Ecuador switches to US dollar

The changeover has led to calming of the economic crisis

Ecuador is saying goodbye to its currency, the sucre, which is being replaced by the United States dollar.

Long queues have been forming outside banks as people exchange their sucres before Saturday night when the dollar will become the sole currency.

President Noboa: Policies have brought semblance of stability

The currency change was introduced to try to control Ecuador's economic crisis - the International Monetary Fund (IMF) has warned that inflation this year could reach 100%.

Since the dollar began to be introduced in April, some confidence has returned to the country's financial institutions and the government says this shows that its strategy is working.

Central bank president Jose Luis Ycaza said on Friday the change would usher in an era of "stability, confidence and economic recovery".

Dollarisation ... has proceeded rapidly (and) has calmed the financial markets

IMF

Most notes in circulation are already dollar bills and the government is importing new coins which have the same weight and value as US cents but an Ecuadorian design.

But some people still regard dollarisation as an affront to national sovereignty.

A wave of protests over the move contributed to the overthrow of President Jamil Mahuad's government last January.

False remedy

A short-lived civilian military junta was taken over by senior military officers who quickly installed vice president Gustavo Noboa, a 63-year old law professor, as president.

Mr Noboa, Ecuador's fifth president in three years, vowed to maintain his predecessor's policies.

Correspondents say he has succeeded in bringing a semblance of stability to the nation.

Advocates of the changeover to dollars say it can put developing economies on a fast track toward stability and economic growth. Some US economists believe other Latin American countries should follow Ecuador's example.

On Thursday, the IMF praised the changeover, saying: "Dollarisation ... has proceeded rapidly (and) has calmed the financial markets."

Detractors, however, say that it is a false remedy that attacks the symptoms, but not the root of economic problems.

The new currency is just one of many sectors where reforms have been ushered in.

Under a $2bn, three-year agreement with the IMF, Ecuador drastically cut petrol subsidies earlier this year.

The IMF said however that the government in Quito needs to impose a tight fiscal policy "for the foreseeable future," to reduce the public sector deficit, which stood at 7% of gross domestic product in 1999.