IMF, Lenders Give Ecuador $2 Billion

By HARRY DUNPHY, Associated Press Writer

WASHINGTON (AP) - A group of official lenders, led by the International Monetary Fund, threw Ecuador a $2 billion lifeline Thursday to help the South American country get its battered economy back on track.

The funds are to be made available over the next three years to support a government program that seeks to virtually rebuild the Ecuadorean economy, with dollarization a cornerstone of the recovery effort.

The IMF and the World Bank issued identical statements that outline their commitment to helping the authorities in Quito who are struggling an inflation rate that topped 90 percent the past 12 months, the highest in Latin America.

Ecuador's new president Gustavo Noboa, is pushing to make the U.S. dollar Ecuador's official currency in a move to stabilize the economy and halt inflation. Such a move would involved gradually replacing Ecuadorean currency, the sucre, with the U.S. greenback.

Under the emergency financing plan, the World Bank will contribute $425 million and the IMF $300 million, with the Inter-American Development Bank tapped for a further $ 620 million.

The remaining $700 million is to be provided by Corporacion Andina de Fomento, an Andes-based development bank.

Out of the total rescue package, $900 million will be available to Ecuador over the next 12 months, the IMF said, which will include a $300 million standby facility to go before the IMF board within a month.

``The loans are a combination of balance of payments support and investment lending, with a strong social content,'' the IMF said.

``They are intended to assist the implementation of dollarization, the resolution of the banking crisis, and to strengthen the public finances,'' it said.

The funds are also designed to protect social programs, ensuring there are sufficient funds in the government's budget to support health, education, welfare and pension initiatives.

Ecuador will likely have access to the financial package within a month, during which time the lenders expect the Ecuadoran congress to pass a series of economic and structural measures ``necessary to complement Ecuador's reform program,'' the IMF said.

The international rescue package follows hard on the heels of a visit to Ecuador of high-level U.S. officials, who worked with the government in Quito to put the finishing touches on the economic recovery plan.

World Bank, IMF and IDB officials also were in almost constant contact with Quito in the wake of the government's announcement last September that it was unable to meet repayments on a series of Brady bonds, named for a former U.S. Treasury secretary.

Responding to the default, the IMF declared that it would delay considering a new loan program for Ecuador until the authorities had made progress in renegotiating its $13 billion in foreign debt obligations.

A credible economic strategy was also cited as an essential requirement for Ecuador to qualify for official loans.