The International Monetary Fund said Thursday it reached a staff-level funding agreement with Ecuador to provide roughly $4 billion to shore up the country’s finances, in a boost for President Daniel Noboa as his government struggles with fiscal, economic and security crises.
IMF staff and Ecuadorian officials agreed on a set of policies to underpin a four-year extended fund facility, the lender said in a statement. The deal is subject to approval by the Fund’s management and its executive board.
“The IMF staff welcomes the reform efforts taken by the authorities to help strengthen fiscal sustainability, safeguard macroeconomic stability, and foster a stronger and more inclusive economy,” said Varapat Chensavasdijai, the Fund’s mission chief for Ecuador. “The authorities have put together a robust plan and have started to take important policy steps to address the liquidity and fiscal situation.”
The deal is a boon for the country’s popular 36-year-old leader, who is just five months into his presidential term and is struggling to contain an upsurge organized crime-related violence while grappling with economic malaise.
To secure the IMF’s support, Noboa pledged to narrow the budget deficit while increasing taxes to fund increased security spending. His administration has also obtained equipment and training from the US to tackle gang violence.
Finance Minister Juan Carlos Vega said the IMF program, if approved, will provide “fresh resources that will help support citizen security, spur public works, guarantee social protection and lead the country along the path of inclusive economic growth,” according to a press release issued Thursday.
The new facility would follow a 27-month extended fund facility approved in September 2020 for roughly $6.5 billion. Ecuador successfully wrapped up the economic program underpinning that arrangement in December 2022, its first completion in two decades, according to the IMF.
CAF LOAN
In parallel, Latin American development bank CAF approved $800 million in short-term liquidity financing for Ecuador, a move the bank said was closely co-ordinated with the IMF.
In a statement published Thursday, CAF said the operation was made possible due to it being a holder of special drawing rights, which are issued by the Fund to supplement countries’ reserve assets and provide them with extra liquidity.
CAF said the financing will allow Ecuador it to continue negotiating the IMF facility while favoring fiscal and macroeconomic stability as well as “inclusive growth and protection for the most vulnerable.”