IMF Executive Board Concludes First Review of the Extended Arrangement Under the Extended Fund Facility for Ecuador, Approves US$251.14 Million Disbursement
IMF News, June 28, 2019
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- IMF Executive Board Concludes First Review of the Extended Arrangement Under the Extended Fund Facility for Ecuador, Approves US$251.14 Million Disbursement
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- Published: June 28, 2019
Review outcome and disbursement
- The Executive Board completed the first review of Ecuador’s performance under the Extended Arrangement under the Extended Fund Facility (EFF).
- Completion of the review allows the authorities to draw the equivalent of SDR 180.65 million (about US$251.14 million).
- The 36-month EFF has a total access of SDR 3.035 billion (about US$4.2 billion), equivalent of 435 percent of Ecuador’s quota in the IMF.
- The EFF was approved by the IMF’s Executive Board on March 11, 2019 (Press Release 19/72).
Program performance and macro outcomes
- The Board found that the authorities’ reform program supported by the Fund arrangement is yielding results.
- Specific outcomes noted:
- The underlying fiscal position is improving.
- International reserves are rising.
- Borrowing costs are declining.
- The Board highlighted downside risks, including spillovers from neighboring countries, but emphasized that fiscal strengthening and structural reforms should help boost growth and create jobs.
Fiscal reforms and public financial management
- The Ecuadorian government has demonstrated resolve to restore fiscal discipline by rationalizing public spending.
- Planned tax reform is described as instrumental in:
- Raising revenues.
- Making the tax system more efficient, simple and equitable.
- These reforms are expected to help put public debt on a sustainable path and strengthen Ecuador’s external competitiveness.
- Fiscal sustainability should be underpinned by reforms in public financial and debt management and improvements in fiscal transparency.
- The authorities are taking steps towards:
- Strengthening budget formulation and execution.
- Reducing discretion.
- Strengthening oversight and controls.
- Introducing robust fiscal rules.
- Improving public debt management.
Financial sector and central bank reform
- Fortifying the financial system is deemed paramount to preserving financial stability, improving crisis preparedness, and boosting the efficiency of financial intermediation.
- The institutional reform of the central bank is identified as key in:
- Supporting the dollarization regime.
- Boosting international reserves.
Labor market, governance, and social protection
- Labor market reforms are essential for supporting job creation and boosting competitiveness and growth.
- Measures needed include:
- Facilitating hiring.
- Reducing rigidities and informality.
- Increasing female labor force participation.
- Efforts to increase transparency and governance will help safeguard public resources and promote a business environment supportive of growth and job creation.
- Protecting the poor and the most vulnerable remains a key priority.
- The authorities are taking steps to upgrade the social registry and expand the coverage of social assistance.
- The Ecuadorian government “stands ready to step up efforts to ensure that the vulnerable remain protected.”
Press Release No. 19/257, June 28, 2019 — International Monetary Fund