Ecuador to increase foreign reserves, revamp tax under IMF deal

QUITO (Reuters) - Ecuador will increase its foreign reserves, optimize public spending and make tax changes during the next three years to comply with a $4.2 billion financing deal with the IMF, Finance Minister Richard Martinez said on Thursday. President Lenin Moreno on Wednesday announced the deal with the International Monetary Fund, which gives the Andean country the chance to get a further $6 billion in loans from other multilateral institutions

Reuters February 22, 2019 01:05:50 IST
Ecuador to increase foreign reserves, revamp tax under IMF deal

Ecuador to increase foreign reserves revamp tax under IMF deal

QUITO (Reuters) - Ecuador will increase its foreign reserves, optimize public spending and make tax changes during the next three years to comply with a $4.2 billion financing deal with the IMF, Finance Minister Richard Martinez said on Thursday.

President Lenin Moreno on Wednesday announced the deal with the International Monetary Fund, which gives the Andean country the chance to get a further $6 billion in loans from other multilateral institutions.

Ecuador is grappling with a large fiscal deficit and heavy external debt. But the country hopes to strengthen its dollarisation, reach a fiscal surplus and improve employment figures under the deal, Martinez said.

"It's an unprecedented deal because its structure allows the willingness of different multi-lateral organizations to converge," Martinez told reporters. "And it aims not just to solve a fiscal problem but toward structural reforms."

The accord is subject to approval by the Washington-based lender's executive board.

"During the next three years the government won't be required to go to the international market for financing," the IMF's Alejandro Werner said. "The accord provides a network of security and tranquillity."

The government will start a tax "simplification" project to increase revenues, Martinez said, and seek legal reforms to bolster the central bank.

Basic services will not be affected, he said, and privatisations are prohibited. The country will receive an initial $4.6 billion of the loans this year, Martinez added.

Ecuador's sovereign bonds surged last week after the IMF confirmed it was engaged in formal talks with Moreno over a possible financial arrangement.

The OPEC nation's debt grew under former leftist President Rafael Correa. Moreno earned Correa's support during the 2017 election campaign, but has implemented more market-friendly economic policies since taking office.

Moreno has begun to implement an austerity plan that includes layoffs of workers at state-owned companies and cuts to gasoline subsidies. He also plans to find a private operator for state-run telecoms company CNT and other state-owned firms.

On Wednesday, Moreno said most of the money would be dedicated to "social investment," citing a rising number of police officers and promising retirees they would not lose out on an annual bonus.

Scepticism of the IMF runs strong in Ecuador and throughout Latin America, where many blame Fund-imposed austerity policies for economic hardship.

(Reporting by Alexandra Valencia; Writing by Julia Symmes Cobb; Editing by Helen Murphy and Dan Grebler)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.