IMF and the Ecuadorian Authorities Reach Staff-Level Agreement on the First Review of Ecuador’s Economic Program Under the Extended Fund Facility

IMF News, November 23, 2020

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IMF staff and the Ecuadorian authorities reached a staff-level agreement on the first review of Ecuador’s economic program supported by a 27-month Extended Fund Facility (EFF).
The agreement is subject to the approval of IMF management and the Executive Board, contingent on the implementation by the authorities of prior actions and fulfillment of all relevant Fund policies.
Upon completion of the review, Ecuador would have access to about US$2 billion (equivalent to SDR 1.42 billion).

The economic recovery is currently under way, following a severe contraction in the second quarter as a result of the pandemic.
Preliminary data point to a less severe contraction in economic activity than anticipated in the second quarter of 2020.
The IMF projects the economy to contract by 9.5 percent in 2020, instead of 11 percent as projected at the time of the EFF’s approval.
Growth is expected to gradually reach its potential of 2½ percent over the medium term.
Risks to the outlook are to the downside, given significant uncertainty regarding the future path of the pandemic and global oil prices.

The authorities met all quantitative performance criteria and indicative targets for the first review of the program, with the fiscal balance target being exceeded by a wide margin.
Social assistance expansion:
- The authorities have brought an additional 63,764 low income families on a net basis into the social assistance programs between July and September.
- The authorities are making significant progress toward their December goal of providing benefits to over 161,000 more families.
Given potential delays in key bilateral disbursements, the authorities are making concerted efforts to secure additional financing from other public and private sources.
The authorities are preparing a cash plan for 2021 to better manage the public purse.

In the near term, the authorities plan to implement key legislative reforms to enhance the anti-corruption framework and strengthen central bank autonomy.
Specific reform efforts under way or planned:
- Amendments to the penal code to criminalize corruption and align the anticorruption framework with international best practices.
- Draft amendments to the Monetary and Financial Organic Code to strengthen the foundations of Ecuador’s dollarization regime and protect the purchasing power of all Ecuadorian families.
- Regulations to operationalize the recently adopted organic budget code.
- Improvements to the audit capabilities of the central bank to make it a stronger institution.
- Bringing transparency to the assets of high level officials to improve governance and tackle corruption.

An IMF mission led by Ms. Ceyda Oner conducted virtual meetings with the Ecuadorian authorities from October 28 to November 20 to discuss progress on reforms and policy plans in response to the COVID-19 and oil price shocks.
The mission met with Minister of Economy and Finance Pozo, Minister of Labor Isch, General Manager of the Central Bank of Ecuador Artola, other government officials, private sector participants, and civil society.
The IMF statement commends the authorities’ decisive policy actions to contain the COVID-19 outbreak, their continued efforts to advance the reform agenda, steps to stabilize the economy, and expansion of social assistance to protect vulnerable families.
The statement notes that new COVID-19 infections and deaths have moderated compared to the high levels seen earlier in the year, and that the Ecuadorian economy is showing tentative signs of a recovery since the reopening began in July.

IMF Press Release No. 20/355 — November 23, 2020