CAF approves $800 million credit for Ecuador EFE

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By Daniel Villatoro García

The Development Bank of Latin America CAF approved on Thursday a $800 million loan for Ecuador, which is in addition to the $4 million outstanding grant also announced Thursday by the International Monetary Fund (IMF).

The Ministry of Economy and Finance of Ecuador indicated in a statement that the financial support of the CAF is the result of a coordinated work that has been realized after the country reached a technical agreement with the IMF, for a new credit program of $4 billion over the course of 48 months.

Ecuador’s economic plan and the public policies implemented by President Daniel Noboa’s government continue to receive the support of multilateral agencies, the Ministry said in its statement.

The Ecuadorian government detailed that it will receive these resources in the coming days that constitute a dynamic financial solution to deal with liquidity situations and thus consolidate strategic management in the management of public finances.

The $4.8 billion in Ecuador’s two credit operations with the IMF and the CAF coincide with the estimated state deficit with which the country closed in 2023, equivalent to about 5 per cent of gross domestic product (GDP).

Under the internal armed conflict – declared to the organized crime gangs, Noboa carried out one of the largest tax reforms in recent years in Ecuador, where among other taxes the value added tax (VAT) rose from 12% to 15%, which entered into force in April.

With this measure, the Noboa Government estimated to raise an additional $1.3 billion per year. This tax reform also served to cool the risk premium, which during its term of office has fallen from 2,141 points in mid-December to 1,159 integers this Thursday, giving the Ecuadorian Executive more facilities to access debt markets.

Noboa has also expressed its intention to reduce fuel subsidies, which represent an expense of about $3 million a year for the state, and to delay the dismantling of Bloque 43-ITT, one of the country’s most important oil fields, the closure of which was voted last year in a historic national plebiscite. 

This article has been translated from the original which first appeered in Prensa