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Special Report: The end of the Citizen’s Revolution in Ecuador? (ISSN 17414474)

Dollarisation: a straightjacket?

A key factor constraining economic policy decisions by the administration of both Rafael Correa and his successor Lenin Moreno is that Ecuador has a dollarised economy. Towards the end of the 1990s Ecuador had begun to suffer a growing economic crisis. Contributory factors included low international prices for oil (the country’s main export commodity), limited non-oil tax revenues, and large public sector wage settlements, all of which caused high inflation (96.1% in 2000) and a drastic loss of confidence in the national currency, the sucre. In an attempt to halt capital flight and prevent a descent into hyperinflation the government of the day adopted the US dollar as the national currency. The move helped stabilise the economy. In the subsequent 16 years GDP growth has averaged 3.9%, better than the Latin American average of 2.7% over the same period.

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