Ecuador agrees to $4.2 billion financing deal with IMF

The International Monetary Fund (IMF) has agreed to support the economic policies of Ecuadorean President Lenin Moreno with a $4.2 billion credit line over the next three years.

The arrangement is expected to be brought to the IMF Executive Board for its final approval in the coming weeks.

The IMF said the agreement is part of a broader effort by the international community that totals $10 billion and includes financial support of almost $6 billion over the next three years from the Development Bank of Latin America, the Inter-American Development Bank, the Latin American Reserve Fund, and the World Bank.

Ecuador faces a fiscal deficit of $10 billion (9.3% of GDP), leading to delays in paying salaries to government employees and suppliers. The country's adoption of the U.S. dollar in 2000 has limited its ability to finance deficits domestically, relying instead on dollar-denominated debt (some $32 billion).

The agreement reportedly requires Ecuador to cut, among other expenses, 10% from its public enterprise work force and $2 billion in annual fuel subsidies, as well as raise value-added taxes from the current 12% to 15%.

It also marks the end of at least a decade-long estrangement between nation with the IMF since then-president Rafael Correa kicked out the IMF mission short after taking office in 2007.

Skepticism of the IMF runs strong in Ecuador and throughout Latin America, where many blame Fund-imposed austerity policies for economic hardship.

At: http://www.batimes.com.ar/news/economy/ecuador-agrees-us42-billion-financing-deal-with-imf.phtml

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