IMF board approves 3-year, USD 4.2 billion fund for Ecuador

The executive board of the International Monetary Fund on Monday approved a USD 4.2 billion fund to support Ecuador over the next three years.

The arrangement was reached last month at staff level and required a final approval by the board. It allows an immediate disbursement of USD 652 million.

The IMF has said the agreement is part of a broader effort by the international community that totals USD 10 billion and includes financial support of almost USD 6 billion over the next three years from the Development Bank of Latin America, the Inter-American Development Bank, the Latin American Reserve Fund and the World Bank.

"The aim is to reduce debt-to-GDP ratio through a combination of a wage bill realignment, a careful and gradual optimization of fuel subsidies, a reprioritization of capital and goods and services spending, and a tax reform," IMF managing director Christine Lagarde said after the board discussion.

Ecuador's government faces a fiscal deficit of USD 10 billion, which has caused delays in paying government employees and suppliers.

Lagarde said that protecting the poor is another objective of the program, and that work is underway to increase benefits under Ecuador's social protection programs and to improve the targeting of those programs.

The agreement ends an estrangement that began with the South American nation in 2007, when then President Rafael Correa kicked out the IMF mission shortly after taking office.