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Friday, March 12, 1999 Published at 05:11 GMT

World: Americas

Ecuador faces tough medicine

Demonstrations in Guayaquil during the second day of the strike

President Jamil Mahuad of Ecuador has announced a package of emergency economic measures, as the country's economic and political crisis deepens.

In a television address, Mr Mahuad detailed plans to raise taxes and fuel prices, and limit withdrawals from bank accounts.

James Reynolds reports: "Critical week for Ecuador"
His speech came on the final day of a two-day nationwide strike held to protest against the government's economic programmes.

The sense of crisis was heightened by the resignation of the Central Bank's board of directors.

[ image: President Mahuad:
President Mahuad: "Better future" ahead
The president said the measures were necessary to reduce the huge budget deficit and stave off hyperinflation.

But he added that he could not afford to wait until Congress approved the tax rise, and so petrol and diesel prices would go up immediately by as much as 165%.

The small Andean nation is facing its worst financial crisis for decades, resulting from the fall in the price of oil - its main export - and from the effects of the El Niño weather phenomenon.

President Mahuad told Ecuadorans that help from international lenders was on its way.

"I could have done nothing ... But I am sure I am here to provide (Ecuadorans) with a better future," the president said. "If we achieve our goals the country has a future and it is going to receive support from abroad."

He said he expected fresh credit from the Inter-American Development Bank worth $230 million and $150 million from each of the World Bank and the Andean Development Corporation.

In addition, he believed the IMF would provide a further $400 million in loans after signing a pact.

However this optimism was not shared by the IMF, which said it was far from reaching a deal with the government.

"There is no decision yet on anything, not even whether there will be an agreement or what the modality of any agreement will be," an IMF spokesman said.

Strike runs down

In Ecuador's major cities, police dispersed protesters with tear gas in isolated street clashes on the second day of the strike.

Altogether more than 200 people have been arrested over the two days of the action, but unlike on Wednesday, no injuries were reported.

The authorities have declared a state of emergency throughout the country, and brought in troops to guard power stations, oil installations and other essential locations.

The banks have been closed since the weekend, but are due to re-open on Friday.

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