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Ecuador to seek 3-year loan pact with IMF-source

QUITO, Jan 12 (Reuters) - Ecuador will negotiate a three-year loan accord with the International Monetary Fund to help stabilize the inflation, debt-ridden country in the throes of a radical dollarization plan, a top central bank official said Wednesday.

The amount sought in the three-year loan accord was not disclosed.

The government's announcement comes after it said it would not need a shorter-term IMF accord to gain a $250 million credit line because President Jamil Mahuad's shock plan to adopt the U.S. dollar, announced Sunday, would give the Andean nation financial stability.

The government said last year it would first sign the shorter term IMF loan before negotiating the three-year accord.

Now we are going straight ahead for the extended fund facility, a high-ranking official at the central bank, who asked to remain anonymous, told Reuters.

Finance Minister Alfredo Arizaga told Reuters it was too early to comment on any fund facility talks.

Under the dollarization initiative the local sucre currency will almost disappear, with a small amount remaining in circulation after the exchange of 80 percent -- about $300 million worth -- of the local currency in the first half of the year.

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.

Ecuador had been in hard-fought talks with the IMF since February for a one-year, $250 million loan to help repay debt and put its flailing economy back on its feet.

International creditors see an IMF deal with Ecuador, which has defaulted on $6 billion of Brady bond debt and $500 million in Eurobonds, as a prerequisite for any restructuring deal that would reopen international markets to the Andean country.

Ecuador ended 1999 with inflation of 60.7 percent, an economic contraction of around 7.3 percent and a 67 percent devaluation of its sucre currency.

The last contingency accord that Ecuador signed with the IMF was in 1994. These short term agreements usually last a year to 18 months and seek to alleviate short-term fiscal imbalances.