News Brief No. 01/129

News Brief: IMF Approves US$95 Million to Ecuador Under Stand-By Arrangement

December 10, 2001

The Executive Board of the International Monetary Fund (IMF) today completed the third and fourth reviews under the stand-by credit for Ecuador. The Board's decision will enable Ecuador to draw a last tranche of SDR 75.6 million (about US$95 million) from the IMF.

The stand-by credit was approved on April 19, 2000 (see Press Release No. 00/32) in a total amount of SDR 226.73 million (about $286 million).

Following the Executive Board's discussion on Ecuador, Eduardo Aninat, Deputy Managing Director and Acting Chairman, said:

"Economic developments in 2001 have generally been favorable: the economic situation has stabilized and the authorities expect to meet or exceed their targets for growth and reduction in inflation for this year. Moreover, the fiscal position has strengthened, and pressures on most private banks have eased. Although much remains to be done to secure the gains achieved this year, the authorities are to be commended for having implemented a number of bold measures in very difficult circumstances.

"The recent fall in crude oil prices will, if sustained, pose a significant challenge going forward. Identifying and implementing durable measures that reduce the country's dependence on oil revenues and that are sufficient to maintain a sustainable fiscal balance will therefore be a high priority.

"Steps taken recently to strengthen banks have had a stabilizing effect. It is important that the authorities maintain this momentum by moving forward rapidly with additional measures that strengthen prudential and supervisory regulations, and accelerate progress under the household and corporate debt restructuring scheme.

"Notwithstanding the decline in inflation, pressures have emerged on Ecuador's external competitiveness over the past year, and more progress on structural reforms will be necessary to enhance productivity growth to offset some of this pressure. Particularly important would be to improve flexibility in labor markets and to speed up privatization and deregulation in the telecommunications and electricity sectors," Mr. Aninat said.