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Dollarization won't affect Ecuador's debt talks-govt

QUITO, Jan 12 (Reuters) - Ecuador's finance minister said Wednesday the government's proposal to adopt the U.S. dollar as its currency will not interfere with its plans to restructure more than $13 billion in public foreign debt.

The government will soon begin talks with holders of its Brady bond and Eurobond debt, worth about $6.5 billion, on which Ecuador defaulted last year, Finance Minister Alfredo Arizaga told reporters.

We believe what we're doing is going to guarantee to our creditors that the economy is going to be better managed in the future, Arizaga said.

President Jamil Mahuad announced Sunday he would send Congress a proposal to dollarize the nation of 12.4 million people. The move would make the U.S. dollar the legal tender for all major transactions, leaving the beleaguered sucre currency only for the smallest of purchases.

Government officials said Wednesday a rough draft of the plan was ready and that the completed project would be sent to Congress in the next few days.

We are preparing a meeting (with creditors) in the next weeks ... in order to explain what we're doing and then follow up with this process that has been stalled by our lack of an agreement with the International Monetary Fund, Arizaga said.

Ecuador wrote itself into the history books in September last year when it became the first country ever to default on Brady debt. It defaulted on its Eurobonds in October and has since been in tense negotiations with bondholders for both types of debt.

The country is immersed in its worst economic crisis in decades. Mahuad is hoping a dollar economy will slash inflation, reduce interest rates and revive its flagging industrial sector.

A high-placed Central Bank official told Reuters Wednesday Ecuador would move ahead with plans to negotiate a three-year extended fund facility with the IMF. The government said it no longer needed access to a $250 million standby loan it was negotiating with the IMF.

The three-year extended fund facility would mean Ecuador would set a series of key macroeconomic goals with the IMF in return for access to multilateral funds.