Lenders led by IMF help Ecuador with $2-billion US lifeline

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

The loans are to be made available over the next three years to support a government program that seeks to virtually rebuild the Ecuadorean economy, with U.S. 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 per cent 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 involve 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.

World Bank, IMF and IDB officials 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 bonds.

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. © The Canadian Press, 2000

Mar 21 | Mar 20 | Mar 19 | Mar 18 | Mar 17 | Mar 16 | Mar 15 | Mar 14 | Mar 13 | Mar 12

Home