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Resident representative of the IMF: we do not see Ecuador entering a recession

Resident representative of the IMF: we do not see Ecuador entering a recession

Peruvian Jorge Salas is the new resident representative of the International Monetary Fund (IMF) in Ecuador. He arrived in August 2022 and supported the successful completion of the financing agreement with the multilateral, which was for $6.5 billion in 27 months. The senior executive comments on the country’s economic achievements. Salas considers that this year the country’s debt will fall to almost 55% of the gross domestic product (GDP) and assures that “clearly, we do not see Ecuador entering a recession”, despite the complicated global outlook.

How is your arrival in Ecuador and what are the tasks you have accomplished since August 2022 and your plans for the future in the country?

In August I began my work as the new resident representative of the IMF in Ecuador. From that moment on, my work has focused above all on helping to successfully conclude the economic program supported by IMF financing, which was achieved in December. This was an important achievement for the country and for the Fund, since the last time that Ecuador had completed a program with the IMF was in 2001. Let us also remember that this program began during an unprecedented health and economic crisis and that it was implemented by two different governments. All this shows a great commitment of the country to implement important economic policies and reforms. Looking to the future, my tasks will focus on maintaining the IMF’s close collaboration with the country. We will continue to support efforts to strengthen the economy and generate well-being for Ecuadorians.

Can the closing of the agreement with the IMF be considered a success? What are the reasons or figures that denote a better situation of the Ecuadorian economy before and after the agreement with the IMF?

As part of the agreement with the IMF, which included disbursements of almost $6.5 billion, important achievements have been made. One of them was to support public finances and help the economy grow again, after the harsh impact of the COVID-19 crisis. Another achievement, to promote growth with equity, has been the greater coverage of social assistance programs, which previously reached 30% of lower-income families and today reaches more than 80%. On the fiscal side, there are several measures that have helped reduce public debt and make it more sustainable. To give a figure, we project that this year the debt will fall to almost 55% of GDP, while in 2020 it was 61% of GDP. The dollarization regime is also stronger today, with legal reforms that have made the Central Bank more autonomous and with international reserves rising to historically high levels. And let’s not forget that the program also supported other reforms, for example, to make public contracts more transparent and penalize acts of corruption.

However, there were some issues that were not fulfilled in the agreement by Ecuador, such as audits of the state oil company or better honesting the figures with the IESS, why did these types of factors not affect the agreement in general?

Regarding the fiscal figures related to the IESS, in reality important goals were achieved. We have worked a lot with the Ministry of Economy and Finance to correct the historical figures of central government obligations to the IESS for transfers of pensions and health expenses. What’s more, now the ministry’s proforma and fiscal plans adequately reflect this type of obligation. The agreement with the IMF also supported the establishment of a plan for the State to continue regularizing its payments to the IESS for obligations on health expenses. In the case of Petroecuador, although the goal of carrying out the audits could not be met, we saw a clear effort by the authorities to contract one of the large international auditing companies. And we know that the Government continues to work to meet the objective of carrying out these audits, which, beyond the program with the IMF, would be a historic milestone for transparency in the public sector.

How do you project the IMF’s relationship with Ecuador to be once the agreement is concluded? The Government has talked about a possible non-financial agreement, but it did provide support at an advisory level. Is it possible and could this help the country financially?

Our relationship with the country remains close and we will continue to support efforts to build a more prosperous and solid economy. Any new agreement, whether with or without financing, will depend in the first place on the needs and options that the authorities identify. And in all cases, we will continue our joint work and advice on economic policy. In addition, we continue technical assistance activities to help the Government implement important policies for the country, for example, in financial and fiscal aspects. A key piece of information here is that since 2019 we have carried out close to 40 technical assistance and training activities.

How does the IMF envision the year 2023 for Ecuador and for the world, considering that there are fears about the price of crude oil and a global contraction?

A positive fact is that the GDP in Ecuador recently would have finally equaled the level it had before the pandemic. For this year we see that the Ecuadorian economy would grow around 3%, which would be above the Latin American average. For Ecuador, which exports oil, a rise in the price of crude above our current expectations should help improve the growth forecast. Regarding inflation, for Ecuador we project an average inflation close to 2.5%, well below the average for the region. But indeed, the global context is complicated, because global growth is low and inflation remains high. In fact, we forecast that a third of the world economy will be in recession by 2023. Clearly, we do not see Ecuador entering a recession. But in this unfavorable international environment, efforts to accelerate reforms in the country that foster higher, inclusive and sustainable economic growth, and that also boost formal employment, are more necessary. (YO)

Source: Eluniverso

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