IMF Executive Board Approves US$4.2 Billion Extended Fund Facility for Ecuador
IMF News, March 11, 2019
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Bibliographic details
- Published: March 11, 2019
Arrangement details and immediate financing
- The Executive Board approved a US$ 4.2 billion (435 percent of quota and SDR 3.035 billion) arrangement under the IMF’s Extended Fund Facility (EFF) for Ecuador.
- The Board’s decision enables the immediate disbursement of US$652 million (equivalent to SDR 469,7 million, or 67.3 percent of Ecuador’s quota).
- The arrangement provides support for the Ecuadorean government’s economic policies over the next three years.
Program priorities (authorities’ plan)
- Create a more dynamic, sustainable, and inclusive economy for the benefit of all Ecuadorians.
- Four major priorities:
- boosting competitiveness and job creation;
- strengthening fiscal sustainability and the institutional foundations of Ecuador’s dollarization;
- protecting the poor and most vulnerable;
- improving transparency and bolstering the fight against corruption.
Executive Board summary (Ms. Christine Lagarde, Managing Director and Chair)
- “The Ecuadorian authorities are implementing a comprehensive reform program aimed at modernizing the economy and paving the way for strong, sustained, and equitable growth. The authorities’ measures are geared towards strengthening the fiscal position and improving competitiveness and by so doing help lessen vulnerabilities, put dollarization on a stronger footing, and, over time, encourage growth and job creation.
- “Achieving a robust fiscal position is at the core of the authorities’ program, which will be supported by a three-year extended arrangement from the IMF. The aim is to reduce debt-to-GDP ratio through a combination of a wage bill realignment, a careful and gradual optimization of fuel subsidies, a reprioritization of capital and goods and services spending, and a tax reform. The savings generated by these measures will allow for an increase in social assistance spending over the course of the program. The authorities will continue their efforts to strengthen the medium-term fiscal policy framework, and more rigorous fiscal controls and better public financial management will help to enhance the effectiveness of fiscal policy.
- “The authorities are committed to supporting job creation, restoring competitiveness and catalyzing private sector-led growth while increasing transparency and forcefully countering corruption. A more efficient tax system, public wage restraint, facilitating the hiring process, and a more efficient energy sector are important components of the authorities’ plan in this area.
- “Building crisis-preparedness capabilities and strengthening the oversight of banks and cooperatives will help to strengthen financial sector resilience. The institutional foundations of dollarization will be supported by the authorities’ efforts, already underway, to increase the operational autonomy of the central bank and to build reserve buffers.
- “Protecting the poor and most vulnerable segments in society is a key objective of the authorities’ program. In this context, the authorities plan to extend the coverage of, and increase the nominal level of benefits under the existing social protection programs. Work is also underway to improve the targeting of social programs.”
Key policy measures highlighted
- Fiscal consolidation aimed at reducing debt-to-GDP ratio via:
- wage bill realignment;
- careful and gradual optimization of fuel subsidies;
- reprioritization of capital and goods and services spending;
- tax reform.
- Strengthening medium-term fiscal policy framework through more rigorous fiscal controls and better public financial management.
- Measures to support private sector-led growth:
- more efficient tax system;
- public wage restraint;
- facilitating the hiring process;
- more efficient energy sector.
- Financial sector resilience:
- strengthen oversight of banks and cooperatives;
- increase operational autonomy of the central bank;
- build reserve buffers.
Social protection and targeting
- Plan to extend coverage of, and increase the nominal level of benefits under existing social protection programs.
- Work underway to improve the targeting of social programs.
Selected economic indicators (as reported)
- Output
- Real GDP growth: 2016: -1.2; 2017: 2.4; Est. 2018: 1.1; Proj. 2019: -0.5; Proj. 2020: 0.2
- Employment
- Unemployment (%): 2016: 5.2; 2017: 4.6; Est. 2018: 3.7; Proj. 2019: 4.3; Proj. 2020: 4.7
- Prices
- Inflation, average (%): 2016: 1.7; 2017: 0.4; Est. 2018: -0.2; Proj. 2019: 0.6; Proj. 2020: 1.2
- Public sector 1/
- Revenue (% GDP): 2016: 30.3; 2017: 32.0; Est. 2018: 36.3; Proj. 2019: 35.2; Proj. 2020: 38.3
- Expenditure (% GDP): 2016: 38.6; 2017: 36.6; Est. 2018: 37.2; Proj. 2019: 34.6
- Overall balance (% GDP): 2016: -8.2; 2017: -4.5; Est. 2018: -0.9; Proj. 2019: 0.0; Proj. 2020: 3.8
- Debt (% GDP): 2016: 43.2; 2017: 44.6; Est. 2018: 46.1; Proj. 2019: 49.2; Proj. 2020: 46.8
- Money and credit
- Broad money (% change): 2016: 16.5; 2017: 10.0; Est. 2018: 5.6; Proj. 2019: 4.2
- Credit to the private sector (% change): 2016: 6.2; 2017: 16.4; Est. 2018: 14.9; Proj. 2019: 4.4; Proj. 2020: 5.7
- Balance of payments
- Current account (% GDP): 2016: 1.3; 2017: -0.4; Est. 2018: -0.7; Proj. 2019: 1.4
- FDI (% GDP): 2016: 0.8; 2017: 0.9
- GIR (in months of imports): 2016: 2.7; 2017: 1.0; Est. 2018: 2.5; Proj. 2019: 3.9
- External debt (% GDP): 2016: 39.5; 2017: 40.5; Est. 2018: 42.8; Proj. 2019: 42.9
- Source data: Central Bank; Ministry of Finance; National Statistical Institute (INEC); and Fund staff estimates/projections.
- 1/ Consolidated at the level of the non-financial public sector.
Press Release No. 19/72, March 11, 2019 — IMF Communications Department
