Washington, DC: An International Monetary Fund (IMF) mission led by Ms. Ceyda Oner
conducted in-person and virtual meetings with the Ecuadorian authorities
during August 2 –September 7 to discuss policies to complete the second and
third reviews under the Extended Fund Facility (EFF) arrangement and
conduct the 2021 Article IV consultation. Ms. Oner issued the following
statement in Washington, D.C today at the conclusion of those meetings:
“The IMF team and the Ecuadorian authorities have reached a staff-level
agreement on the combined second and third reviews of Ecuador’s economic
program supported by a 27-month EFF arrangement. The teams also completed
discussions for the 2021 Article IV consultation. The agreement is subject
to the approval of the IMF Executive Board in the coming weeks, contingent
on the implementation by the authorities of prior actions and fulfillment
of all relevant Fund policies. Upon completion of the review, Ecuador would
have access to about US$ 800 million (equivalent to SDR 564,9 million).
“We welcome the new administration’s commitment to continue with the
EFF-supported economic program. The authorities’ economic program backed by
the IMF aims to support Ecuador’s recovery from the pandemic, expand social
assistance to protect Ecuador’s vulnerable families, promote a transparent
management of public resources, restore fiscal sustainability with equity,
and promote sustainable growth with high quality jobs.
“We commend the speed with which vaccines have been obtained and
administered to 9 million Ecuadorians (more than half of the population) in
the first hundred days of the new administration. These efforts are helping
Ecuadorian families and businesses recover decisively from the pandemic.
Continued efforts to secure vaccines, provide support to the most
vulnerable families, and reopen the economy will further support the
recovery.
“Notwithstanding the speedy vaccination program, the effects of the
pandemic are still being felt in the economy. The downturn in 2020 was the
largest on record at 7.8 percent and the economy is projected to expand by
2¾ percent in 2021 and 3½ percent in 2022. Going forward, like many other
countries across the world, Ecuador’s outlook faces significant uncertainty
regarding the future path of the pandemic and global oil prices. Over the
medium term, we expect growth to be 2¾ percent.
“The fiscal balances for December 2020 and April 2021 were better than
projected at the time of the First Review. Higher revenues, expenditure
restraint, and oil prices being higher than expected contributed to this
outcome. As a result, most targets were met except for the April target on
nonfinancial public sector (NFPS) deposits, which was missed by a small
margin. There has been important progress on the structural reform agenda,
notwithstanding some delays. Most notably, the authorities amended on May
3, 2021 the central bank legal framework within the Organic Monetary and
Financial Code (COMYF). The enacted amendments to COMYF were comprehensive
revisions that significantly strengthened the basis for dollarization and
the technical autonomy of the Central Bank of Ecuador (BCE).
“The pandemic has increased the government’s spending needs this year
beyond what had been anticipated at the time of last review. The better
fiscal outturns and somewhat improved economic outlook provide some space
to accommodate these higher immediate spending needs. In addition, the
program is being revised in terms of the pace and composition of policies
to reflect the authorities’ own plans, favoring a reduction of public
sector expenditures more than what was envisaged initially. The reform
agenda reflects their view on the need to firmly ensure a path of fiscal
sustainability over the medium term, while lowering Ecuador’s dependence on
oil revenue. Looking ahead, restoring fiscal sustainability and building
much-needed liquidity buffers will hinge upon the authorities’ resolve and
capacity to implement such plans in a timely and sustainable fashion.
“Going forward, the authorities are also committed to continue improving
public financial management, enhancing transparency in the management of
public resources—including on COVID spending and operations of State-Owned
Enterprises— and advancing the anti-corruption agenda, which would
strengthen confidence in public institutions and boost private sector
activity. The authorities also plan to reform their public-private
partnership framework, capital and labor markets, and improve the business
environment to catalyze domestic private investment and attract foreign
direct investment.
“The mission met with Minister of Economy and Finance Cueva, Minister of
Government Vela, Minister of Production and Trade Prado, Minister of Labor
Donoso, General Manager of the Central Bank of Ecuador Avellan, other
senior government officials, private sector participants, and civil society
in Quito and Guayaquil. We thank the Ecuadorian authorities for the candid
and constructive discussions.”