The Ecuadorian government will try to reach a new agreement with the International Monetary Fund (IMF) next year as it seeks new financing after its bonds fall, which, according to President Guillermo Lasso, are “absurdly undervalued”.
“Next year, once this program concludes, we will do another one,” said the Ecuadorian president from the United States when referring to the agreement about to be concluded with the IMF.
The collapse of Ecuadorian bonds, registered since June due to social protests, has made a return to the world credit markets impracticable soon.
Yields on the country’s dollar-denominated debt maturing in 2040 have risen to 16.3%, up from less than 10% at the beginning of the year.
Although Ecuador’s borrowing costs are high, “there are still options to borrow from multilateral lenders,” the president said.
The country is close to completing an agreement with the IMF by the end of the year. Only one last disbursement of US$700 million remains to be made.
Lasso warned that the details of a possible future program with the Fund have not yet been finalized.
GOLDMAN AND JPMORGAN
In meetings with Goldman and JP Morgan, Lasso explained why he believes Ecuador’s bonds are undervalued. He believes “the country is politically stable and has solid fundamentals.”
“Even in the political arena, this is a very solid government,” and “it has been able to win battles democratically,” he noted, insisting that “there is no reason to worry about political stability.”
This week, Ecuador also announced a debt renegotiation with China, which will save US$1.4 billion in payments and includes the extension of maturities.
The head of state pointed out that his government “does not plan to resort to Chinese banks to obtain debt in 2023”.
Among additional sources of financing, Ecuador expects to obtain funding from the US International Development Finance to help protect the Amazon.
Also, bids for the sale of Banco del Pacifico, a commercial bank that became state-owned, are due next week. The idea is to sell it to a foreign bank in January.
“Ecuador is well positioned to weather a possible downturn in the world economy, as some key exports, such as shrimp, are registering record international demand,” the president added.
With information from Bloomberg