The IMF is studying the request of the Government of Ecuador to access a loan under the Rapid Financing Instrument (IFR) modality to attend to the health emergency due to the coronavirus and the drastic fall in the price of oil.
In a statement dated in Washington and also released by the Ministry of Economy in Quito, the IMF’s managing director, Kristalina Georgieva, acknowledged “Ecuador’s economic challenges” that “have been exacerbated by the devastating effects of the COVID-19 outbreak and the sharp drop in world oil prices. “
“The Government of Ecuador expressed its intention to seek our financial support through the Fund’s Rapid Financing Instrument (IFR)” and, in response, “our team is working quickly to respond to this request,” so the Board of Directors of the IMF “may consider” such a request.
PRAISE TO ECUADOR
He assured that the Government of President Lenín Moreno has responded “quickly and decisively to protect Ecuadorians from the impact of these global developments that continue to evolve rapidly, by implementing a series of measures to stabilize the economy and prevent the spread of the virus.”
The IFR, he said, is an emergency financial tool that will allow the Ecuadorian Government “to address the urgent needs of the balance of payments” and support policies that “allow funds to be directed quickly to the most affected sectors of Ecuador, including the health system and social protection, to strengthen its response to COVID-19 “.
In addition, he mentioned that in parallel the IMF “is working immediately with the authorities on a new agreement backed by the Fund, which is based on the framework of the Expanded Service” of Financing (SAF), a credit agreement in execution for 4.200 million of dollars, which ties credits with several multilaterals for another 6,000 million.
That new agreement, Gerogieva said, seeks to “strengthen Ecuador’s economic performance, strengthen the bases of dollarization, and provide broad-based benefits for all Ecuadorians, especially the most vulnerable part of the population.”
“Our goal is to provide immediate support to help Ecuador address the effects of a growing global health crisis, while continuing to support the authorities’ unwavering commitment to implement much-needed structural and economic reforms to foster strong, sustainable and inclusive growth” he emphasized.
ECUADOR WILL PAY BONDS
The pronouncement of the managing director of the IMF was given in parallel to the announcement made by the Ecuadorian Minister of Economy, Richard Martínez, that he would pay about 320 million dollars of his 2020 bonds, which expire tomorrow, Tuesday, which It will allow you to free up some 2,000 million of your financing sources.
Martínez recalled that the Ecuadorian Government has to pay, on a scheduled basis, some 540 million dollars for the debt contracted through the 2020, 2022, 2025 and 2030 bonds, for which reason he has decided to comply with the maturity of the former and accept to grace periods to alleviate the cash flow that requires the attention of the health emergency.
He denied that this can be understood as a “technical moratorium”, since what is done is to take the grace period and release some 200 million dollars that would have been used to meet credit obligations.
This, he added, will allow an additional disbursement to the Health portfolio for about 50 million dollars to be made tomorrow, which will allow it to serve its providers and act in a more dynamic way in the current situation.
The other decision is to honor the payment of the 320 million dollars, “so as not to violate future sources of financing” and that could be at risk of not materializing if it fell into an eventual moratorium.
With this, in addition, some “2,000 million dollars are immediately accessed” from the country’s financing sources, which include an IMF disbursement of nearly 500 million that will arrive in the country between the third and fourth weeks of April. .
Likewise, the financing of some 500 million dollars by the Inter-American Development Bank (IDB), the World Bank (WB) and the Development Bank of Latin America (CAF).
Martinez said that it is also expected to obtain about $ 1 billion, which he said he hopes can be increased to $ 1.5 billion, from bilateral financing, especially with China.