Ecuador clears IMF technical review, paving the way for $500 million amid reforms and ongoing economic challenges.

On December 9, 2024, the Ecuadorian government under President Daniel Noboa successfully passed the first technical review of its economic goals as part of its agreement with the International Monetary Fund (IMF).

While this marks a key milestone, final approval from the IMF Board of Directors is still pending.

Once the Board grants its approval, Ecuador will receive a $500 million loan installment.

This amount adds to the $1 billion disbursed in June 2024, bringing the total disbursement so far to $1.5 billion under the IMF’s Extended Loan Service (EFS) program.

The EFS agreement, signed on April 25, 2024, provides a total loan package of $4 billion to Ecuador, which will be distributed in stages until the first quarter of 2028.

The approval of this latest installment follows an IMF technical team’s visit to Ecuador from October 28th to November 7, 2024, to evaluate compliance with the program’s goals.

Positive Results and Structural Reforms

Varapat Chensavasdijai, head of the IMF’s technical mission, commended Ecuador for meeting all quantitative performance criteria and indicative targets as of August 2024. Chensavasdijai also highlighted substantial progress in implementing structural reforms supported by the program.

“The authorities have taken measures that have helped safeguard macroeconomic stability, strengthen fiscal sustainability, and protect vulnerable population groups,” Chensavasdijai stated.

The reforms are part of the government’s broader strategy to enhance Ecuador’s economic resilience and support long-term development.

Impact of the Electricity Crisis

While the technical review showed favorable results, it did not fully account for the effects of Ecuador’s ongoing electricity crisis. Since September 23, 2024, the country has experienced daily blackouts caused by a historic drought that has severely impacted hydroelectric power generation.

Chensavasdijai acknowledged the challenging environment, noting that the IMF’s priority is to support Ecuador’s efforts to improve living standards despite these difficulties. The IMF praised the Ecuadorian government’s efforts to manage the costs of the crisis within the constraints of its fiscal framework.

According to an official statement, “The authorities’ policy measures and reforms are helping to safeguard dollarization, improve macroeconomic and financial stability, strengthen fiscal sustainability, and protect vulnerable groups.”

Ecuador’s Growing Debt to the IMF

Ecuador’s reliance on IMF loans has grown significantly over the past decade as successive governments have turned to external funding to address economic challenges.

The country’s total debt to the IMF now stands at approximately $8.5 billion. Here’s an overview of its progression:

• Lenín Moreno Administration (2017–2021): Moreno secured a $4.2 billion Extended Fund Facility in 2019. However, the associated austerity measures led to widespread public protests.
• Guillermo Lasso Administration (2021–2023): Lasso continued leveraging IMF support, negotiating additional disbursements from Moreno’s $6.5 billion facility and pushing for economic reforms tied to IMF conditions.
• Daniel Noboa Administration (2023–present): Noboa’s government approved a new $4 billion, 48-month Extended Fund Facility in May 2024. The program aims to stabilize the economy and foster growth, starting with a $1 billion disbursement earlier this year.

This growing debt reflects Ecuador’s ongoing struggle to address fiscal imbalances, manage global economic shocks, and recover from the COVID-19 pandemic.

However, the government remains committed to leveraging these funds to ensure macroeconomic stability and protect its most vulnerable citizens.