{ "title": "Press Release: IMF Approves US$205 Million Stand-By Arrangement for Ecuador", "publication": "IMF News, March 21, 2003", "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr0339", "canonical": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr0339", "overlayPath": "/en/news/articles/2015/09/14/01/49/pr0339/index.md", "summary": "The Executive Board approved a 13-month SDR 151 million (about US$205 million) Stand-By Arrangement for Ecuador to support the country's economic and financial program through March 2004.", "publishDate": "2003-03-21", "sections": [ { "heading": "IMF approval and financing", "content": "- The Executive Board approved a 13-month SDR 151 million (about US$205 million) Stand-By Arrangement for Ecuador to support the country's economic and financial program through March 2004.\n- The approval opened the way for the immediate release of SDR 30.2 million (about US$41 million)." }, { "heading": "Repurchase/repayment extension decision", "content": "- The Executive Board approved the authorities' request to extend by one year the repayment expectations arising from a purchase under a Stand-By Arrangement approved on April 19, 2000.\n- The repayments in an aggregate amount are equivalent to SDR 14 million (about US$19 million) and were expected to be made on August 30, 2003; November 30, 2003; and February 29, 2004.\n- Purchases in the credit tranches are expected to be repaid in eight quarterly installments made within 2.25 and 4 years after the date of purchase.\n- The extension is allowed under the Fund's general policies governing repurchase expectations which authorize the Executive Board to extend repurchase expectations on request by a member with an insufficiently strong external position." }, { "heading": "Managing Director Horst Köhler — key observations", "content": "- Policy slippages in 2002 led to a slowing of economic growth, continued payments arrears in the public sector, and rising concerns about the inconsistency of fiscal and wage policies with dollarization.\n- Rapid public sector wage increases undercut the fiscal position and contributed to the continued relatively high rate of inflation.\n- Structural reforms were suspended in key areas.\n- The new administration acted immediately to reverse 2002 policy slippages by implementing decisive measures to boost revenues and control expenditures, balanced with social safety net support, and by announcing a broad program of economic reforms.\n- Upfront fiscal measures are already helping to raise the public sector primary surplus and overcome the very difficult liquidity position in the Central Government.\n- Sustaining fiscal consolidation objectives is imperative, including customs reform, civil service reform, and tax and revenue earmarking reforms.\n- Greater attention should be paid to improving the living conditions of the poor, including improving the targeting of the social safety net.\n- Authorities have acted to revive the reform agenda by unfreezing public enterprise tariffs and taking steps to deal with closed banks; additional initiatives are contemplated to improve public enterprises in electricity, telephone, and petroleum sectors.\n- The Fund anticipates continuing to work closely with the Ecuadoran authorities as they implement their program." }, { "heading": "Recent economic developments (summary)", "content": "- Ecuador experienced severe economic stress in the 1990s, culminating in accelerating inflation, a banking crisis, a deposit freeze, and the closure of some 18 banks, affecting half of total deposits and ending in a currency crisis.\n- Adoption of the U.S. dollar in January 2000 stabilized expectations and economic activity began to turn around.\n- Oil price slump in 1998, El Niño damage, and shrimp disease worsened outcomes in the late 1990s.\n- In 2001, construction of the Oleoducto de Crudos Pesados (OCP) and higher public sector spending boosted demand.\n- Real GDP growth slowed to 3 percent of GDP in 2002 from 5.1 percent in 2001 due to policy slippages and faltering confidence.\n- Consumer price inflation: 91 percent at end-2000 to 9.4 percent by end-2002.\n- Wages have more than doubled since dollarization in early 2000 (led by the public sector), exceeding inflation over this period.\n- Unemployment fell to 8.5 percent at end-2002 (half its 2000 rate), recovering by end-2001 its pre-crisis level.\n- External current account deficit widened to 5 percent of GDP in 2002 from 2.4 percent in 2001 due to rapid import growth and an appreciating real effective exchange rate." }, { "heading": "Authorities' program and projections", "content": "- The program projects:\n - Real GDP growth of 3.5 percent in 2003.\n - Decline in consumer price inflation to an end-of-period rate of 6-7 percent after initial adverse effects of unfreezing utility, fuels, and other prices.\n - Assuming a cautious oil price of US$18 per barrel, the external current account deficit is projected at just over 5 percent of GDP in 2003.\n- The program's four building blocks:\n - A package of immediate fiscal measures.\n - Fiscal structural reforms.\n - Liquidating closed banks and resolving outstanding issues from the banking crisis.\n - Reforms in the state enterprises.\n- Fiscal program objectives and measures:\n - Address immediate liquidity constraints and bring expenditure growth under control, consistent with dollarization.\n - Government implemented revenue measures and a budgetary freeze on wages and other expenditure controls.\n - Fiscal Responsibility law (approved in 2002) limits primary expenditures growth to a maximum of 3.5 percent in real terms annually; the budget sent by the government and approved by congress in February is consistent with this rule.\n - Strengthened social safety net to compensate the poor for some revenue measures.\n- Planned reforms:\n - Customs reform: law submitted to Congress to overhaul customs administration and bring it under the SRI tax administration office.\n - Public sector wage unification and civil service reform law to achieve a lower nominal wage bill in 2004 through shrinking government size and reducing personnel; wage unification aims to phase in a broadening of the base for social security contributions and income taxes.\n - Tax reform law to eliminate revenue earmarking not mandated in the constitution, eliminate most tax exemptions (including special rules in the income tax system), cut some low-yielding taxes, increase vehicle fees, and reduce the currently high standard deduction for income taxes.\n - Reassessment of social security operations and actuarial positions of IESS, ISSFA, and ISSPOL with outside technical assistance.\n- Banking sector actions:\n - Plans to address unresolved issues including liquidation of Filanbanco and preparation for sale of Banco del Pacífico.\n - Discussion of a strategy to replace the existing Liquidity Fund; contemplated new Liquidity Fund to be administered by an independent private manager, who would keep most of the liquidity abroad." }, { "heading": "Program-related institutional facts", "content": "- Ecuador's IMF quota is SDR 302.3 million (about US$410 million).\n- Outstanding use of IMF credit currently totals SDR 226.7 million (about US$308 million)." }, { "heading": "Key statistics (select figures from Table 1)", "content": "- Real GDP (annual percentage changes): 1999 -6.3; 2000 2.8; 2001 5.1; 2002 3.0; 2003 3.5; 2004 6.0.\n- Consumer price index end-of-period: 1999 -25.2; 2000 -10.1; 2001 22.4; 2002 9.4; 2003 6.5; 2004 4.0.\n- Unemployment: 1999 14.4; 2000 14.1; 2001 10.4; 2002 8.7.\n- External current account (percent of GDP): 2001 2.4 (implicitly in text); 2002 5.0.\n- Public finances (percent of GDP):\n - Revenue: 1999 22.5; 2000 27.6; 2001 24.7; 2002 25.9; 2003 27.8.\n - Primary balance (deficit -): 1999 7.7; 2000 4.3; 2001 4.5; 2002 5.2; 2003 6.7.\n - Overall balance (deficit -): 1999 -4.6; 2000 1.0; 2001 -0.5.\n - Total public debt: 1999 101.6; 2000 91.4; 2001 70.2; 2002 59.6; 2003 51.7; 2004 44.1.\n - Public sector external debt (percent of exports of goods and nonfactor services): 1999 27.7; 2000 28.7; 2001 26.5; 2002 22.3; 2003 20.8.\n- Net foreign assets (in millions of US$): 1999 872; 2000 1,180; 2001 1,074; 2002 1,008; 2003 919; 2004 1,154.\n- Public sector deposits (US$ millions): 1999 570; 2000 1,228; 2001 1,261; 2002 1,282; 2003 1,306; 2004 1,589.\n- Central government deposits (US$ millions): 1999 78; 2000 396; 2001 86; 2002 118; 2003 218.\n\nInternational Monetary Fund — Press Release No. 03/39 (March 21, 2003).\n\n---\n\n\n References\n\n- Ecuador and the IMF\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr0339" } ], "bullets": [ "[Markdown version](/en/news/articles/2015/09/14/01/49/pr0339/index.md)", "[Structured JSON version](/en/news/articles/2015/09/14/01/49/pr0339/index.json)", "[Bundle manifest](/en/news/articles/2015/09/14/01/49/pr0339/bundle-manifest.json)", "Published: March 21, 2003", "The Executive Board approved a 13-month SDR 151 million (about US$205 million) Stand-By Arrangement for Ecuador to support the country's economic and financial program through March 2004.", "The approval opened the way for the immediate release of SDR 30.2 million (about US$41 million).", "The Executive Board approved the authorities' request to extend by one year the repayment expectations arising from a purchase under a Stand-By Arrangement approved on April 19, 2000.", "The repayments in an aggregate amount are equivalent to SDR 14 million (about US$19 million) and were expected to be made on August 30, 2003; November 30, 2003; and February 29, 2004.", "Purchases in the credit tranches are expected to be repaid in eight quarterly installments made within 2.25 and 4 years after the date of purchase.", "The extension is allowed under the Fund's general policies governing repurchase expectations which authorize the Executive Board to extend repurchase expectations on request by a member with an insufficiently strong external position.", "Policy slippages in 2002 led to a slowing of economic growth, continued payments arrears in the public sector, and rising concerns about the inconsistency of fiscal and wage policies with dollarization.", "Rapid public sector wage increases undercut the fiscal position and contributed to the continued relatively high rate of inflation.", "Structural reforms were suspended in key areas.", "The new administration acted immediately to reverse 2002 policy slippages by implementing decisive measures to boost revenues and control expenditures, balanced with social safety net support, and by announcing a broad program of economic reforms.", "Upfront fiscal measures are already helping to raise the public sector primary surplus and overcome the very difficult liquidity position in the Central Government.", "Sustaining fiscal consolidation objectives is imperative, including customs reform, civil service reform, and tax and revenue earmarking reforms.", "Greater attention should be paid to improving the living conditions of the poor, including improving the targeting of the social safety net.", "Authorities have acted to revive the reform agenda by unfreezing public enterprise tariffs and taking steps to deal with closed banks; additional initiatives are contemplated to improve public enterprises in electricity, telephone, and petroleum sectors.", "The Fund anticipates continuing to work closely with the Ecuadoran authorities as they implement their program.", "Ecuador experienced severe economic stress in the 1990s, culminating in accelerating inflation, a banking crisis, a deposit freeze, and the closure of some 18 banks, affecting half of total deposits and ending in a currency crisis.", "Adoption of the U.S. dollar in January 2000 stabilized expectations and economic activity began to turn around.", "Oil price slump in 1998, El Niño damage, and shrimp disease worsened outcomes in the late 1990s.", "In 2001, construction of the Oleoducto de Crudos Pesados (OCP) and higher public sector spending boosted demand.", "Real GDP growth slowed to 3 percent of GDP in 2002 from 5.1 percent in 2001 due to policy slippages and faltering confidence.", "Consumer price inflation: 91 percent at end-2000 to 9.4 percent by end-2002.", "Wages have more than doubled since dollarization in early 2000 (led by the public sector), exceeding inflation over this period.", "Unemployment fell to 8.5 percent at end-2002 (half its 2000 rate), recovering by end-2001 its pre-crisis level.", "External current account deficit widened to 5 percent of GDP in 2002 from 2.4 percent in 2001 due to rapid import growth and an appreciating real effective exchange rate.", "The program projects:", "The program's four building blocks:", "Fiscal program objectives and measures:", "Planned reforms:", "Banking sector actions:", "Ecuador's IMF quota is SDR 302.3 million (about US$410 million).", "Outstanding use of IMF credit currently totals SDR 226.7 million (about US$308 million).", "Real GDP (annual percentage changes): 1999 -6.3; 2000 2.8; 2001 5.1; 2002 3.0; 2003 3.5; 2004 6.0.", "Consumer price index end-of-period: 1999 -25.2; 2000 -10.1; 2001 22.4; 2002 9.4; 2003 6.5; 2004 4.0.", "Unemployment: 1999 14.4; 2000 14.1; 2001 10.4; 2002 8.7.", "External current account (percent of GDP): 2001 2.4 (implicitly in text); 2002 5.0.", "Public finances (percent of GDP):", "Net foreign assets (in millions of US$): 1999 872; 2000 1,180; 2001 1,074; 2002 1,008; 2003 919; 2004 1,154.", "Public sector deposits (US$ millions): 1999 570; 2000 1,228; 2001 1,261; 2002 1,282; 2003 1,306; 2004 1,589.", "Central government deposits (US$ millions): 1999 78; 2000 396; 2001 86; 2002 118; 2003 218.", "[Ecuador and the IMF](http://www.imf.org/external/country/ECU/index.htm)", "[Press Releases](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2015/09/14/01/49/pr0339/index.md", "json": "/en/news/articles/2015/09/14/01/49/pr0339/index.json", "bundleManifest": "/en/news/articles/2015/09/14/01/49/pr0339/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T16:05:58.842Z" }