Quito. The government of Daniel Noboa hat agreed on a loan of four billion US dollars with the International Monetary Fund (IMF). With it should to cover the expected budget deficit of more than $4.8 billion. The corresponds around five percent of gross domestic product (GDP). Formal approval from the IMF Board of Directors is still pending. Following the agreement with the IMF, the Development Bank for Latin America and the Caribbean (CAF) also has a short-term loan to stabilize the balance of payments worth $800 million approved.
According to the Ministry of Economy and Finance, Ecuador’s external debt is over $46.75 billion, while its domestic debt is $13.25 billion. Total public sector debt to international organizations currently stands at over $25 billion, including $7.97 billion to the IMF. Other major multilateral lenders include the World Bank (WB), the Inter-American Development Bank (IDB) and the Development Bank for Latin America and the Caribbean (CAF).
The head of the IMF mission in Ecuador, Varapat Chensovasdijai, stated that the IMF’s goal is to support the Ecuadorian government in improving the quality of life of Ecuadorians during difficult economic times. They are satisfied with the reform efforts of Daniel Noboa’s government for budget consolidation and macroeconomic stabilization.
The economist and former finance minister Marco Flores (1997-1998) criticized On the other hand, the continuation of the austerity policy already practiced by Noboa’s predecessors Lenín Moreno and Guillermo Lasso. This will meet the IMF’s requirements, but will not lead the country out of stagnation. The economist fears Ecuador’s public debt could rise to $90 billion by the end of the year.
Economist and political scientist Juan Pablo Jaramillo explains that the IMF’s new credit line is not intended for new public investments, but for paying off old debts. The expert criticizes the government’s lack of transparency regarding interest and loan conditions. It is clear that part of the money is already being used to repay debts, including those that Ecuador itself owes to the monetary fund. The aim is to gain more financial flexibility and reduce the risk of default by replacing maturing debts with new ones with longer terms.
Der Indigenenverband Ecuadors (Confederation of Indigenous Nationalities of Ecuador, Conaie) writes in a communiqué: “A new agreement with the IMF is not a reward for our country, but a punishment.” The association demands that the terms and scope of the agreement be made public. “It was negotiated in secret, and there is certainly further damage to the country and nature behind it.”