Ecuador has reached an agreement to restructure its debt to Chinese banks. According to the government, the deal provides for the cancellation of about US$1.4 billion in debt by 2025.
Ecuadorian President Guillermo Lasso announced in February this year that he wanted to restructure the South American country’s debt and improve the terms of its long-term oil sales contracts with Beijing.
China has become Ecuador’s most important financial partner over the past decade.
Agreements have been reached with both the “China Development Bank” and the “Export-Import Bank of China” (Eximbank) for loans of US$1.4 billion and US$1.8 billion, respectively, extending the maturity of the loans and reducing repayment.
“As a result of these agreements, the maturities of China Development Bank will be extended to 2027 and Eximbank to 2032, allowing for cash flow relief to support the government’s priorities,” the presidential press team said in the statement.
The government said that Ecuador was also able to get certain applicable interest rates reduced, and all repayments to China Eximbank were suspended for a six-month grace period.
The loans were agreed to during the administration of former President Rafael Correa, and some were tied to long-term oil sales contracts with Chinese companies.
The agreements also include the release of certain export volumes to the Chinese oil company “CNPC” under oil-covered contracts that allow Ecuador to sell an unspecified amount of oil at market prices.
Since taking office last May, Lasso has turned to multilateral organizations for funding to revive Ecuador’s economy, which was hit by the coronavirus pandemic, and renegotiated a $6.5 billion loan agreement with the International Monetary Fund that expires this year.