Ecuador’s agreement with IMF involves progressive tax reform

RIO DE JANEIRO, BRAZIL – The International Monetary Fund (IMF) Board of Directors approved the technical agreement reached with Ecuador early this month, to disburse US$2.5 billion between 2021 and 2022.

The multilateral organization authorized a disbursement of US$800 million of this amount, to be immediately allocated to finance the State Budget.

The agreement contains significant commitments by the government. The first is to achieve fiscal sustainability in the medium term.

Second, to reduce public debt, optimizing spending and guaranteeing the protection of the most vulnerable. These efforts should be complemented with a progressive tax reform.

The Fund’s Directors endorsed a more gradual fiscal consolidation in order to address urgent pandemic-related spending needs this year. They also stressed the need for solid efforts in terms of revenue, including a progressive tax reform, to complement the expenditure-based consolidation strategy.

IMF Deputy Managing Director and Acting President Antoinette Sayeh said in a statement that Ecuador has implemented some of the agreement’s guidelines, such as the new anti-corruption law and an organic monetary and financial code, “to underpin the anti-corruption framework and to strengthen the foundations of dollarization.”

Minister of Economy and Finance Simón Cueva assured that the agreement will also allow the country to access more financing under better conditions with other multilateral organizations.

Since September 2020, Ecuador has had a 27-month EFF program with the IMF for US$6.5 billion, of which it received US$4 billion last year. The country expects to access US$1.5 billion this year and the remaining US$1 billion next year.

For the full picture, see our Brazil Tax Reform: Complete Guide.