{
  "title": "Ecuador's New Economic Plan Explained",
  "publication": "IMF News, March 21, 2019",
  "sourceUrl": "https://www.imf.org/en/news/articles/2019/03/20/na032119-ecuador-new-economic-plan-explained",
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  "summary": "Ecuador has developed a new economic plan designed to put the country’s debt on a firm downward path, create jobs, protect the poor and most vulnerable, and bolster the fight against corruption.",
  "publishDate": "2019-03-21",
  "sections": [
    {
      "heading": "Program goals and support",
      "content": "- Objective: put public debt on a firm downward path, create jobs, protect the poor and most vulnerable, and bolster the fight against corruption.\n- Financial support: program supported by a US$4.2 billion Extended Fund Facility from the IMF, along with additional financial support from the international community.\n- Expected outcome: restore sustainable growth that benefits all Ecuadorians."
    },
    {
      "heading": "Context and rationale for IMF engagement",
      "content": "- Ecuador previously benefited from dollarization and high oil prices but faced growing vulnerabilities after the oil price plunge of 2014 and US dollar appreciation.\n- Past policy inconsistencies with dollarization: wage increases outpaced productivity growth, hurting competitiveness.\n- Consequences: public debt doubled over the past five years and international reserves fell to very low levels; previous government resorted to central bank financing.\n- Government action: current government proactively sought IMF support to tackle vulnerabilities, restore growth, and improve social outcomes."
    },
    {
      "heading": "Core pillars of the economic program",
      "content": "- Fortify the institutional foundations of Ecuador’s dollarization.\n- Boost competitiveness and create jobs.\n- Promote shared prosperity and protect the poor and most vulnerable.\n- Improve transparency and strengthen the fight against corruption."
    },
    {
      "heading": "Competitiveness strategy in a dollarized economy",
      "content": "- Constraint: using the US dollar prevents exchange rate adjustment to improve export competitiveness.\n- Internal devaluation measures emphasized:\n  - Reign in government spending, particularly through optimization of the wage bill.\n  - Allow less rigidity in wages and prices to support external adjustment.\n  - Remove rigidities in the labor and product markets and in the financial sector."
    },
    {
      "heading": "Policies to support jobs and formal employment",
      "content": "- Reforms to attract private investment and boost formal employment:\n  - Review the system of taxation.\n  - Remove obstacles to business formation and operation.\n  - Encourage private investment and deepen capital markets.\n  - Open international trade.\n  - Create better conditions for participation of women in the labor market."
    },
    {
      "heading": "Social outcomes and protection measures",
      "content": "- Historical social progress:\n  - Share of population below the national poverty line fell from 64.4 percent in 2000 to 21.5 percent in 2017.\n  - Share of population living below US$1.90 a day fell from 28.2 percent in 2000 to 3.6 percent in 2016.\n- Remaining challenges: poverty rates among rural and indigenous populations remain high.\n- Measures to protect the poor and most vulnerable:\n  - Increase spending on social assistance programs, such as Bono de Desarrollo Humano and Bono Joaquin Gallegos Lara, and extend coverage of non-contributory pensions.\n  - Develop a social registry to improve targeting of social programs.\n  - Increase the efficiency and quality of primary education and health spending to improve outcomes and enhance the quality of the labor force and external competitiveness."
    },
    {
      "heading": "Transparency and anti-corruption measures",
      "content": "- Rationale: improved transparency and anti-corruption efforts support business environment, lower public financing costs, and encourage private investment and jobs.\n- Key measures:\n  - Anti-corruption legislation to enhance the independence and power of law enforcement agencies and the judiciary, and improve access to government operation information.\n  - Publish central bank financial statements in conformance with international financial reporting standards as they become available.\n  - Develop an anti-money laundering and countering financial terrorism (AML/CFT) national risk assessment that properly prioritizes corruption-related threats and incidents.\n  - Gain membership into Extractive Industries Transparency Initiative to improve transparency in the oil sector.\n\nSource: Ecuador's New Economic Plan Explained (March 21, 2019).\n\n---\n\n\n References\n\n- https://www.imf.org/en/News/country-focus\n- PRESS CENTER\n- Read the report\n- Watch the video\n- Extended Fund Facility factsheet\n- Ecuador and the IMF\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2019/03/20/na032119-ecuador-new-economic-plan-explained"
    }
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    "Published: March 21, 2019",
    "Objective: put public debt on a firm downward path, create jobs, protect the poor and most vulnerable, and bolster the fight against corruption.",
    "Financial support: program supported by a US$4.2 billion Extended Fund Facility from the IMF, along with additional financial support from the international community.",
    "Expected outcome: restore sustainable growth that benefits all Ecuadorians.",
    "Ecuador previously benefited from dollarization and high oil prices but faced growing vulnerabilities after the oil price plunge of 2014 and US dollar appreciation.",
    "Past policy inconsistencies with dollarization: wage increases outpaced productivity growth, hurting competitiveness.",
    "Consequences: public debt doubled over the past five years and international reserves fell to very low levels; previous government resorted to central bank financing.",
    "Government action: current government proactively sought IMF support to tackle vulnerabilities, restore growth, and improve social outcomes.",
    "Fortify the institutional foundations of Ecuador’s dollarization.",
    "Boost competitiveness and create jobs.",
    "Promote shared prosperity and protect the poor and most vulnerable.",
    "Improve transparency and strengthen the fight against corruption.",
    "Constraint: using the US dollar prevents exchange rate adjustment to improve export competitiveness.",
    "Internal devaluation measures emphasized:",
    "Reforms to attract private investment and boost formal employment:",
    "Historical social progress:",
    "Remaining challenges: poverty rates among rural and indigenous populations remain high.",
    "Measures to protect the poor and most vulnerable:",
    "Rationale: improved transparency and anti-corruption efforts support business environment, lower public financing costs, and encourage private investment and jobs.",
    "Key measures:",
    "[https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[Read the report](https://www.imf.org/en/Publications/CR/Issues/2019/03/20/Ecuador-Staff-Report-for-the-2019-Article-IV-Consultation-and-Request-for-an-Extended-46682)",
    "[Watch the video](https://www.imf.org/external/mmedia/view.aspx?vid=6016636374001)",
    "[Extended Fund Facility factsheet](https://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/20/56/Extended-Fund-Facility)",
    "[Ecuador and the IMF](https://www.imf.org/en/Countries/ECU)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
  ],
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