International monetary reserves are $6,905 million as of September 1, 2023, which means a drop of $2,111 million compared to the highest point reached a few weeks ago when it reached $9,016 million (July 22 of this year).

This figure was announced by the director of the Central Bank, Guillermo Avellán, and despite the decline, it was reassuring when it was shown that the current amount covers 100% of the national fractional currency and deposits of public and private financial entities. .

Avellán also said that it is important to remember that the resources that are part of international reserves belong to Ecuadorians and are deposited mainly by public and private entities at the Central Bank of Ecuador (BCE). These resources guarantee foreign transactions and sustainability of dollarization.

However, according to the chart presented by Avellán himself, the liabilities of the Central Bank currently amount to 14.110 million dollars. This means that $6.905 million only covers part of the liabilities and there is a very important amount: $7.205 million, which is not covered.

Thus, the balance sheet of the Central Bank is divided into four systems. The first two are 100% covered, but the third is already only 21%, while the fourth is 0%.

What obligations do these systems have and how much are they?

On this topic, Alberto Acosta Burneo, editor Weekly analysis, explained that the reserve had a significant decline due to various factors. First of all, the price of oil fell and revenues to the state treasury decreased. In this sense, debt amortization payments also had to be made, which led to more foreign exchange going out than coming in, because additional financing is not flowing. “Ecuador sends more funds, that is, more wages than it receives. He has no new responsibilities, because there is no one to lend him – he said.

According to Acosta Burne, what the Central Bank wants to say with its statement is that, although the reserves have fallen, it is not so serious because the deposits, that is, the required reserves of banks and cooperatives are covered. In any case, he commented that it is not good news that the reserve has fallen.

He explained that in reality the Central Bank has a large gap as a result of what Correato did by expanding the institution’s balance sheet, making accounting records of funds exchanged for bonds, known as the issuance of “Ecuadors” for approximately 9,000 million dollars. That is why, despite the fact that this government tried to pay the debt that the state has to the ECB, that imbalance of more than 7,000 million dollars still remains.

He commented that, although the first and second systems are 100% covered, the biggest problem is in the third system, which has deposits from public banks and IESS.

When Acosta was asked if Correísmo candidate Luisa González’s offer to take about $2,500 million from international reserves to finance her plans would be viable under the circumstances, he explained that it was illegal, as it was prohibited by the Defense Against Dollarization Act. But if it were to be done, it could only be done by taking money from the reserve, because the reserve is weakened.

For his part, candidate Daniel Noboa prefers to propose strengthening the reserves. In his work plan, he states that “in order to protect and strengthen dollarization, it is necessary to maintain fiscal discipline and responsibility in the management of public finances.” In addition, it is put on the table that “we must strive to increase international reserves, which will provide a safety net in case shocks external economy”.