Ecuador’s international reserves reach record figure in November

RIO DE JANEIRO, BRAZIL – The manager of the Central Bank of Ecuador, Guillermo Avellán, announced that Ecuador’s international reserves reached US$8.13 billion up to November of this year. This represents an important recovery of these assets that in 2020, due to the coronavirus pandemic, were reduced to only US$1.99 billion.

With the announcement, President Guillermo Lasso wrote in his Twitter account that “this level of reserves is due to the responsibility and efficiency in the management of public finances, consolidates dollarization and generates more confidence in domestic and foreign investors.”

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International reserves are financial assets that the central banks of each country invest abroad. Increases in the international reserve fund, experts explain, demonstrate an economic recovery. International reserves ensure the country a certain degree of liquidity, regulate credit risks – the country has funds to deliver more credits -, finance external payments and the demand for cash.

Manager Avellán explained that there are three determining factors in the increase in the value of international reserves. One of them is related to the government’s trade policy and oil prices, “this has allowed a 30% growth in exports and a trade surplus of US$ 1.946  billion as of September this year,” according to El Comercio.

The second factor is the signing of a financial agreement with the International Monetary Fund and finally, according to Avellán, the responsible administration of international reserves has been decisive in reaching this record figure.

According to data from the Central Bank of Ecuador, the Andean country’s economy is recovering after the sharp fall caused by the coronavirus pandemic, which increased the nation’s financial problems.

In the second quarter of 2021, according to official figures, there was a 10.5% growth in household consumption “which shows a considerable recovery after seven consecutive quarters of contraction,” a 16% increase in exports due to the growth of oil, shrimp and flower sales, and a 9.8% increase in the investment component.

“The results of the Quarterly National Accounts show that, as of the second quarter of 2021, the national economy grew by 8.4% compared to the same period in 2020. These figures reflect a recovery of economic and productive activities in Ecuador,” the Central Bank said in a statement.

The Central Bank’s information reflects that there were three industries that reported a higher growth in relation to 2020, these were those in charge of oil refining, because they showed a growth of 89.6% due to the increase in the supply of oil derivatives.

Industries related to oil and mining showed a growth of 25.3%, due to the increase in domestic oil production. The fishing sector also had a considerable growth of 20.7%, due to the increase in exports of fish and other aquatic products.

In addition, according to the Central Bank, in the second quarter of 2021, the GDP grew by 2.1% compared to the first three months of the year. “This behavior is explained by the growth of government spending by 4.4%, the 1.9% increase in exports and the 1.2% increase in household consumption.”

There were three industries that reported higher growth in the second quarter of 2021, among them the one related to education and health social services that registered a growth of 7.2%, mainly due to the expenses related to the Vaccination Plan.

According to the financial institution, “the quarterly results reflect that Ecuador is returning to the path of economic growth. In addition, the interannual growth of 8.4% is aligned with the annual projection of 3.02% for 2021.″