Ecuador to strengthen its fiscal sustainability with IDB support

$500 million in financing will protect macroeconomic stability and social spending

Ecuador will strengthen its fiscal sustainability with $500 million in financing approved by the Inter-American Development Bank (IDB).

The resources will be used to support the country in implementing its reform program, which is aimed at reestablishing macroeconomic stability; restoring fiscal sustainability; strengthening the institutional framework of the Central Bank; and safeguarding social expenditure in support of vulnerable populations.

This loan is extended through Special Development Financing (SDL), an emergency program. It will play an essential role in ensuring the success of the fiscal consolidation process and the launch of a structural reform agenda, which enables the private sector to take over from the public sector as the main driver of Ecuador’s economic growth, as the government intends.

The framework for structural reforms includes optimization of the fuel-subsidy system for the benefit of the poor and vulnerable; adjustment of the State's salary account; and optimization of external-debt management through greater transparency.

These reforms are intended to generate a reduction in spending levels and public debt and an increase in international reserves. As part of the program, the government has committed to establishing a floor of 1% of GDP in social-assistance spending for the period 2020-2021, in addition to increasing spending on social assistance by $370 million in 2019.

The IDB $500-million financing has a repayment term of 7 years with 3 years of grace and an interest rate based on LIBOR.

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The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source of long-term financing for economic, social and institutional development in Latin America and the Caribbean. The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public and private sector clients throughout the region.