MercoPress. South Atlantic News Agency

World Bank US$ 500 million loan to help Ecuador cover budget needs

The flexible resources have three objectives: support government response to Covid-19; eliminate constraints to private sector development and support the economic recovery.

The World Bank Board of Directors approved a flexible US$500 million loan to help cover Ecuador's budget needs during the Covid-19 emergency and to promote economic recovery. The loan is the second in a series of three Development Policy Financing (DPF) operations. The first loan of this series was disbursed in June 2019. The operation has been adapted to the current context and to the country’s needs during the pandemic.

The flexible resources approved have three objectives: to support the government response to Covid-19; eliminate constraints to private sector development and support the economic recovery; and promote public sector efficiency and fiscal sustainability following the crisis.

“The decisive support of multilateral organizations, including the World Bank, has enabled us to shore up efforts to continue to protect the most vulnerable citizens and employment. It also is acknowledgment of the ordered, responsible management of the debt,” said Ministry of Economy and Finance, Richard Martínez.

Operations in recognition of public policies are possible when an adequate macroeconomic management exists. In this case, the US$500 million loan recognizes the Ecuadorian government’s efforts to achieve fiscal sustainability, strengthen dollarization, improve transparency and accountability, and promote responsible public debt management.

“We recognize the effort that the Government of Ecuador is making and the need to continue with the economic recovery in the medium term,” said the World Bank Director for Bolivia, Chile, Ecuador and Peru, Marianne Fay. “We continue to support Ecuador in its response to this health emergency, this time through resources that will allow the government to attend to the most urgent needs of the population,” she said.

These resources are part of a coordinated effort of the international community to support the Covid-19 response and to strengthen Ecuador’s program for macroeconomic stabilization and inclusive growth. This is a variable-spread loan with a 28-year maturity period and an 11-year grace period.

Ecuador also will receive a non-reimbursable US$6 million grant from the Global Concessional Financing Facility.

Additionally, this operation benefits from a US$6 million budget support grant from the Global Concessional Financing Facility (GCFF), which was created to support middle-income countries that receive large numbers of refugees. These resources will support the country’s efforts to aid the Venezuelan migrant population and the Ecuadorian population receiving the refugees.

The GCFF was launched in 2016 by the World Bank, the United Nations and the Islamic Development Bank as a global platform to provide concessional funding to middle-income countries. Worldwide, the GCFF has support from Canada, Denmark, the European Commission, Germany, Japan, the Netherlands, Norway, Sweden, the United Kingdom and the United States.

The World Bank Group, one of the largest sources of funding and knowledge for developing countries, is taking broad, fast action to help developing countries strengthen their pandemic response. Over the next 15 months, the Group will be deploying up to US$ 160 billion in financial support to help countries protect the poor and vulnerable, support businesses, and bolster economic recovery, including US$ 50 billion of new IDA resources in grants or highly concessional terms.