Ecuador’s President Noboa Enshrines Dollar as Sole Currency After 25 Years

President Daniel Noboa issued Decree 565 on Tuesday, officially confirming the US dollar as Ecuador’s sole legal currency. The executive order also proposes significant constitutional reforms to strengthen dollarization permanently, marking 25 years since Ecuador first adopted the dollar.

The decree contains two key provisions. First, it formally ratifies the dollar as Ecuador’s only official means of payment. Second, it urges Noboa’s political movement to initiate reforms to Article 303 of the Constitution to permanently embed dollarization.

The proposed constitutional changes would explicitly prohibit Ecuador’s Central Bank from issuing any alternative or parallel currency. This restriction aims to prevent future governments from abandoning dollarization, a policy that remains overwhelmingly popular among Ecuadorians.

Ecuador initially adopted the US dollar on January 9, 2000, during a severe economic crisis. Then-President Jamil Mahuad made this desperate decision to stabilize an economy experiencing banking collapse, frozen deposits, and rampant inflation that had reached 91% annually.

Mahuad lost power just thirteen days after announcing dollarization. His vice president, Gustavo Noboa, continued implementing the policy despite strong opposition at the time.

Twenty-five years later, dollarization enjoys approximately 90% public approval. Analysts credit it with restoring confidence in Ecuador‘s banking system and providing monetary stability through earthquakes, the pandemic, and political unrest.

Noboa’s Decree on Dollarization Amidst Economic Struggles

The timing of Noboa’s decree coincides with his campaign for re-election. The 37-year-old president faces significant challenges, including rising crime rates, energy shortages, and economic stagnation.

While Noboa projects 4% economic growth for 2025, the International Monetary Fund forecasts just 1.2%. Ecuador’s economy contracted 1.5% in the third quarter of 2024, reflecting ongoing struggles.

The decree addresses longstanding concerns about potential abandonment of dollarization. Several economists note that “Ecuadorians spontaneously dollarized before politicians formalized it,” highlighting the currency’s deep integration into daily economic life.

By cementing dollarization in the constitution, Noboa aims to provide economic certainty during uncertain times. Ecuador now balances the stability of dollarization against limited monetary policy options as it confronts security crises and seeks new economic growth.