Ecuador’s international reserves were set at $6,312.2 million on September 30, 2023. This means they had a decrease of $437 million compared to $6,769.3 million registered on September 22, according to data from the Central Bank – which handles the money – and Association of private banks (Assobanca).
According to Asobanca, the drop meant a drop of 6.8 percent. In addition, financial reserves (private and public banks, cooperatives) increased in the same period by 5.1% (USD 274 million), reaching a balance of USD 5,602 million. Of this, the reserves of other depository companies (OSD), which include private banks and cooperatives, represent 73% (USD 4,090 million), and the National Financial Corporation (CFN) and Biess, which are considered other financial companies (OSF), 27%. ($1.512 million).
In this way, the system of exchange and financial reserves, which includes monetary emission and financial reserves, amounted to a total of 5.689 million dollars; Therefore, RI covers the system of exchange and financial reserves with 111%, with a surplus of 623 million dollars in the said system. Excluding CFN and Biess, the OSD Exchange and Reserve System ($4.177 million) is 151% covered, so there is a surplus of $2.135 million when the said system is covered.
However, the figures also represent less coverage than required liabilities. This is because this money belongs to different actors such as Decentralized Autonomous Governments (GAD), IESS, the Government itself, among others. Thus, the coverage of liquid assets by liabilities increased from 58% to 56% in the past week.
This translates into less coverage in the three balance sheet systems. The Central Bank of Ecuador has three systems in its balance sheet.
The situation with International Reserves has become relevant these days before the presidential elections, because both candidates, Luisa González (RC) and Daniel Noboa (ADN) said that they could use International Reserves to cover government expenses. However, it is currently not possible to use it because it is prohibited by the Defense Against Dollarization Act. In the case of Luisa González, she said she would use the $2.5 billion that would be in Switzerland, although she did not clarify who owns those resources. Noboa said that he would use about 1.5 billion dollars for the El Niño phenomenon, although during the debate he softened his position by saying that using this money would be option Z, or the last option.
Several experts have indicated that “using money” is not possible and that the mechanism used by Rafael Correa’s government was to expand the central bank’s balance sheet and thus create the so-called Ecuadorian dollars.
On that topic, Jaime Carrera, executive secretary of the Observatory for Fiscal Policy, indicated that the recurring drop in the reserve, which at one point reached $9,000 million, is a consequence of the fact that there are more expenses than income in the said reserve. Debt is paid, purchases are made abroad. However, there is less income from loans, among other income from oil.
As for the coverage of the system, he explained that the smallest coverage is precisely the non-financial public sector (social protection, municipalities, prefectures, public companies). The account of the State Treasury fell to 316 million dollars, while it previously amounted to 589 million dollars. The lack of coverage is a concern, because if you wanted to make money transfers in this system, there would be no dollars needed. In this sense, he said that there is no sense in the candidates’ proposals to take money from the reserves, but he believes that this is only possible by “inventing dollars”, which is not healthy for dollarization.
Source: Eluniverso

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