Development: The International Monetary Fund (IMF) and World Bank conducted visits to Ecuador last week.
Significance: Inviting the Bretton Woods twins to Ecuador would have been anathema during the decade-long tenure of former president Rafael Correa (2007-2017). This visit was yet another sign of just how far President Lenín Moreno has diverged from his predecessor’s policy priorities. The visit even coincided with the national court of justice (CNJ), Ecuador’s top court, ordering the inclusion of Correa in an investigation into the botched kidnapping in 2012 of a former opposition deputy, Fernando Balda.
- The World Bank approved US$400m in new financing for Ecuador last week. The IMF mission, meanwhile, arrived in Quito a week after Ecuador’s economy & finance minister, Richard Martínez, headed a delegation to its US headquarters to open a dialogue channel. Martínez, who assumed the position in May, hails from the private sector, having previously served as president of the umbrella business lobby Comité Empresarial Ecuatoriano (CEE).
- After Ecuador’s so-called ‘selective default’ in 2008, the country became a pariah and Correa pursued alternative sources of financing, primarily from China, through oil-for-loan deals. The Moreno administration has been fiercely critical of excessive spending under Correa and the accumulation of debt in opaque circumstances.
- Martínez accused the Correa administration of “aggressive indebtedness”, singling out for criticism the pre-sale of oil agreements. The government recently calculated that public debt (internal and external), and other obligations, amounted to US$58.98bn, 57% of GDP.
Looking Ahead: The decision to invite the IMF and World Bank to Ecuador signals that the Moreno administration is keen to recover its credibility in international markets. In part, this is because issuing bonds at the moment is punitively expensive for Ecuador given its high country-risk. But Moreno is also keen to reduce Ecuador’s reliance on Chinese funds.
