The finance minister, Mauricio Pozo, claims that the government has agreed 80% of the issues with the Fund. The Fund's original agreement, inherited by the current administration headed by President Lucio Gutiérrez, set a schedule for reforms, which the government has been unable to meet.
So far the country has drawn down two tranches of US$41m from the contingency loan. Three tranches remain to be drawn.
Firing up
The economy is doing pretty well, despite the political uncertainty. The government is forecasting GDP growth of 6% this year, thanks to a promising outlook for both oil prices and banana exports. The government is also forecasting that dollarisation will finally have the desired effect of bringing the national inflation rate down to US levels: the target for Ecuador is to get the rate down to 4% this year.
In 2003, the country's exports rose by 19.2%, to a record US$6bn. Revenues were driven by sales of primary commodities: oil exports were the highest for a decade, up 29% on 2002, at US$2.37bn. Exports of bananas, the country's second most import export earner after oil, were up 13.2%. Even more encouraging was the fact that imports still ran ahead of exports: the country's trade deficit was a negligible US$94m, according to figures from the central bank. This was less than 10% of the thumping US$969m deficit recorded in 2002. That year's import bill was inflated by the purchase of equipment for the Oleoducto de Crudos Pesados (OCP).
The fact that, over the past 10 years, imports have tripled while exports have only doubled suggests that the economy is becoming more efficient and competitive.
Despite the surge in exports, growth in 2003 was disappointing, at around 2%. The government is confident that 2004 will be better after the commissioning of the new OCP pipeline, which came on stream in October 2003.
The government hopes that the completion of the OCP will encourage more investment in the upstream oil industry. This investment has yet to appear and the latest auction of concessions did not go as well as the government had hoped. Despite dollarisation, inflation is still uncomfortably strong. In 2003, it was about 7%, a slight improvement on 2002, when it was 9.7%. An increase in remittances from expatriates has led to a fall of almost two-thirds in the current account deficit.
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