IMF Executive Board Approves 27-month US$6.5 billion Extended Fund Facility for Ecuador

IMF News, October 1, 2020

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The IMF Executive Board approved a 27-month arrangement under the Extended Fund Facility (EFF) for Ecuador.
Access equivalent to SDR 4.615 billion (661 percent of quota, equivalent of US$6.5 billion).
Immediate disbursement equivalent to US$2 billion, available to the budget.
The EFF arrangement follows prior Fund emergency support in May this year of 67.3 percent of quota (equivalent of US$643 million) and a previous EFF arrangement approved in March 2019 that was canceled in May 2020.

Two main objectives of the IMF-supported program under the EFF:
- Mitigate the crisis by protecting lives and livelihoods, and restore macroeconomic stability.
- Ensure the sustainability of public finances and strengthen domestic institutions to lay the foundations for strong, job-rich, and long-lasting growth that benefits all Ecuadorians.
Immediate priorities include expanding social assistance programs and protecting vulnerable groups.

Fiscal sustainability anchored on the debt ceiling under the homegrown organic budget code (COPLAFIP) of 57 percent of GDP by end-2025.
Policy mix to underpin sustainability:
- A progressive tax reform over the medium-term.
- Expenditure measures aimed at aligning Ecuador with regional peers.
Operationalization of COPLAFIP expected to:
- Enforce timely and accurate provision of fiscal data by non-financial public sector entities.
- Improve fiscal monitoring and enhance public financial management.
Recommendation to formulate a debt management strategy early on to improve the maturity and cost structure of amortization payments in 2022.

Strengthening fiscal transparency and promoting governance are key planks of the reform agenda, including:
- Adopting robust cash management practices.
- Improving transparency in public procurement.
- Promoting debt transparency.
Enforcing the rule of law, including through the adoption of landmark anti-corruption legislation by end-year, cited as essential to protect the public purse, catalyze private investment, promote job creation, and boost growth potential.

Timely implementation of reforms to promote the autonomy of the central bank and strengthen its institutional framework to back the commitment to Ecuador’s dollarization regime.
Authorities committed to continue monitoring credit risk developments and to closely supervise financial institutions in the post-pandemic period.
Recommendation to establish a Financial Coordination Committee to facilitate strong coordination among oversight bodies.

High uncertainty about the depth and duration of the pandemic globally.
Domestic mitigation of implementation risks requires:
- Close coordination among government agencies.
- Broad-based social dialogue and buy-in across the political spectrum for program objectives and policies.
- Timely implementation of the program’s prior actions to strengthen institutions and policy frameworks.
- Efforts to secure broad public support for the program.
The statement notes that these efforts helped meet the criteria for the IMF to provide financing exceeding normal access.

Source: IMF press release, September 30, 2020.