New IMF deal likely as fiscal consolidation comes undone in Ecuador

Ecuador is no longer on track towards meeting the criteria imposed on it by the IMF to keep its US$6.4bn Extended Fund Facility (EFF) program afloat. President Guillermo Lasso has temporarily abandoned the fuel subsidy reform in the face of opposition from Congress and growing social unrest, undermining fiscal consolidation.

What you will learn:

• We find that under a scenario where cuts to fuel subsidies and the wider tax reform are permanently suspended, public debt by 2026 could be 6ppts of GDP above the IMF’s target.
• With Ecuador still out of international financial markets and paying prohibitively high borrowing costs (its EMBI spread is at >1,500bps) we think the country will be unable to avoid engaging in still another IMF program after the current EFF expires this year.