Press Release No. 19/478

IMF Executive Board Concludes Second and Third Reviews of the Extended Arrangement Under the Extended Fund Facility for Ecuador, Approves US$498.4 Million Disbursement

December 19, 2019

The Executive Board of the International Monetary Fund (IMF) today completed the combined second and third reviews of Ecuador’s performance under its economic program supported by the Extended Arrangement under the Extended Fund Facility (EFF). The completion of both reviews allows the authorities to draw the equivalent of SDR 361.3 million (about US$498.4 million). The 36-month Extended Arrangement with a total access of SDR 3.035 billion (about US$4.2 billion), the equivalent of 435 percent of Ecuador’s quota in the IMF, was approved by the IMF’s Executive Board on March 11, 2019 (see Press Release 19/72 ).

Following the Executive Board discussion, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, summarized the Board’s findings:

“The Ecuadorian authorities have continued to make progress in strengthening the country’s fiscal and external positions and have appropriately recalibrated their economic program to include a more moderate fiscal consolidation and international reserves’ paths in response to recent developments and to protect pro-poor growth and social spending.

“The Ecuadorian authorities have demonstrated commitment to fiscal prudence, which remains key to fiscal sustainability. In this context, the recently approved tax reform will raise revenues and make the tax system more growth-friendly, simple, and equitable.

“Protecting the poor and increasing the social safety net are central priorities in the government’s program. The authorities have introduced new measures to improve the adequacy and coverage of the social safety net. Continued work is needed to upgrade the social registry, which will allow for a better targeting of social assistance spending. To support the authorities’ efforts, the program’s floor on social assistance will be raised.

“Public financial management reforms are paramount to secure fiscal sustainability in the longer term. The revised reform of the Organic Budget Code will be key to fortifying expenditure controls, limiting budget discretion, introducing mechanisms to address arrears, and improving the framework for fiscal rules. Continued work will be needed in the area of debt management to reduce borrowing costs and ensure a more efficient allocation of resources.

“The reform of the central bank aimed at strengthening central bank autonomy, accountability, and governance will be instrumental in supporting the dollarization regime, boosting reserves, and ensuring their prudent management.

“The financial system continues to be stable, and sustained reforms will help solidify the system. In this context, strengthening credit risk regulation and closing other regulatory gaps are priorities. Upgrading banking and cooperatives’ supervision, building the macroprudential framework, and simplifying liquidity requirements will help reinforce the financial system in the longer term.

“Efforts to raise competitiveness should continue to focus on improving transparency, strengthening governance, increasing efficiency of the public sector, and creating conditions in the labor market to facilitate hiring and female participation.”