Ecuador’s international reserves closed at $4.454 million on December 31, 2023, which implies a decline of 48% in one year when considering that the figure reached $8.458 million on December 31, 2022.

Reserve accumulation was an agreement with the International Monetary Fund (IMF) and is associated with the good health of dollarization. Therefore, the result at the end of 2023 is worrying, because the first two systems are no longer covered, but only the first at 100 percent, and the second at 43 percent, according to the Central Bank’s own data.

The Central Bank of Ecuador (BCE) confirmed that, after reaching one of the highest levels since the beginning of dollarization in January 2023, international reserves (IR) amounted to 4454 million dollars this December 31. “This level of reserves made it possible to cover 100% of the obligations of the first balance sheet system of the Central Bank and 43% of the second.”

According to the institution, the reserves can now cover with liquid funds all the deposits held by BanEcuador and private financial entities and the national and solidarity economy in the Central Bank. In the second balance are the National Financial Corporation (CFN) and the Bank of the Ecuadorian Social Security Institute (Biess). In any case, they show that, despite recording an annual decrease of 48% since December 2023 compared to the same period in 2022, this level of reserves is the fifth highest since the beginning of dollarization, if the level is compared with IRs at the end of each year, the subject reported.

In this regard, for Jaime Carrera, executive secretary of the Observatory for Fiscal Policy (OPF), what is evident is the absolute deterioration of public accounts and that a limit has been reached that is practically unmanageable if structural reforms are not implemented. Currently, the reserve barely covers the issuance of fractional currencies and the issuance of bank reserves in the private sector, but no longer the deposits of the public financial sector, he says. When also looking at the deposits in the treasury account, it was concluded at 135 million dollars. “Practically nothing,” Carrera claims.

Why did the reserves fall so much?

According to the analysis of the Central Bank, the decline is particularly concentrated in the public sector. The central bank stated that the biggest decline occurred in the public sector, as it was reduced by 3,668.4 million dollars. And within this big number are the debt payments and the drop in hydrocarbons.

Meanwhile, according to a report from the Association of Private Banks of Ecuador (Assobanca), as of December 31, 2023, international reserves totaled $4,454 million, a decrease of 7.1% ($339 million) compared to December 22, 2023.

On the other hand, financial reserves increased in the same period by 17.1% (USD 800 million), reaching a balance of USD 5,484 million, of which the reserves of other depository companies (OSD) represent 71% (USD 3,890 million), and CFN and Biess (OSF) the remaining 29% ($1.595 million).