LatinNews Daily - 01 September 2020

In brief: Ecuador reaches landmark IMF agreement

* Ecuador’s President Lenín Moreno has announced that his government has reached a provisional agreement with the International Monetary Fund (IMF) to access some US$6.5bn in credit over the next 27 months, under the multilateral organisation’s Extended Fund Facility (EFF). After a similar agreement signed in 2019 (worth US$4.2bn) was cancelled in May in light of the coronavirus (Covid-19) pandemic, this new deal - if approved by the IMF’s executive board - would provide funds “to help the authorities stabilise the economy and protect the lives and livelihoods of the Ecuadorean people”, according to Ceyda Oner, who led the IMF negotiating team. However, this agreement also requires Ecuador to continue meeting IMF structural adjustment requirements, via an austerity programme that has seen Moreno’s popularity plummet; critics have already highlighted that Ecuador’s economy (forecast by the IMF to contract by 11% in 2020) will struggle to recover while spending restrictions prevent investment, and claim that the terms of this EFF will make it impossible to pay off. Reaching a deal with the IMF was a necessary condition for the completion of Ecuador’s debt restructuring with private bondholders, a process that was completed through the exchange of bonds with 98.5% of eligible bondholders on 31 August.

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