiscal planning and management. Due: End-November 2025. Status: Met
  28. Launch a public tender to audit the financial statements of Petroecuador for 2022-2024. Enhance transparency and governance in the oil sector. Due: End-February 2026. Status: Met
  29. Publish an audited actuarial report for the social security system with data up to 2024. Enhance transparency and governance of the social security system. Due: End-December 2026. (Status blank in source)

*Source: Ministry of Economy and Finance and IMF staff estimates, as reported in the TMU and Tables 1 and 2 in the EFF arrangement documentation.*

### 17.      Total expenditures are recorded on an accrual basis except for interest expense that is

### 1ecuea2025003-source-pdf - 17.      Total expenditures are recorded on an accrual basis except for interest expense that is

### Expenditure recording and coverage
- Total expenditures are recorded on an accrual basis except for interest expense that is recorded on a cash basis.
- Expenditures explicitly included:
  - Wages and salaries (sueldos y salarios)
  - Purchases of goods and services (compra de bienes y servicios)
  - Interest expenses (intereses)
  - Transfers to international organizations, local governments (GADs), IESS, other social security institutions (ISSFA and ISSPOL), SOEs, and the private sector. Transfers to private sector explicitly include the “account 99” (cuenta 99) expense items
  - Social assistance benefits
  - Employment-related social benefits
  - Transactions in nonfinancial assets

### Specific provisions and expense treatments
- Estimated transfers to IESS for healthcare expenses:
  - PGE transfers to the IESS will include US$337 million in accrued estimated expenses.
  - This estimated amount will increase every year in line with projected average annual CPI inflation and will be updated as soon as the agreement on the treatment of future healthcare expenditures between MEF and IESS is operational.
- Government-funded PPPs:
  - Treated as traditional public procurements.
  - PGE obligations accrued on public private partnerships will be recorded transparently in budget data and measured as part of the PGE deficit as they accrue.
  - Accrued but not settled obligations related to PPPs will be recorded either as public debt or as a contingent liability of the government depending on the nature of the obligation (e.g., public guarantees).
- Costs associated with divestment, liquidation, or lawsuits:
  - Recorded as expense. Examples include cancellation of existing contracts, severance payments, awards related to unfair dismissal trials.
- Account 99:
  - All expenditures recorded as a credit in “Account 99” (due to 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 Account 99.

### Monitoring and reporting requirements
- Fiscal data for program monitoring:
  - All fiscal data referred to above and needed for program monitoring purposes will be provided to the Fund within 45 days from the end of each test date as shown in Table 2.
  - Preliminary monthly data will be provided with a lag of no more than 30 days after the end of each month.
- For the Non-Oil Primary Balance IT (separate monitoring):
  - All fiscal data needed will be provided within 60 days from the end of each test date as shown in Table 2.
  - Preliminary monthly data will be provided with a lag of no more than 30 days after the end of each month.
  - Submission includes fuel subsidies expenditures provided by Petroecuador, as well as below the line data.
- NFPS deposits at the BCE:
  - For 2025, accumulation measured as change in stock of deposits between the beginning of the year and the last day of the corresponding test date month as shown in Table 2.
  - For end-January 2026 targets, measured between November 1, 2025, and January 31, 2026.
  - For remaining 2026 targets, measured between January 31, 2026, and the last day of the corresponding test date.
  - NFPS deposits at the BCE data will be provided to the Fund at weekly frequency within 5 business days following the end of the week.
- BCE financing data:
  - 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.
- External payment arrears PC:
  - Monitored on a continuous basis.
  - External payment arrears 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), and (ii) payment arrears on goods delivered or services rendered by external entities.
  - Coverage excludes (i) arrears on short-term trade credit or letters of credits; (ii) arrears on debt subject to renegotiation or restructuring; and (iii) arrears from nonpayment of commercial claims subject to litigation initiated prior to May 1, 2024.

### Adjustors and quantitative adjustments
- Adjustor on oil prices (overall balance of budgetary central government and CFDD):
  - Floor 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.
  - This adjustor is capped at US$178.9 million at corresponding test dates.
  - For end-January 2026 targets, average price calculated as total value of crude oil exports divided by total volume of oil exports over period between November 1, 2025 and January 31, 2026.
  - For other 2026 targets, average price calculated over period between January 1, 2026, and each test date.
- Adjustor on NFPS deposits accumulation (external borrowing):
  - Floor adjusted upward/downward by the amount of NFPS borrowing from non-residents above/below that envisioned under the program (as reported in Table 5), 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 IMF and other multilateral institutions:
  - Floor adjusted upward/downward by the amount of excess/shortfall in program loan disbursements from the IMF and other IFIs (IDB, World Bank, CAF, and FLAR) relative to baseline projection in Table 6.
  - Program loan disbursements defined as external loan disbursements (excluding project financing disbursements and disbursements repaid within same test period) from official creditors freely usable for NFPS budget financing.
- Adjustor on oil prices (NFPS deposits accumulation):
  - Floor 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.
  - Same calculation windows for average price as noted above.

### NFPS definition and deposits at BCE
- NFPS for program purposes consists of:
  - PGE and CFDD (as defined), Decentralized Autonomous Governments (including municipal governments, provincial governments and parish boards), Social Security Funds (including IESS, ISSFA, ISSPOL and BIESS), Non-Financial State-Owned Enterprises (SOEs, detailed in Table 4), Development Bank of Ecuador (BEDE), and accounts related to 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.
- Deposits of NFPS at the BCE include all depository liabilities (time and on-call deposits) at the BCE of the NFPS.

### Tables and numeric program assumptions (as presented)
- Ecuador mix crude oil price (US$ per barrel)54.5554.20
- Table 4: Non-Financial Public Sector Corporations Covered Under the Definition of NFPS:
  - 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.
- Table 5 / Table 6 program assumptions (as presented):
  - Jun. 2026 2/ Total external borrowing consistent with program targets 1/ 5000
    - 2/ Cumulative from January 2026 to June 2026.
    - Jan. 2026 1/ 1/ Cumulative from November 2025 to January 2026.
  - Jan. 2026 1/Jun. 2026 2/ Expected disbursement of IMF credit583375
  - Expected disbursements of program loans by other IFIs1,9251,225
    - 2/ Cumulative from January 2026 to June 2026.
    - 1/ Cumulative from November 2025 to January 2026.

### Definitions and ceilings for debt, arrears, and BCE financing
- Debt definition:
  - Determined according to residency criterion except for debt securities where criterion is place of issuance.
  - Debt understood as a current (not contingent) liability created under a contractual arrangement through provision of value in the form of assets or services requiring future payments to discharge principal and/or interest.
  - Primary forms: Loans (including deposits, bonds, debentures, commercial loans, buyers’ credits, repurchase agreements, official swap arrangements), Suppliers’ credits, and Leases (debt equals present value at inception of lease payments expected during agreement period excluding payments that cover operation, repair or maintenance).
- Arrears, penalties, and judicially awarded damages that constitute debt are debt.
- BCE direct and indirect financing to NFPS includes:
  - Overdraft transfers from BCE to entities of NFPS
  - Advance distribution of unrealized profits from BCE
  - BCE acquisition of government debt on primary market or by purchase from public institutions
  - BCE lending to public banks for acquisition of government debt on primary market or by purchase from public institutions
- Monitoring of BCE financing PC:
  - Monitored on a continuous basis.

### Indicative targets: Non-oil primary balance and overall balance definitions
- Non-oil Primary Balance of NFPS:
  - 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 (otros ingresos), including administrative fees, sales of market and nonmarket establishments, and other Transfers not elsewhere classified
- Primary non-oil revenues explicitly exclude interest, proceeds from sale of financial assets, revenues from privatization, revenues from oil exports, and revenues from domestic sales of oil derivatives.
- Primary non-oil spending (recorded on accrual basis) comprises:
  - Wages and salaries (sueldos y salarios)
  - Purchases of goods and services (compra de bienes y servicios), excluding purchases of goods and services and investments (“servicios petroleros”) of Petroecuador, CFDD and payments to private oil companies (SHE)
  - Grants
  - Social benefits, including social security benefits, social assistance, and employment related social benefits
  - Dividends paid by social security funds
  - Current and capital transfers, including “Account 99”
  - Transactions in nonfinancial assets
- Petroleum product subsidies:
  - Include subsidies for gasoline, diesel, liquefied petroleum gas, and sectoral subsidies granted to specific industries (including consumption of jet fuel and fuel oil).
  - Subsidies defined as difference between distributor sale price and cost of product.
  - Cost definition: weighted average between cost of imported petroleum derivative products and cost of domestically produced petroleum products, cost of transportation, storage, and commercialization. For domestically produced products, export price of Eastern crude (opportunity cost) and cost of refining considered. Import cost includes price at FOB value plus freight and insurance.
- Non-oil primary balance of NFPS, including fuel subsidies, is defined as non-oil primary balance of NFPS minus spending on subsidies on petroleum products.
- Overall balance of NFPS:
  - Defined as net lending/borrowing of NFPS.
  - Calculated as non-oil primary balance plus oil balance plus interest revenues minus interest expenditures.
  - NFPS revenues and interest expenses recorded on a cash basis; NFPS primary expenditures measured on an accrual basis.
- Oil balance of NFPS defined as:
  - (i) Revenues from oil exports and domestic sales of oil derivatives, minus (ii) expenditures on imports of oil derivatives (CFDD), (iii) payments to private oil companies (SHE), and (iv) goods and services expense and investments of Petroecuador, including “servicios petroleros”.
- Monitoring lags:
  - For overall NFPS balance, fiscal data provided with lag of no more than 90 days after end of each test date and preliminary data with lag of no more than 30 days after end of each month. Submission includes below the line data.
- Adjustor on oil prices for overall balance:
  - Floor adjusted upward/downward by US$23.85 million at corresponding test dates for each US$1 per barrel that average Ecuador mix crude oil price is above/below program assumption in Table 3.
  - Adjustor capped at US$178.9 million at corresponding test dates.
  - Same calculation windows for average price as noted above for end-January 2026 and other 2026 targets.

*Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1ecuea2025003-source-pdf.pdf*

### 55.      Net International Reserves (NIR) of the central bank are computed under the program as

### 1ecuea2025003-source-pdf - 55.      Net International Reserves (NIR) of the central bank are computed under the program as

### NIR definition and computation
- NIR are computed as the US dollar value of the usable gross international reserve assets of the BCE minus:
  - (i) gross reserve related liabilities of the BCE to nonresidents, and
  - (ii) the reserve holdings of domestic banks and deposits of other financial institutions held at the BCE.
- Non-U.S. dollar denominated foreign assets and liabilities will be converted into U.S. dollar at the program exchange rates.

### Usable gross international reserve assets (components and exclusions)
- Usable gross international reserve assets comprise all readily available claims on non-residents denominated in convertible foreign currencies and controlled by monetary authorities, consistent with the Balance of Payments and International Investment Position Manual (Sixth Edition).
- Specifically included:
  - (i) currency and deposits;
  - (ii) monetary gold;
  - (iii) holdings of SDRs;
  - (iv) the reserve position in the IMF;
  - (v) securities (including debt and equity securities);
  - (vi) financial derivatives; and
  - (vii) other claims (loans and other financial instruments).
- Specifically excluded from gross international reserves:
  - Any precious metals or metal deposits, other than monetary gold, held by the BCE;
  - Assets in nonconvertible currencies and illiquid assets;
  - Claims on residents; and
  - Any reserve assets that are pledged, collateralized or otherwise encumbered (in so far as those assets are not already excluded from gross international reserve assets of the central bank), including assets tied up in repurchase agreement transactions.

### Gross reserve-related liabilities and reserve holdings
- Gross reserve-related liabilities comprise:
  - All short-term liabilities of the BCE vis-à-vis non-residents denominated in convertible foreign currencies with an original maturity of one year or less;
  - Short-term loans, securities, and other liabilities (excluding account payables) of the central government with an original maturity of less than 30 days;
  - The stock of IMF credit outstanding; and
  - The nominal value of all derivative positions (including swaps, options, forwards, and futures) of the BCE, implying the sale of foreign currency or other reserve assets.
- Reserve holdings of domestic banks held at the BCE:
  - All liabilities of the BCE to other depository institutions (otras sociedades de depósitos, as defined in the 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)).

### Adjustors to the NIR floor
- Adjustor on external borrowing:
  - The floor on net international reserves will be adjusted upward/downward by the amount of borrowing from non-residents above/below what envisioned under the program, as reported in Table 5 above 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.
- Adjustor on disbursement from other multilateral institutions:
  - The floor on net international reserves 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.
- Adjustor on oil prices:
  - The floor on the net international reserves 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 the Table 3.
  - This adjustor is capped at US$178.9 million at corresponding test dates.
  - For end-January 2026 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 November 1, 2025 and January 31, 2026.
  - For other 2026 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, 2026, and each test date.

### Monitoring and measurement rules for NIR
- For 2025 targets:
  - 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.
- For the end-January 2026 target:
  - The change in NIR will be measured as the change in the stock of deposits between November 1, 2025, and January 31, 2026.
- For the remaining 2026 targets:
  - The change in NIR will be measured as the change in the stock of deposits between January 31, 2026, and the last day of the corresponding test date.
- Data provision:
  - 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.

### PGE payment arrears to the domestic private sector (ceiling) — definitions and monitoring
- Arrears definition:
  - 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 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 as shown in 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, with an “of which” detail for amounts overdue by more than 90 days from the date of accrual.

### Social assistance scheme coverage — definitions and monitoring
- Coverage definition:
  - Social assistance coverage of poor families 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, with poor beneficiary families defined according to information in the RS2018.
  - Coverage expansion will occur through listed social assistance programs in force on the date of issuance of the program (program names preserved as in source).
  - 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, NFPS debt, reporting timelines)
- Debt definitions (GFSM 2014 alignment):
  - Total gross debt covers all liabilities that are debt instruments (SDRs; currency and deposits; debt securities; loans; insurance, pension, and standardized guarantee schemes; other accounts payable).
  - Equity and investment fund shares and financial derivatives and employee stock options are not considered debt.
- NFPS debt instruments included for the program:
  - 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.
- Consolidation and netting:
  - Any liabilities issued by entities of the NFPS, held as an asset by other entity of the NFPS should be netted out.
  - Since consolidation is done at the level of NFPS, central bank lending to the government is included in the stock of NFPS debt.
- Monitoring and reporting frequencies:
  - 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; submission will include cross-holdings among NFPS entities.
  - Daily: Daily monetary and financial data in the agreed template, no later than 1 business days after the end of the day, including (a) movements of international reserves by inflows and outflows; (b) main balance sheet accounts of financial institutions (private banks, cooperatives and mutuals); and (c) daily oil production.
  - Weekly: Consolidated banking system balance sheets; BCE balance sheet financial indicators (Deposits of banks at the BCE); weekly monetary data in the agreed template no later than 5 business days after 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.
  - Monthly: Data on stocks and flows (above- and below-the-line) by NFPS subsector using agreed templates; NFPS financing data based on detailed financial assets and liabilities; data on amortizations and disbursements of credit from the BCE to NFPS and publicly-owned banks within five business days from the end of the month; PGE and NFPS cash flow data with a lag of no more than 30 days for PGE and 60 days for NFPS after the closing of each month; data on social spending for listed programs; export price of Ecuador mix crude oil with a lag of no more than 20 days after the closing of each month; data to determine the latest net SDR position at the end of each month (reported in SDRs); provision of detailed collateralized debt information within 2 weeks of signing new contracts.
  - Quarterly: Detailed balance of payments data no later than 90 days after the end of the quarter; 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, statistical discrepancy summary, amortization calendar, and stock of gross debt).

*Source: Excerpt from IMF staff report (program documentation) covering Net International Reserves, adjustors, monitoring, PGE arrears, social assistance coverage, and data reporting requirements.*

### 1.5 percent, remaining below the levels of trading partners. The current account surplus reached 4 percent

### 1.5 percent, remaining below the levels of trading partners. The current account surplus reached 4 percent

### External sector and reserves
- The current account surplus reached 4 percent of projected GDP in the first half of the year.
- The Central Bank projects a surplus of 6 percent of GDP by year-end, supporting continued accumulation of international reserves – which have reached record levels.
- These positive developments occurred despite the temporary suspension of oil production in July – following the closure of major pipelines due to heavy rainfall – and lower oil prices.

### Fiscal Policy
- Bold policy actions have significantly strengthened the fiscal position.
- The authorities implemented decisive, high-quality fiscal measures during 2024 and 2025, placing them on track to achieve a cumulative fiscal consolidation of 3.5 percent of GDP over the two-year period.
- Ecuador’s overall fiscal deficit is projected at 1.2 percent of GDP in 2025.
- Public debt is projected to reach 53 percent of GDP by year-end and remains on track to meet the 40 percent of GDP target by 2031, one year ahead of schedule.
- Fiscal performance remains strong and consistent with the EFF targets; end-October program targets related to strengthening fiscal and international reserve buffers and reducing government arrears to the domestic private sector were achieved with margins.
- The envisaged fiscal trajectory remains broadly unchanged relative to the third review.
- The authorities submitted a draft 2026 budget consistent with the EFF fiscal program, which has been approved by the National Assembly.
- Key public financial management and governance reforms supporting consolidation:
  - In November, the Ministry of Economy and Finance and the Ecuadorean Social Security Institute (IESS) signed an agreement establishing a procedure to settle outstanding healthcare obligations and process future claims.
  - Publication of an audited actuarial report for the social security system is expected this year to clarify pension trends, safeguard financial sustainability, and mitigate fiscal risks.
  - Steps underway to upgrade the procurement system and, with technical assistance from the Inter-American Development Bank, operationalize the National Control Subsystem to strengthen procurement transparency and expenditure control.
- Social safety net expansion:
  - Coverage of cash transfer programs for households in the lowest three income deciles has been expanded, exceeding the end-October program target by a significant margin.
  - In September, a comprehensive package of compensatory measures was introduced to mitigate the impact of reforms on vulnerable groups.
  - As a result, 55,000 additional families were incorporated into cash transfer programs in October, effectively frontloading part of the coverage increase originally planned for 2026.
  - The poverty rate is declining rapidly.
  - The government remains committed to improving targeting and efficiency of public spending, including updates to the social registry to reduce coverage gaps and enhance targeting of social protection programs.

### Financing Plan
- Continued multilateral and bilateral support remains essential; multilateral and official bilateral lending continue to serve as the primary sources of external financing.
- The authorities have actively engaged with official bilateral creditors to secure positive net financing over the remainder of the program.
- Progress is being made on timely financing of projects shared with China’s Exim Bank.
- The authorities reaffirm their strong commitment to remaining current on debt obligations.
- Prospects for regaining market access in 2026:
  - Sovereign spreads hovered around 550 basis points in December – a level not seen since 2019.
  - As the authorities continue to implement their fiscal plan, bolster liquidity buffers, maintain robust multilateral support, and meet the external bond amortization due in January 2026, market confidence will consolidate.
  - Continued decline in sovereign spreads will facilitate Ecuador’s return to international capital markets.
  - The authorities are actively engaging with market participants to prepare for a successful external debt issuance in 2026.

### Financial sector policy
- The financial sector remains stable, and supervision is being enhanced.
- Robust deposit growth, supported in part by a record current account surplus, has underpinned a significant expansion in productive credit, accompanied by a notable decline in borrowing costs.
- Financial soundness indicators have remained broadly stable, with banks improving asset quality, provisioning, and profitability.
- Supervisory agencies and the central bank are continuing to develop stress-testing models with IMF support.
- The Fund will provide technical assistance to the credit cooperatives’ supervisory agency to operationalize risk-based supervision and enhance prudential oversight effectiveness.
- Reforms to improve credit market efficiency and foster domestic capital market development:
  - Authorities are committed to developing a new methodology for setting interest rates to replace the current system of lending rate caps.
  - Regulations governing domestic market auctions for bonds and treasury notes were issued in November, and plans to launch these auctions in 2026 remain on track.
  - These reforms aim to enhance credit allocation, promote financial inclusion, mobilize greater domestic financing for both public and private entities, and support economic growth.

### Structural Reforms
- A comprehensive structural reform agenda is underway to foster job-rich growth and strengthen economic resilience.
- Authorities are focused on creating an enabling environment to attract private investment in high-potential sectors such as mining and energy.
- Mining sector actions:
  - The cadaster for non-metallic small-scale mining was reopened in June.
  - With IMF technical assistance, a new fiscal regime is being developed to attract private investment and enhance revenue potential.
- Electricity sector actions:
  - Following severe power outages in 2024, authorities implemented measures to bolster energy resilience, including diversifying electricity sources, adopting transparent and cost-reflective pricing mechanisms to encourage private investment, and improving preparedness for natural disasters.
- Governance and AML/CFT framework strengthening:
  - Audits of the 2019-2021 financial statements of the state-owned oil company were completed; a public tender process has been launched to audit the 2022-2024 financial statements ahead of the deadline agreed under the EFF arrangement.
  - The new AML/CFT law – aligned with FATF standards and approved in July 2024 – entered into force in July 2025.
  - With IMF technical assistance, the authorities are developing an AML/CFT Strategic Action Plan that reflects current risks and strategic priorities.
  - Strengthening the fight against money laundering and the financing of organized crime remains a top policy priority.

### Concluding Remarks
- The authorities have made substantial progress in implementing their economic program.
- They have adopted high-quality measures and advanced a comprehensive structural reform agenda to durably strengthen fiscal sustainability, safeguard macroeconomic stability, and foster job-rich growth and economic diversification.
- The substantial narrowing of sovereign spreads offers strong prospects for regaining market access in 2026.
- The authorities have demonstrated unwavering commitment to the program’s objectives and deeply value the Fund’s continued financial, policy, and technical support.

*IMF staff summary as presented in the source content.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1ecuea2025003-source-pdf.pdf_