CAF approves US$ 120 million in support of a program of reforms in Ecuador

In support of a structural reform program being implemented by the government of Ecuador to improve the country’s sustainability and fiscal transparency as well as its competitiveness in international markets, the Andean Development Corporation (CAF) yesterday approved a US$ 120 loan million, repayable in twelve and a half years with two years’ grace. The Ministry of Economy and Finance will have overall responsibility for implementing the program.

The CAF’s Executive President, Enrique García, explained that this operation falls within the scope of the priorities that this multilateral financial institution has established to help shareholder countries achieve sustained growth with quality and social equity, and highlighted the progress achieved by Ecuador in the area of economic stability, although he warned that it needed to improve its competitiveness indicators.

García emphasized that, in opting for dollarization, Ecuador must be very strict in handling fiscal matters. On this point, he stressed that the purpose of the loan that had been approved was to make an effective contribution to the pursuit of these objectives defined by the Government.

The Ecuadorian Government’s economic program requires funding of US$ 705 million for the period 2004-2005, and the resources contributed by the CAF complement the support it expects to receive from the international financial community.

Implementing this program involves a series of actions aimed at giving priority to controlling public spending and achieving effective, transparent management of the State’s borrowing, which will make it possible to ensure fiscal, financial and social sustainability over the medium and long terms. In addition, there are plans to implement a plan of reforms aimed at strengthening the oil sector and at promoting the participation of the private sector in this field, as well as to provide incentives for new investments in the area of electricity generation that will make it possible to set up a modern, competitive energy generation and distribution system.

In addition, the Government envisages initiatives for adapting current regulations to the commitments that will have to be undertaken and the requirements that will have to be met as part of the trade agreements that the country is currently negotiating, and in particular in order to finalize a Free Trade Treaty (FTT) with the United States, with a view to facilitating the country’s insertion in international markets.