Ecuador obtains financing for more than US$600 million, between the World Bank and CAF

The Ecuadorian government obtained in the last two days two loans from two international credit organizations: the World Bank and the Development Bank of Latin America (CAF). Between both disbursements, add up to US$600 million in financing.

On the other hand, the World Bank managed a donation of US$30 million for Ecuador, based on a contribution from the United States and Canada.

THE WORLD BANK LOAN

The Executive Board of the World Bank approved a freely available loan for US$500 million for Ecuador. It is a variable rate loan, repayable in 18 years, including a 4-year grace period.

These resources are aimed at supporting “government efforts to promote inclusive, resilient, and low-carbon development,” the communication states.

According to the World Bank, the approved operation is the second in a series of three loans that will help the Ecuadorian government to continue implementing policies to address “structural challenges” that will allow it to “achieve fiscal sustainability, promote the creation of employment and protect the most vulnerable people”, as well as strengthening low-carbon development and fulfilling the commitment acquired by the country to achieve carbon neutrality by 2050.

The first operation, for US$700 million, had been approved by the World Bank Board of Executive Directors in February 2022.

On the other hand, the World Bank adds that this operation has two pillars:

• Support critical elements of the economic, social and comprehensive security axes of the Plan for the Creation of Opportunities that, among other things, seek to ensure that public finances are managed in a sustainable and transparent manner, improve risk management, protect families and promote social inclusion and climate resilience of vulnerable groups.
• Support the ecological transition axis that seeks to promote ecological growth measures through a low carbon economy and climate change mitigation and adaptation measures.

THE DONATION FROM CANADA AND THE UNITED STATES

The aforementioned donation of US$30 million is due to support from the World Bank “for the efforts of middle-income countries to meet the needs of refugees and host communities.” Beyond the management of the organization, the contribution of money is from the United States and Canada.

More than 502,000 Venezuelan refugees and migrants reside in Ecuador, making this country the third host nation of the more than 7.1 million Venezuelans who have left their country since 2018. To reduce the vulnerability of migrants In September 2022, the Ecuadorian government announced a special registration and regularization process.

CAF’S CREDIT

For its part, CAF approved a US$100 million loan for the Support Program for the Reconstruction of Manabí and Esmeraldas, which will contribute to enabling public services through the provision of infrastructure in the provinces of Manabí and Esmeraldas. It is estimated that this operation will benefit about 336,000 people.

The Manabí and Esmeraldas Reconstruction Support Program is structured into three components:

• Restitution of public services to execute municipal public buildings in Pedernales and El Carmen.
• Provision of water, sanitary sewerage and urban regeneration services in the cities of Chone, San Vicente, Pedernales and Esmeraldas.
• Strengthening and management of the program to carry out inspections, consultancies, studies, audits and the executing unit for follow-up and monitoring.

In the last five years (2017-2021), CAF approved operations in favor of Ecuador for US$4.629 billion, which represents an average of US$926 million per year, equivalent to 7% of the total approved in said period. In the same period, total disbursements amounted to US$3.532 billion, representing an annual average of US$706 million.

With information from Bloomberg Línea