May 2, 2020

Washington, DC – May 2, 2020 The Executive Board of the International Monetary Fund (IMF) approved a 36-month Extended Arrangement under the Extended Fund Facility (EFF) for Ecuador in the amount of SDR 3.035 billion (about US$4.2 billion), equivalent to 435 percent of quota, on March 11, 2019. The combined second and third reviews under the arrangement were completed by the Executive Board on December 19, 2019, based upon, inter alia, the reported observance of the quantitative performance criteria (QPC) at end-September 2019, including the non-oil primary balance including fuel subsidies (NOPBS) of the Non-Financial Public Sector (NFPS). Upon completion of the combined second and third reviews under the EFF, Ecuador made a purchase equivalent to SDR 361.3 million (about US$498.4 million).

Subsequently, as part of the commitment to transparency of the Ecuadorian authorities, their continuous engagement with IMF staff and close monitoring of the program criteria, important unintended shortcomings in the compilation of fiscal statistics were unveiled that contributed to incorrect estimates of fiscal deficit for years, starting as far back as 2012. The statistical deficiencies were found primarily in the data provided by entities outside the central government. The revised data indicate a nonobservance of the performance criterion on the NOPBS of the NFPS at end-September 2019 by a margin of US$431 million, which resulted in a noncomplying purchase and a breach of obligations under Article VIII, Section 5 of the IMF Articles of Agreement. The authorities previously reported that the performance criterion had been met with a margin of US$694 million at end-September 2019. The statistical revision only modestly impacted public debt. Gross debt of the NFPS remained broadly unchanged.

The occurrence of the statistical deficiencies reflects in part an extended lack of engagement between Ecuador and the Fund in the past. The reevaluation of the statistical methodology helped improve the reconciliation of above- and below-the-line data for each sector of the NPFS and enhance the accuracy of the overall fiscal aggregate. As the shortcomings came to light, the authorities took strong remedial actions, including (i) strengthening of the institutional arrangement to collect and process fiscal data, with clear assignments of responsibilities and line of accountability for each party involved; (ii) submitting to the National Assembly draft amendments to the Organic Code of Planning and Public Finance (COPLAFIP), geared towards improving the data provision; and (iii) enhancing information sharing among government agencies, including for consistency checks. Beyond these actions, the authorities reaffirmed their commitment to continuously adopt international best practices towards fiscal data transparency.

At the conclusion of the meeting, Ms Kristalina Georgieva Managing Director and Chair, stated:

“The Executive Board of the International Monetary Fund (IMF) reviewed Ecuador’s remedial actions and data revisions linked to a noncomplying purchase under the Extended Arrangement under the Extended Fund Facility as well as a breach of obligations under Article VIII, Section 5. The non-complying purchase arose as a result of statistical deficiencies found in the compilation of fiscal statistics by public entities that contributed to incorrect estimates of fiscal deficit starting as far back as 2012.

“In view of the strong and proactive commitment by Ecuador to provide timely and accurate data to the IMF in the future, the Executive Board decided not to require further remedial action in connection with the breach of obligations under Article VIII, Section 5. As the authorities have taken substantive and appropriate corrective measures since the purchase in December 2019, the Executive Board also granted a waiver for the nonobservance of the quantitative performance criterion.”

The IMF’s transparency policy requires publication of misreporting related to use of Fund resources, including Executive Board findings in these matters.