IMF grants emergency funds for Ecuador

IMF grants emergency funds for Ecuador

Debt Capital Markets Corporate & Sovereign Strategy Economy & Policy Ecuador Latin America Coronavirus

The International Monetary Fund (IMF) said on Saturday it approved $643 million in emergency financing for Ecuador to support the country’s balance of payment needs, as well as underpin its healthcare capacity and social protection programs amid the coronavirus pandemic.

Ecuador's economy has been buffeted not only by the disease, but also the collapse in global oil prices, as crude is the major contributor to the country's budget.

“The COVID-19 pandemic has had a devastating impact in Ecuador, along with plummeting oil prices and a sharp drop in global demand,” Kristalina Georgieva, managing director and acting chair of the board, said in a press release.

“Protecting the poor and strengthening the social safety net are central priorities of the government at the time of this healthcare crisis. Efforts are underway to increase social assistance to protect the most vulnerable, while continuing to strengthen the framework for such assistance,” she said.

The financing equals 469.7 million special drawing rights (SDRs), or 67.3% of the country's quota, and will be disbursed through the IMF's Rapid Financing Instrument (RFI), the fund said.

The government has pleaded with creditors to provide liquidity relief and sought a consensual agreement as debt service costs threaten to consume 31% of fiscal revenues in 2020.

Finance Minister Richard Martínez said in a tweet on Wednesday that the Inter-American Development Bank (IDB) approved the disbursement of $700 million to fund the government's response to the COVID-19 pandemic.

The IDB redirected some of the funds from other projects or delivered money from other loans ahead of schedule, according to a letter that Martínez posted on Twitter.

Of the $700 million, $250 million will go to healthcare services to lower the mortality rate of COVID-19 and $93.8 million will support small businesses in Ecuador, the IDB said in the letter.